EXHIBIT 10.4
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KILROY REALTY, L.P., as trustor
(Borrower)
to
FIRST AMERICAN TITLE INSURANCE COMPANY, as trustee
(Trustee)
for the benefit of
COMMERZBANK AKTIENGESELLSCHAFT
(New York Branch), as Administrative Agent on behalf
of the Banks, as beneficiary
(Lender)
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VARIABLE INTEREST RATE DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING
================================================================================
Dated: October 20, 1999
Location: San Diego County, California
PREPARED BY AND UPON
RECORDATION RETURN TO:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael B. Levy, Esq.
TABLE OF CONTENTS
Page
Article 1 - GRANTS OF SECURITY...................................................................... -1-
Section 1.1 Property Mortgaged....................................................... -1-
Section 1.2 Assignment of Rents...................................................... -4-
Section 1.3 Security Agreement....................................................... -4-
Section 1.4 Pledge of Moneys Held.................................................... -4-
Article 2 - DEBT AND OBLIGATIONS SECURED............................................................ -4-
Section 2.1 Debt..................................................................... -4-
Section 2.2 Other Obligations........................................................ -5-
Section 2.3 Debt and Other Obligations............................................... -5-
Article 3 - BORROWER COVENANTS...................................................................... -5-
Section 3.1 Payment of Debt.......................................................... -5-
Section 3.2 Incorporation by Reference............................................... -5-
Section 3.3 Insurance................................................................ -6-
Section 3.4 Payment of Taxes, etc.................................................... -9-
Section 3.5 Escrow Fund.............................................................. -10-
Section 3.6 Condemnation............................................................. -10-
Section 3.7 Leases and Rents......................................................... -11-
Section 3.8 Maintenance of Property.................................................. -12-
Section 3.9 Waste.................................................................... -12-
Section 3.10 Compliance With Laws..................................................... -13-
Section 3.11 Books and Records........................................................ -13-
Section 3.12 Payment For Labor and Materials.......................................... -13-
Section 3.13 Performance of Other Agreements.......................................... -14-
Section 3.14 Change of Name, Identity or Structure.................................... -14-
Section 3.15 Existence................................................................ -14-
Article 4 - SPECIAL COVENANTS....................................................................... -14-
Section 4.1 Property Use............................................................. -14-
Section 4.2 ERISA.................................................................... -14-
Section 4.3 Intentionally Deleted.................................................... -15-
Section 4.4 Restoration.............................................................. -15-
Article 5 - REPRESENTATIONS AND WARRANTIES.......................................................... -22-
Section 5.1 Warranty of Title........................................................ -22-
Section 5.2 Authority................................................................ -22-
Section 5.3 Legal Status and Authority............................................... -22-
Section 5.4 Validity of Documents.................................................... -22-
Section 5.5 Litigation............................................................... -23-
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Section 5.6 Status of Property....................................................... -23-
Section 5.7 No Foreign Person........................................................ -24-
Section 5.8 Separate Tax Lot......................................................... -24-
Section 5.9 ERISA Compliance......................................................... -24-
Section 5.10 Leases................................................................... -24-
Section 5.11 Financial Condition...................................................... -25-
Section 5.12 Business Purposes........................................................ -25-
Section 5.13 Taxes.................................................................... -25-
Section 5.14 Mailing Address.......................................................... -25-
Section 5.15 No Change in Facts or Circumstances...................................... -25-
Section 5.16 Disclosure............................................................... -25-
Section 5.17 Third Party Representations.............................................. -25-
Section 5.18 Illegal Activity......................................................... -25-
Article 6 - OBLIGATIONS AND RELIANCES............................................................... -25-
Section 6.1 Relationship of Borrower and Lender...................................... -25-
Section 6.2 No Reliance on Lender.................................................... -26-
Section 6.3 No Lender Obligations.................................................... -26-
Section 6.4 Reliance................................................................. -26-
Article 7 - FURTHER ASSURANCES...................................................................... -26-
Section 7.1 Recording of Security Instrument, etc.................................... -26-
Section 7.2 Further Acts, etc........................................................ -27-
Section 7.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws.................. -27-
Section 7.4 Estoppel Certificates.................................................... -28-
Section 7.5 Splitting of Security Instrument......................................... -28-
Section 7.6 Replacement Documents.................................................... -28-
Article 8 - DUE ON SALE/ENCUMBRANCE................................................................. -29-
Section 8.1 Lender Reliance.......................................................... -29-
Section 8.2 No Sale/Encumbrance...................................................... -29-
Section 8.3 Sale/Encumbrance Defined................................................. -29-
Section 8.4 Lender's Rights.......................................................... -29-
Article 9 - PREPAYMENT.............................................................................. -30-
Section 9.1 Prepayment Before Event of Default....................................... -30-
Section 9.2 Prepayment on Casualty and Condemnation.................................. -30-
Section 9.3 Prepayment After Event of Default........................................ -30-
Article 10 - DEFAULT................................................................................ -31-
Section 10.1 Events of Default........................................................ -31-
Section 10.2 Late Payment Charge...................................................... -32-
Section 10.3 Default Interest......................................................... -32-
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Article 11 - RIGHTS AND REMEDIES.................................................................... -33-
Section 11.1 Remedies................................................................. -33-
Section 11.3 Right to Cure Defaults................................................... -35-
Section 11.4 Actions and Proceedings.................................................. -35-
Section 11.5 Recovery of Sums Required To Be Paid..................................... -36-
Section 11.6 Examination of Books and Records......................................... -36-
Section 11.7 Other Rights, etc........................................................ -36-
Section 11.8 Right to Release Any Portion of the Property............................. -37-
Section 11.9 Recourse and Choice of Remedies.......................................... -37-
Section 11.10 Right of Entry........................................................... -37-
Article 12 - ENVIRONMENTAL HAZARDS.................................................................. -37-
Section 12.1 Environmental Representations and Warranties............................. -37-
Section 12.2 Environmental Covenants.................................................. -39-
Section 12.3 Lender's Rights.......................................................... -40-
Article 13 - INDEMNIFICATION........................................................................ -40-
Section 13.1 General Indemnification.................................................. -40-
Section 13.2 Mortgage and/or Intangible Tax........................................... -40-
Section 13.3 ERISA Indemnification.................................................... -41-
Section 13.4 Environmental Indemnification............................................ -41-
Section 13.5 Duty to Defend; Attorneys'Fees and Other Fees and Expenses............... -42-
Article 14 - WAIVERS................................................................................ -42-
Section 14.1 Waiver of Counterclaim................................................... -42-
Section 14.2 Marshalling and Other Matters............................................ -42-
Section 14.3 Waiver of Notice......................................................... -42-
Section 14.4 Waiver of Statute of Limitations......................................... -43-
Section 14.5 Sole Discretion of Lender................................................ -43-
Section 14.6 Survival................................................................. -43-
Section 14.7 WAIVER OF TRIAL BY JURY.................................................. -43-
Article 15 - EXCULPATION ......................................................................... -43-
Section 15.1 Exculpation.............................................................. -43-
Section 15.2 Reservation of Certain Rights............................................ -44-
Section 15.3 Exceptions to Exculpation................................................ -44-
Section 15.4 Recourse................................................................. -44-
Section 15.5 Bankruptcy Claims........................................................ -45-
Article 16 - NOTICES................................................................................ -45-
Section 16.1 Notices.................................................................. -45-
Article 17 - SERVICE OF PROCESS..................................................................... -46-
Section 17.1 Consent to Service....................................................... -46-
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Section 17.2 Submission to Jurisdiction............................................... -46-
Section 17.3 Jurisdiction Not Exclusive............................................... -46-
Article 18 - APPLICABLE LAW......................................................................... -46-
Section 18.1 Choice of Law............................................................ -46-
Section 18.2 Usury Laws............................................................... -46-
Section 18.3 Provisions Subject to Applicable Law..................................... -47-
Article 19 - Intentionally Deleted.................................................................. -47-
Article 20 - COSTS.................................................................................. -47-
Section 20.1 Performance at Borrower's Expense........................................ -47-
Section 20.2 Attorney's Fees for Enforcement.......................................... -47-
Article 21 - DEFINITIONS............................................................................ -47-
Section 21.1 General Definitions...................................................... -47-
Article 22 - MISCELLANEOUS PROVISIONS............................................................... -48-
Section 22.1 No Oral Change........................................................... -48-
Section 22.2 Liability................................................................ -48-
Section 22.3 Inapplicable Provisions.................................................. -48-
Section 22.4 Headings, etc............................................................ -48-
Section 22.5 Duplicate Originals; Counterparts........................................ -48-
Section 22.6 Number and Gender........................................................ -48-
Section 22.7 Subrogation.............................................................. -49-
Section 22.8 Entire Agreement......................................................... -49-
Section 22.9 Trustee.................................................................. -49-
Article 23 - CERTAIN MATTERS RELATING TO THE STATE OF CALIFORNIA.................................... -50-
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This VARIABLE INTEREST RATE DEED OF TRUST, LEASEHOLD DEED OF TRUST,
ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this "Security
Instrument") is made as of the 20th day of October, 1999, by KILROY REALTY,
L.P., a Delaware limited partnership, having its principal place of business at
2250 East Imperial Highway, El Segundo, California 90245, as trustor
("Borrower") to FIRST AMERICAN TITLE INSURANCE COMPANY, a California
corporation, as trustee, having an address of 411 Ivy Street, San Diego,
California 92101 ("Trustee") for the benefit of COMMERZBANK AKTIENGESELLSCHAFT,
New York Branch), a branch duly licensed under the laws of the State of New
York, having an address at 2 World Financial Center, New York, New York 10251-
1050, as Administrative Agent on behalf of the Banks (as defined below), as
beneficiary ("Lender").
R E C I T A L S :
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WHEREAS, pursuant to the Credit Agreement dated October 20, 1999 (the
"Credit Agreement") among Borrower, Lender, as Administrative Agent and
Arranger, Dresdner Bank AG, acting through its New York Branch and Grand Cayman
Branch, as Syndication Agent, and the other banks party thereto (collectively,
the "Banks"), the Banks have loaned to Borrower up to $90,000,000, which loan is
evidenced by, inter alia, the Note of Borrower obligating Borrower to pay said
loan (the "Note"), together with all interest accrued thereon, and all other
amounts due or payable, in accordance with the terms of the Note, the Credit
Agreement and the other Security Documents (as hereinafter defined);
WHEREAS, Borrower is the owner of the Property (as defined below) and
Borrower, in order to secure the payment of the indebtedness evidenced by
Promissory Note, has duly authorized the execution and delivery of this Security
Instrument; and
WHEREAS, Borrower and Lender intend these recitals to be a material part of
this Security Instrument.
NOW, THEREFORE, in consideration of the loan to Borrower evidenced by the
Note (the "Loan") and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be bound hereby,
Borrower hereby agrees as follows:
Article 1 - GRANTS OF SECURITY
Section 1.1 Property Mortgaged. Borrower does hereby irrevocably
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mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Trustee and grant a security interest to Trustee in, for the benefit of Lender
and Lender's successors, substitutes and assigns, the following property,
rights, interests and estates now owned, or hereafter acquired by Borrower
(collectively, the "Property"), IN TRUST WITH POWER OF SALE AND RIGHT OF ENTRY
AND POSSESSION TO HAVE AND TO HOLD the same, together with all and singular the
rights, hereditaments, and appurtenances in any way appertaining or belonging
thereto forever:
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(a) Fee Land. The real property described in Exhibit A attached hereto and
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made a part hereof (the "Fee Land");
(b) Ground Lease. The leasehold estate in the real property described in
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Exhibit A-13 attached hereto and leased pursuant to the ground lease described
in Exhibit B attached hereto (the "Ground Lease"). The land conveyed pursuant to
the Ground Lease (the "Leased Land"), together with the Fee Land, is referred to
as the "Land".
(c) Additional Land. All additional lands, estates and development rights
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hereafter acquired by Borrower for use in connection with the Land and the
development of the Land and all additional lands and estates therein which may,
from time to time, by supplemental mortgage or otherwise, be expressly made
subject to the lien of this Security Instrument;
(d) Improvements. The buildings, structures, fixtures, additions,
------------
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (the "Improvements");
(e) Easements. All easements, rights-of-way or use, rights, strips and
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gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;
(f) Fixtures and Personal Property. All machinery, equipment, fixtures
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(including all heating, air conditioning, plumbing, lighting, communications
and elevator fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now or
hereafter located upon the Land and the Improvements, or appurtenant thereto,
and used or contemplated to be used in connection with the present or future
operation and occupancy of the Land and the Improvements and all building
equipment, materials and supplies of any nature whatsoever owned by Borrower, or
in which Borrower has or shall have an interest, now or hereafter located upon
the Land and the Improvements, or appurtenant thereto, and used or contemplated
to be used in connection with the present or future operation and occupancy of
the Land and the Improvements (collectively, the "Personal Property"), and the
right, title and interest of Borrower in and to any of the Personal Property
which may be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states where any of the
Property is located (the "Uniform Commercial Code"), superior in lien to the
lien of this Security Instrument and all proceeds and products of the above;
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(g) Leases and Rents. All leases and other agreements affecting the use,
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enjoyment or occupancy of the Land and the Improvements heretofore or hereafter
entered into, whether before or after the filing by or against Borrower of any
petition for relief under 11 U.S.C. (S)101 et seq., as the same may be amended
from time to time (the "Bankruptcy Code") (the "Leases") and all right, title
and interest of Borrower, its successors and assigns therein and thereunder,
including cash or securities deposited thereunder to secure the performance by
the lessees of their obligations thereunder and all rents, additional rents,
revenues, issues and profits (including all oil and gas or other mineral
royalties and bonuses) from the Land and the Improvements whether paid or
accruing before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code (the "Rents") and all proceeds from the sale or
other disposition of the Leases and the right to receive and apply the Rents to
the payment of the Debt (as defined in Article 2);
(h) Condemnation Awards. All awards or payments, including interest
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thereon, which may hereafter be made with respect to the Property to the extent
actually received or receivable by Borrower, whether from the exercise of the
right of eminent domain (including any transfer made in lieu of or in
anticipation of the exercise of the right), or for a change of grade, or for any
other injury to or decrease in the value of the Property;
(i) Insurance Proceeds. All proceeds of and any unearned premiums on any
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insurance policies covering the Property, including the right to receive and
apply the proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Property;
(j) Tax Certiorari. All refunds, rebates or credits in connection with a
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reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;
(k) Conversion. All proceeds of the conversion, voluntary or involuntary,
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of any of the foregoing including proceeds of insurance and condemnation awards,
into cash or liquidation claims;
(l) Rights. The right, in the name and on behalf of Borrower, to appear in
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and defend any action or proceeding brought with respect to the Property and to
commence any action or proceeding to protect the interest of Lender in the
Property;
(m) Agreements. All agreements, contracts, certificates, instruments,
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franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right, title and
interest of Borrower therein and thereunder, including the right, upon the
happening of any default hereunder, to receive and collect any sums payable to
Borrower thereunder;
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(n) Trademarks. All tradenames, trademarks, servicemarks, logos,
----------
copyrights, goodwill, books and records and all other general intangibles
relating to or used in connection with the operation of the Property; and
(o) Rights Under Ground Lease. All modifications, extensions and renewals
-------------------------
of the Ground Lease and all credits, deposits, options, privileges and rights of
Borrower, as tenant under the Ground Lease, including the right, if any, to
renew or extend the Ground Lease for a succeeding term or terms;
(p) Additional Interests in Property. All the estate, right, title, claim
--------------------------------
or demand of any notice whatsoever of Borrower, either in law or in equity, in
possession or expectancy in and to the Property or any part thereof; and
(q) Other Rights. Any and all other rights of Borrower in and to the items
------------
set forth in Subsections (a) through (p) above.
Section 1.2 Assignment of Rents. Borrower hereby absolutely and
-------------------
unconditionally assigns to Trustee, for the benefit of Lender, Borrower's right,
title and interest in and to all current and future Leases and Rents; it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Nevertheless,
subject to the terms of this Section 1.2 and Section 3.7, each of Trustee and
Lender grants to Borrower a revocable license to collect and receive the Rents.
Borrower shall hold the Rents, or a portion thereof sufficient to discharge all
current sums due on the Debt, for use in the payment of such sums.
Section 1.3 Security Agreement. (a) This Security Instrument is both a
------------------
real property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Property includes both real and personal property
and all other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Personal Property to the full extent
that the Personal Property may be subject to the Uniform Commercial Code.
(b) This Security Instrument shall be effective from the date of its
recording as a financing statement filed as a fixture filing in accordance with
Section 9313 of the Uniform Commercial Code with respect to all goods
constituting part of the Property which are or are to become fixtures. This
Security Instrument shall also be effective as a financing statement covering
minerals or the like (including oil and gas) and is to be filed for record in
the real estate records of the county where the Land is situated.
Section 1.4 Pledge of Moneys Held. Borrower hereby pledges to Lender any
---------------------
and all moneys now or hereafter held by Lender, including any sums deposited in
the Escrow Fund (as defined in Section 3.5), Net Proceeds (as defined in Section
4.4), and condemnation awards or
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payments described in Section 4.4, as additional security for the Obligations
until expended or applied as provided in this Security Instrument.
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt. This Security Instrument and the grants, assignments
----
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
(a) the payment of the indebtedness evidenced by the Note in lawful money
of the United States of America;
(b) the payment of interest, default interest, late charges and other sums,
as provided in the Note, the Credit Agreement, this Security Instrument or the
Other Security Documents (defined below);
(c) the payment of all other moneys agreed or provided to be paid by
Borrower in the Note, the Credit Agreement, this Security Instrument or the
Other Security Documents;
(d) the payment of all sums advanced by Lender pursuant to and in
accordance with this Security Instrument to protect and preserve the Property
and the lien and the security interest created hereby; and
(e) the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal, extension,
or change of or substitution for the Debt or any part thereof, or the
acquisition or perfection of the security therefor, whether made or incurred at
the request of Borrower or Lender.
Section 2.2 Other Obligations. This Security Instrument and the grants,
-----------------
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
(a) the performance of all other obligations of Borrower contained herein;
(b) the performance of each obligation of Borrower contained in any other
agreement given by Borrower to Lender which is for the purpose of further
securing the obligations secured hereby, and any amendments, modifications and
changes thereto; and
(c) the performance of each obligation of Borrower contained in any
renewal, extension, amendment, modification, consolidation, change of, or
substitution or replacement for, all or any part of the Note, this Security
Instrument or the Other Security Documents.
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Section 2.3 Debt and Other Obligations. Borrower's obligations for the
--------------------------
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Article 3 - BORROWER COVENANTS
Borrower covenants and agrees that:
Section 3.1 Payment of Debt. Borrower will pay the Debt at the time and
---------------
in the manner provided in the Note and in this Security Instrument.
Section 3.2 Incorporation by Reference. All the covenants, conditions
--------------------------
and agreements contained in (a) the Note and (b) all and any of the documents
other than the Note or this Security Instrument now or hereafter executed by
Borrower and/or others and by or in favor of Lender, which wholly or partially
secure or guaranty payment of the Note including the Loan Agreement (the "Other
Security Documents"), are hereby made a part of this Security Instrument to the
same extent and with the same force as if fully set forth herein.
Section 3.3 Insurance.
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(a) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
(i) comprehensive all risk insurance on the Improvements and the
Personal Property, including contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each
case (A) in an amount equal to 100% of the "Full Replacement Cost," which for
purposes of this Security Instrument shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities and
footings) with a waiver of depreciation; (B) containing an agreed amount
endorsement with respect to the Improvements and Personal Property waiving all
co-insurance provisions; and (C) providing for no deductible in excess of the
lesser of $25,000.00 and one percent (1%) of the face value of such policy. In
addition, Borrower shall obtain (y) if any portion of the Improvements is
currently or at any time in the future located in a federally designated
"special flood hazard area," flood hazard insurance in an amount equal to the
lesser of (a) the outstanding principal balance of the Note or (b) the maximum
amount of such insurance available under the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994, as each may be amended or such greater amount as Lender
shall reasonably require; and (z) earthquake insurance in amounts and in form
and substance satisfactory to Lender, provided that the insurance pursuant to
clauses (y) and (z) hereof shall be on terms consistent with the comprehensive
all risk insurance policy required under this Subsection 3.3(a)(i) except that
the deductible on such insurance shall not be in excess of five percent (5%) of
the appraised value of the Property, or such greater deductible as may generally
be available from reputable insurers issuing such insurance and is in accordance
with customary
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requirements of institutional lenders with respect to similar loans secured by
deeds of trust on similar buildings in similar localities;
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring upon, in or
about the Property, such insurance (A) to be on the so-called "occurrence" form
with a combined single limit of not less than $1,000,000.00; (B) to continue at
not less than the aforesaid limit until required to be changed by Lender in
writing by reason of changed economic conditions making such protection
inadequate; and (C) to cover at least the following hazards: (1) premises and
operations; (2) products and completed operations on an "if any" basis; (3)
independent contractors; (4) blanket contractual liability for all written and
oral contracts; and (5) contractual liability covering the indemnities contained
in Article 13 hereof to the extent the same is available;
(iii) business income insurance (A) with loss payable to Lender; (B)
covering all risks required to be covered by the insurance provided for in
Subsection 3.3(a)(i); (C) containing an extended period of indemnity endorsement
which provides that after the physical loss to the Improvements and Personal
Property has been repaired, the continued loss of income will be insured until
such income either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date of the loss, whichever first
occurs, and notwithstanding that the policy may expire prior to the end of such
period; and (D) in an amount equal to 100% of the projected gross income from
the Property for a period of twelve (12) months. The amount of such business
income insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable estimate of the gross income
from the Property for the succeeding twelve (12) month period. All insurance
proceeds payable to Lender pursuant to this Subsection 3.3(a)(iii) shall be held
by Lender and shall be applied to the obligations secured hereunder from time to
time due and payable hereunder and under the Note; provided, however, that
nothing herein contained shall be deemed to relieve Borrower of its obligations
to pay the obligations secured hereunder on the respective dates of payment
provided for in the Note except to the extent such amounts are actually paid out
of the proceeds of such business income insurance;
(iv) at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements (A) owner's
contingent or protective liability insurance covering claims not covered by or
under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in Subsection
3.3(a)(i) written in a so-called builder's risk completed value form (1) on a
non-reporting basis, (2) against all risks insured against pursuant to
Subsection 3.3(a)(i), (3) including permission to occupy the Property, and (4)
with an agreed amount endorsement waiving co-insurance provisions;
(v) workers' compensation, subject to the statutory limits of the
state in which the Property is located, and employer's liability insurance with
a limit of at least $1,000,000.00 per accident and per disease per employee, and
$1,000,000.00 for disease aggregate in respect of any
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work or operations on or about the Property, or in connection with the Property
or its operation (if applicable);
(vi) comprehensive boiler and machinery insurance with respect to
the Property, if applicable, in amounts as shall be reasonably required by
Lender on terms consistent with the commercial general liability insurance
policy required under Subsection 3.3(a)(ii);
(vii) umbrella liability insurance in an amount not less than
$25,000,000.00 per occurrence on terms consistent with the commercial general
liability insurance policy required under Subsection 3.3(a)(ii);
(viii) motor vehicle liability coverage for all owned and non-owned
vehicles used in the operation of the Property, including rented and leased
vehicles containing minimum limits per occurrence of $1,000,000.00; and
(ix) such other insurance and in such amounts as Lender from time
to time may reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Property located
in or around the region in which the Property is located.
(b) All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be subject to the approval of Lender as to
insurance companies, amounts, forms, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the state in which the Property is
located and approved by Lender. The insurance companies must have an investment
grade rating for claims paying ability assigned by Moody's Investors Service,
Inc. and Standard & Poor's Corporation and/or an A.M. Best Rating of A:IX or
better for claims paying ability (each such insurer shall be referred to below
as a "Qualified Insurer"). The Policies described in Subsections 3.3(a)(i),
(iii), (iv)(B) and (vi) shall designate Lender as loss payee. Not less than
fifteen (15) days prior to the expiration dates of the Policies theretofore
furnished to Lender pursuant to Subsection 3.3(a), certificates of insurance
marked "premium paid" or accompanied by evidence satisfactory to Lender of
payment of the premiums due thereunder (the "Insurance Premiums"), shall be
delivered by Borrower to Lender; provided, however, that if an insurer permits
payment of the Insurance Premium on a Policy in installments, Borrower may elect
to pay in installments, in which event Borrower will timely pay each such
installment when due and will deliver to Lender, not more than thirty (30) days
after payment of the first such installment, a copy of the insurer's written
acknowledgement of receipt of payment of such installment together with a
schedule of all installment amounts and due dates.
(c) In the event Borrower obtains an umbrella or a blanket Policy, Borrower
shall notify Lender of the same and shall cause certified copies of each Policy
to be delivered as required in Subsection 3.3(a). Any blanket insurance Policy
shall specifically allocate to the Property the amount of coverage from time to
time required hereunder and shall otherwise
-8-
provide the same protection as would a separate Policy insuring only the
Property in compliance with the provisions of Subsection 3.3(a).
(d) All Policies of insurance provided for or contemplated by Subsection
3.3(a), except for the Policy referenced in Subsection (a)(v), shall name Lender
and Borrower as the insured or additional insured, as their respective interests
may appear, and in the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a so-called New York standard non-
contributing mortgagee clause in favor of Lender providing that the loss
thereunder as and to the extent set forth in Section 4.4 hereof shall be payable
to Lender.
(e) All Policies of insurance provided for in Subsection 3.3(a) shall
contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for Borrower,
or of any tenant under any Lease or other occupant, or failure to comply with
the provisions of any Policy which might otherwise result in a forfeiture of the
insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or canceled without at least thirty (30)
days' written notice to Lender and any other party named therein as an insured;
(iii) each Policy shall provide that the issuers thereof shall give
written notice to Lender if the Policy has not been renewed fifteen (15) days
prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder.
(f) Borrower shall furnish to Lender, on or before thirty (30) days after
the close of each of Borrower's fiscal years, a statement certified by Borrower
or a duly authorized officer of Borrower of the amounts of insurance maintained
in compliance herewith, of the risks covered by such insurance and of the
insurance company or companies which carry such insurance.
(g) If at any time Lender is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, Lender shall have the
right, without notice to Borrower, to take such action as Lender deems necessary
to protect its interest in the Property, including the obtaining of such
insurance coverage as Lender in its sole discretion deems appropriate, and all
expenses incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Borrower to Lender upon
demand and until paid shall be secured by this Security Instrument and shall
bear interest in accordance with Section 10.3 hereof.
(h) If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, and if in part, the cost of restoration is estimated to
exceed $50,000, Borrower shall
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give prompt notice of such damage to Lender and shall promptly commence and
diligently prosecute the completion of the repair and restoration of the
Property as nearly as possible to the condition the Property was in immediately
prior to such fire or other casualty, with such alterations as may be reasonably
approved by Lender (the "Restoration") and otherwise in accordance with Section
4.4 of this Security Instrument. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender may, but
shall not be obligated to make proof of loss if not made promptly by Borrower;
(i) In the event of foreclosure of this Security Instrument, or other
transfer of title to the Property in extinguishment in whole or in part of the
Debt, all right, title and interest of Borrower in and to such policies then in
force concerning the Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.
Section 3.4 Payment of Taxes, etc. Borrower shall promptly pay all
---------------------
taxes, assessments, water rates, sewer rents, governmental impositions, and
other charges, including vault charges and license fees for the use of vaults,
chutes and similar areas adjoining the Land, now or hereafter levied or assessed
or imposed against the Property or any part thereof (the "Taxes"), all ground
rents, maintenance charges and similar charges, now or hereafter levied or
assessed or imposed against the Property or any part thereof (the "Other
Charges"), and all charges for utility services provided to the Property as same
become due and payable, in each case to the extent payable by Borrower directly.
Borrower will deliver to Lender, promptly upon Lender's request, evidence
satisfactory to Lender that the Taxes, Other Charges and such utility service
charges have been so paid or are not then delinquent. Borrower shall not suffer
and shall promptly cause to be paid and discharged any lien or charge whatsoever
which may be or become a lien or charge against the Property (other than a
Permitted Encumbrance). After prior notice to Lender, in the case of any
material item, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any of
the Taxes, provided that (i) no Event of Default exists under this Security
Instrument or the Credit Agreement, (ii) Borrower is permitted to do so under
the provisions of the Ground Lease, if applicable, (iii) such proceeding shall
suspend the collection of the Taxes from Borrower and from the Property, (iv)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower or the Property is subject
and shall not constitute a default thereunder, (v) neither the Property nor any
part thereof or interest therein will be in danger of being sold, forfeited,
terminated, cancelled or lost as a result of such proceeding, (vi) Borrower
shall have set aside adequate reserves for the payment of the Taxes, together
with all interest and penalties thereon, and (vii) Borrower shall have furnished
such security as may be required in the proceeding to insure the payment of any
such Taxes, together with all interest and penalties thereon.
Section 3.5 Escrow Fund. If an Event of Default (hereinafter defined)
-----------
shall have occurred and be continuing, at the option of Lender, evidenced by a
written notice thereof to Borrower, Borrower shall thereafter pay to Lender on
the first day of each calendar month (a)
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one-twelfth of an amount which would be sufficient to pay the Taxes payable, or
estimated by Lender to be payable, during the next ensuing twelve (12) months
and (b) one-twelfth of an amount which would be sufficient to pay the Insurance
Premiums due for the renewal of the coverage afforded by the Policies upon the
expiration thereof (the amounts in (a) and (b) above shall be called the "Escrow
Fund"). So long as the Escrow Fund is in effect, Borrower agrees to notify
Lender immediately of any changes to the amounts, schedules and instructions for
payment of any Taxes and Insurance Premiums of which it has obtained knowledge
and authorizes Lender or its agent to obtain the bills for Taxes and Other
Charges directly from the appropriate taxing authority. The Escrow Fund and the
payments of interest or principal, or both, payable pursuant to the Note shall
be added together and shall be paid as an aggregate sum by Borrower to Lender.
So long as the Escrow Fund is in effect, Lender will apply the Escrow Fund to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to Sections 3.3 and 3.4 hereof, and if the amount of the Escrow Fund
shall exceed the amounts due for Taxes and Insurance Premiums pursuant to
Sections 3.3 and 3.4 hereof, Lender shall, in its discretion, return any excess
to Borrower or credit such excess against future payments to be made to the
Escrow Fund. If the Escrow Fund is not sufficient to pay the items set forth in
clauses (a) and (b) of this Section 3.5 above, Borrower shall promptly pay to
Lender, upon demand, an amount which Lender shall estimate as sufficient to make
up the deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other moneys held by Lender. No earnings or interest on the
Escrow Fund shall be payable to Borrower.
Section 3.6 Condemnation. Borrower shall promptly give Lender notice of
------------
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments reasonably requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Notwithstanding any taking by
any public or quasi-public authority through eminent domain or otherwise
(including any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced as a result of such condemnation or eminent domain
proceeding until any award or payment therefor shall have been actually received
and applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited to the interest
paid on the award by the condemning authority but shall be entitled to receive
out of the award interest at the rate or rates provided herein or in the Note.
If the Property or any portion thereof is taken by a condemning authority,
Borrower shall promptly commence and diligently prosecute the Restoration of the
Property and otherwise comply with the provisions of Section 4.4 of this
Security Instrument. If the Property is sold, through foreclosure or otherwise,
prior to the receipt by Lender of the award or payment, Lender shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the award or payment, or a portion thereof
sufficient to pay the Debt.
-11-
Section 3.7 Leases and Rents. (a) Except as otherwise consented to by
----------------
Lender, all Leases shall be written on the standard form of lease which shall
have been approved by Lender. Borrower shall furnish Lender with executed copies
of all Leases. In addition, all renewals of Leases and all proposed leases shall
provide for rental rates and terms comparable to existing local market rates and
terms and shall be arms-length transactions with bona fide, independent third-
party tenants (except for approximately 8,000 square feet of space in the
property located at 12348 High Bluff Drive, which is occupied by Borrower or its
affiliate (the "Related Party Space")). All proposed leases and renewals of
existing Leases other than Minor Leases (hereinafter defined) shall be subject
to the prior approval of Lender and its counsel, at Borrower's expense. All
Leases hereafter entered into shall provide that they are subordinate to this
Security Instrument and that the lessee agrees to attorn to Lender, or the
tenant shall execute a subordination, nondisturbance and attornment agreement
satisfactory to Lender. Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases and shall not do or permit
to be done anything to materially impair the value of the Leases as security for
the Debt; (ii) shall promptly send copies to Lender of all notices of default
which Borrower shall send or receive thereunder; (iii) shall enforce in a
commercially prudent manner all of the terms, covenants and conditions contained
in the Leases upon the part of the lessee thereunder to be observed or
performed; (iv) shall not collect any of the Rents more than one (1) month in
advance; (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents other than in favor of Lender; (vi) shall not alter,
modify or change the material terms of the Leases in a material adverse manner
without the prior written consent of Lender, or cancel or terminate the Leases
except in accordance with their respective terms or accept a surrender thereof
(except in the event of a default by the tenant under the Lease) or convey or
transfer or suffer or permit a conveyance or transfer of the Land or of any
interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, lessees thereunder; (vii) shall
not alter, modify or change the terms of any guaranty, letter of credit or other
credit support with respect to the Leases (the "Lease Guaranty") in a manner
adverse to Lender's interests or cancel or terminate such Lease Guaranty except
in accordance with its terms without the prior written consent of Lender; and
(viii) shall not consent to any assignment of or subletting under the Leases not
in accordance with their terms, without the prior written consent of Lender.
(b) Notwithstanding the provisions of Subsection (a) above, renewals of
existing Leases and proposed Leases shall not be subject to the prior approval
of Lender provided: (i) the renewal Lease or proposed lease covers less than
15,000 rentable square feet of space ("Minor Leases"), (ii) no rent credits,
free rents or concessions have been granted under the renewal Lease or proposed
lease in excess of then current market terms, (iii) the renewal Lease or
proposed lease shall provide for rental rates and terms comparable to existing
local market rates and terms, but in no event less than the previous lease for
such space, and (iv) the renewal Lease or proposed lease shall be an arms-length
transaction with a bona fide, independent third party tenant (except with
respect to the Related Party Space). Borrower shall deliver to Lender copies of
all Leases which are entered into pursuant to the preceding sentence together
with Borrower's certification that it has satisfied all of the conditions of the
preceding sentence within thirty (30) days after the execution of the Lease.
-12-
(c) Upon and during the continuance of an Event of Default, to the extent
permitted by law, Borrower shall promptly deposit with Lender any and all moneys
actually received by Borrower representing security deposits under the Leases
(the "Security Deposits"). Lender shall hold the Security Deposits (i) in
accordance with the terms of the respective Lease, and shall only release the
Security Deposits in order to return a tenant's Security Deposit to such tenant
if such tenant is entitled to the return of the Security Deposit under the terms
of the Lease and is not otherwise in default under the Lease, or (ii) to
Borrower, if Borrower is entitled thereto pursuant to the provisions of the
Lease. To the extent required by Applicable Laws (defined below), Lender shall
hold the Security Deposits in an interest bearing account selected by Lender in
its sole discretion.
Section 3.8 Maintenance of Property. Borrower shall cause the Property
-----------------------
to be maintained in a good and safe condition and repair, subject to ordinary
wear and tear. The Improvements and the Personal Property shall not be removed,
demolished or materially altered (except for normal replacement of the Personal
Property) without the consent of Lender. Borrower shall promptly repair, replace
or rebuild any part of the Property which may be destroyed by any casualty, or
become damaged, worn or dilapidated or which may be affected by any proceeding
of the character referred to in Section 3.6 hereof and shall complete and pay
for any structure at any time in the process of construction or repair on the
Land. Borrower shall not initiate, join in, acquiesce in, or consent to any
change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Property or any part thereof. If under applicable zoning provisions the use of
all or any portion of the Property is or shall become a nonconforming use,
Borrower will not cause or permit the nonconforming use to be discontinued or
abandoned without the express written consent of Lender, which consent shall not
be unreasonably withheld or delayed.
Section 3.9 Waste. Borrower shall not commit or suffer any waste of the
-----
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that could reasonably be expected
to result in the invalidation or cancellation of any Policy, or do or permit to
be done thereon anything that may in any way materially impair the value of the
Property or the security of this Security Instrument. Borrower will not, without
the prior written consent of Lender, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of the Land, regardless of the depth thereof or the method of mining
or extraction thereof.
Section 3.10 Compliance With Laws. (a) Borrower shall promptly comply
--------------------
with all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including the Americans with Disabilities Act ("ADA")
(collectively, the "Applicable Laws"), to the extent provided in Section 6.1(a)
of the Credit Agreement.
-13-
(b) Borrower shall from time to time, upon Lender's request, provide Lender
with evidence satisfactory to Lender that the Property complies with all
Applicable Laws or is exempt from compliance with Applicable Laws.
(c) Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
specific Applicable Laws from an independent architect, engineer, or other
person acceptable to Lender.
(d) Borrower shall give prompt notice to Lender of the receipt by Borrower
of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
(e) Borrower will take commercially reasonable measures to prevent, and
will not engage in or knowingly permit, any illegal activities at the Property.
Section 3.11 Books and Records. Borrower and any Guarantors (defined in
-----------------
Subsection 10.1(e)) and Indemnitors (defined in Subsection 10.1(k)), if any,
shall keep adequate books and records of account as provided in the Credit
Agreement.
Section 3.12 Payment For Labor and Materials. Borrower will promptly pay
-------------------------------
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined below).
Section 3.13 Performance of Other Agreements. Borrower shall observe and
-------------------------------
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property, or given by Borrower to Lender for the purpose of further securing an
obligation secured hereby and any amendments, modifications or changes thereto.
Section 3.14 Change of Name, Identity or Structure. Borrower will not
-------------------------------------
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying Lender of such change in writing at least thirty (30) days prior to
the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of Lender.
-14-
Borrower will execute and deliver to Lender, prior to or contemporaneously with
the effective date of any such change, any financing statement or financing
statement change required by Lender to establish or maintain the validity,
perfection and priority of the security interest granted herein. At the request
of Lender, Borrower shall execute a certificate in form satisfactory to Lender
listing the trade names under which Borrower intends to operate the Property,
and representing and warranting that Borrower does business under no other trade
name with respect to the Property.
Section 3.15 Existence. Borrower will continuously maintain its
---------
existence and its rights to do business in the state where the Property is
located together with its franchises and trade names.
Article 4 - SPECIAL COVENANTS
Borrower covenants and agrees that:
Section 4.1 Property Use. The Property shall be used only as commercial
------------
buildings and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's sole and absolute discretion.
Section 4.2 ERISA. (a) Borrower shall not engage in any transaction
-----
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Note, this Security
Instrument and the Other Security Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. (S) 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests
in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R.
(S) 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. (S) 2510.3-101(c) or (e) or
an investment company registered under The Investment Company Act of 1940.
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Section 4.3 Intentionally Deleted.
---------------------
Section 4.4 Restoration. As used herein, an "Individual Premises" shall
-----------
mean each of (x) the Land conveyed pursuant to the Ground Lease and the
Improvements now or hereafter erected or located thereon and (y) each parcel of
Land described in Exhibit A and the Improvements now or hereafter erected or
located thereon. The following provisions shall apply in connection with the
Restoration of each Individual Premises:
(a) If the Net Proceeds (as defined below) shall be less than $1,000,000.00
and the costs of completing the Restoration shall be less than $1,000,000.00,
the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided
that all of the conditions set forth in Subsection 4.4(b)(i) are met and
Borrower delivers to Lender a written undertaking to expeditiously commence and
to satisfactorily complete with due diligence the Restoration in accordance with
the terms of this Security Instrument.
(b) If the Net Proceeds are equal to or greater than $1,000,000.00 or the
costs of completing the Restoration is equal to or greater than $1,000,000.00
Lender shall make the Net Proceeds available for the Restoration in accordance
with the provisions of this Subsection (b). The term "Net Proceeds" for purposes
of this Section 4.4 shall mean: (i) the net amount of all insurance proceeds
received by Lender pursuant to Subsections 3.3(a) of this Security Instrument as
a result of such damage or destruction, after deduction of its reasonable costs
and expenses (including reasonable counsel fees), if any, in collecting same
("Insurance Proceeds"), or (ii) the net amount of all awards and payments
received by Lender with respect to a taking referenced in Section 3.6 of this
Security Instrument, after deduction of its reasonable costs and expenses
(including reasonable counsel fees), if any, in collecting same ("Condemnation
Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for the
Restoration provided that each of the following conditions are met:
(A) no Event of Default shall have occurred and be
continuing under the Note, this Security Instrument or any of the Other Security
Documents;
(B) Borrower shall commence the Restoration as soon as
reasonably practicable (but in no event later than thirty (30) days after such
damage or destruction or taking, whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion;
(C) Lender shall be satisfied that any operating deficits,
including all scheduled payments of principal and interest under the Note which
will be incurred with respect to the Property as a result of the occurrence of
any such fire or other casualty or taking, whichever the case may be, will be
covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in
Subsection 3.3(a)(iii), if applicable, or (3) by other funds of Borrower;
-16-
(D) Lender shall be satisfied that, upon the completion of
the Restoration, the Debt Service Coverage Ratio (as defined in the Credit
Agreement) shall be at least 1.25 to 1.0, as determined by Lender in its sole
and absolute discretion;
(E) Lender shall be satisfied that the Restoration will be
completed on or before the earliest to occur of (1) twelve (12) months prior to
the Maturity Date (as defined in the Credit Agreement), (2) twelve (12) months
after the occurrence of such fire or other casualty or taking, whichever the
case may be, or (3) such time as may be required under applicable zoning law,
ordinance, rule or regulation in order to repair and restore the Individual
Premises to the condition it was in immediately prior to such fire or other
casualty or to as nearly as possible the condition it was in immediately prior
to such taking, as applicable;
(F) the Individual Premises and the use thereof after the
Restoration will be in compliance with and permitted under all applicable zoning
laws, ordinances, rules and regulations;
(G) the Restoration shall be done and completed by Borrower
in an expeditious and diligent fashion and in compliance with all applicable
governmental laws, rules and regulations (including all applicable Environmental
Laws) defined below;
(H) such fire or other casualty or taking, as applicable,
does not result in the loss of access to the Individual Premises, including the
Improvements thereof; and
(I) no default shall have occurred and be continuing
pursuant to the Ground Lease.
(ii) The Net Proceeds not otherwise disbursed to Borrower in
accordance herewith shall be held by Lender and, until disbursed in accordance
with the provisions of this Subsection 4.4(b), shall constitute additional
security for the Obligations. The Net Proceeds shall be disbursed by Lender to,
or as directed by, Borrower from time to time during the course of the
Restoration, upon receipt of evidence satisfactory to Lender that (A) all
materials installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices of
pendency, stop orders, mechanic's or materialman's liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Property arising out of the Restoration which have not either been fully bonded
to the satisfaction of Lender and discharged of record or in the alternative
fully insured to the satisfaction of Lender by the title company insuring the
lien of this Security Instrument.
(iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and acceptance in all respects by
Lender and by an independent consulting engineer selected by Lender (the
"Casualty Consultant"). Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained in
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connection with the Restoration. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration, including
reasonable counsel fees and disbursements and the Casualty Consultant's fees,
shall be paid by Borrower.
(iv) In no event shall Lender be obligated to make disbursements of
the Net Proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Casualty Consultant, minus the Casualty Retainage. The term "Casualty
-----
Retainage" as used in this Subsection (b) shall mean an amount equal to 10% of
the costs actually incurred for work in place as part of the Restoration, as
certified by the Casualty Consultant, until the Restoration has been completed.
The Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection (b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection (b) and that all
approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Lender, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration, Borrower shall
deposit the deficiency (the "Net Proceeds Deficiency") with Lender before any
further disbursement of the Net Proceeds shall be made. The Net Proceeds
Deficiency deposited with Lender shall be held by Lender and shall be disbursed
for costs actually incurred in connection with the Restoration on the same
conditions applicable to the disbursement of the Net Proceeds, and until so
disbursed pursuant to this Subsection 4.4(b) shall constitute additional
security for the Obligations.
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(vii) The excess, if any, of the Net Proceeds and the remaining
balance, if any, of the Net Proceeds Deficiency deposited with Lender after the
Casualty Consultant certifies to Lender that the Restoration has been completed
in accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
(c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vii) may be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same may be paid, either in whole or in part, to
Borrower for such purposes as Lender shall designate, in its discretion. If
Lender shall receive and retain Net Proceeds, the lien of this Security
Instrument shall be reduced only by the amount thereof received and retained by
Lender and actually applied by Lender in reduction of the Debt.
Section 4.5 The Ground Lease. (a) Borrower shall (i) pay all rents,
----------------
additional rents and other sums required to be paid by Borrower, as tenant under
and pursuant to the provisions of the Ground Lease, (ii) diligently perform and
observe all of the terms, covenants and conditions of the Ground Lease on the
part of Borrower, as tenant thereunder, to be performed and observed, unless
such performance or observance shall be waived or not required by the landlord
under the Ground Lease ("Ground Lessor"), to the end that all things shall be
done which are necessary to keep unimpaired the rights of Borrower, as tenant,
under the Ground Lease, and (iii) promptly notify Lender of the giving of any
notice by the Ground Lessor to Borrower of any of the terms, covenants or
conditions of the Ground Lease on the part of Borrower, as tenant thereunder, to
be performed or observed and deliver to Borrower a true copy of each such
notice.
(b) Borrower shall not, without the prior consent of Lender, surrender the
leasehold estate created by the Ground Lease or terminate or cancel the Ground
Lease or modify, change, supplement, alter or amend the Ground Lease, in any
respect, either orally or in writing, and Borrower hereby assigns to Lender, as
further security for the payment of the Debt and for the performance and
observance of the terms, covenants and conditions of this Security Instrument,
all of the rights, privileges and prerogatives of Borrower, as tenant under the
Ground Lease, to surrender the leasehold estate created by the Ground Lease or
to terminate, cancel, modify, change, supplement, alter or amend the Ground
Lease, and any such surrender of the leasehold estate created by the Ground
Lease without the prior consent of Lender shall be void and of no force and
effect.
(c) If Borrower shall default in the performance or observance of any term,
covenant or condition of the Ground Lease on the part of Borrower, as tenant
thereunder, to be performance or observed, then, without limiting the generality
of the other provisions of this Security Instrument, and without waiving or
releasing Borrower from any of its obligations
-19-
hereunder, Lender shall have the right, but shall be under no obligation, to pay
any sums and to perform any act or take any action as may be appropriate to
cause all of the terms, covenants and conditions of the Ground Lease on the part
of Borrower, as tenant thereunder, to be performed or observed to be promptly
performed or observed on behalf of Borrower, to the end that the rights of
Borrower in, to and under the Ground Lease shall be kept unimpaired and free
from default. If Lender shall make any payment or perform any act or take action
in accordance with the preceding sentence, Lender will notify Borrower of the
making of any such payment, the performance of any such act, or taking of any
such action. In any such event, subject to the rights of lessees, sublessees and
other occupants under the Leases, Lender and any person designated by Lender
shall have, and are hereby granted, the right to enter upon the Leased Land
(such term being used herein as defined in the Credit Agreement) and at any time
and from time to time for the purpose of taking any such action.
(d) If Ground Lessor shall deliver to Lender a copy of any notice of
default sent by Ground Lessor to Borrower, as tenant under the Ground Lease,
such notice shall constitute full protection to Lender for any action taken or
omitted to be taken by Lender, in good faith, in reliance thereon.
(e) Borrower shall, from time to time, use its best efforts to obtain from
Ground Lessor such certificates of estoppel with respect to compliance by
Borrower with the terms of the Ground Lease as may reasonably be requested by
Lender in substantially the form delivered to Lender on or prior to the date
hereof.
(f) Borrower shall exercise each individual option, if any, to extend or
renew the term of the Ground Lease upon demand by Lender made any time within
one (1) year of the last day upon which any such option may be exercised, and
Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to
exercise any such option in the name of and upon behalf of Borrower, which power
of attorney shall be irrevocable and shall be deemed to be coupled with an
interest.
(g) So long as any portion of the Debt shall remain unpaid, unless Lender
shall otherwise consent, the fee title to the Land, and the leasehold estate
therein created pursuant to the provisions of the Ground Lease shall not merge
but shall always be kept separate and distinct, notwithstanding the union of
such estates in Borrower, or in any other person by purchase, option of law or
otherwise. If Lender shall acquire the fee title to the Land and the leasehold
estate therein created pursuant to the provisions of the Ground Lease, by
foreclosure of this Secured Instrument or otherwise, such estates shall not
merge as a result of such acquisition and shall remain separate and distinct for
all purposes after such acquisition unless and until Lender shall elect to merge
such estates.
(h) To the extent permitted by law, the price payable by Borrower or any
other person or entity in the exercise of any right of redemption following
foreclosure of the Property demised pursuant to the Ground Lease shall include
all rents paid and other sums advanced by Lender,
-20-
together with interest thereon at the Default Rate, as ground lessee under the
Ground Lease, on behalf of Borrower on account of such Property.
(i) Upon acquisition of the fee title or any other estate, title or
interest in the Leased Land, this Security Instrument shall, automatically and
without the necessity of execution of any other documents, attach to and cover
and be a lien upon such other estate so acquired, and such other estate shall be
considered as mortgaged, assigned and conveyed to Lender and the lien hereof
spread to cover such estate with the same force and effect as though
specifically herein mortgaged, assigned and conveyed. Borrower shall execute
such instruments as Lender may require to confirm any such spreads. The
provisions of this subsection (i) shall not apply if Lender acquires title to
the Leased Land unless Lender shall so elect.
(j) Each Lease hereafter made for space in the improvements located on the
Leased Property (each, a "Leased Property Space Lease") and each renewal of any
existing Leased Property Space Lease shall provide that, (i) in the event of the
termination of the Ground Lease, the Leased Property Space Lease shall not
terminate or be terminable by the tenant thereunder; (ii) in the event of any
action for the foreclosure of this Security Instrument, the Leased Property
Space Lease shall not terminate or be terminable by the tenant thereunder by
reason of the termination of the Ground Lease unless such tenant is specifically
named and joined in any such action and unless a judgment is obtained therein
against such tenant; and (iii) in the event that the Ground Lease is terminated
as aforesaid, the tenant under the Leased Property Space Lease shall attorn to
the tenant under the Ground Lease or to the purchaser at the sale of the Leased
Property on such foreclosure, as the case may be.
(k) Borrower hereby assigns, transfers and sets over to Lender all of
Borrower's claims and rights to the payment of damages arising from any
rejection by the Ground Lessor of the Ground Lease under the Bankruptcy Code.
Borrower shall notify Lender promptly (and in any event within ten (10) days) of
any claim, suit action or proceeding relating to the rejection of the Ground
Lease. Lender is hereby irrevocably appointed as Borrower's attorney-in-fact,
coupled with an interest, with exclusive power to file and prosecute, to the
exclusion of Borrower during the continuance of an Event of Default, any proofs
of claim, complaints, motions, applications, notices and other documents, in any
case in respect of the Ground Lessor under the Bankruptcy Code. Borrower may
make any compromise or settlement in connection with such proceedings (subject
to Lender's reasonable approval); provided, however, that Lender shall be
authorized and entitled to compromise or settle any such proceeding if such
compromise or settlement is made after the occurrence and during the continuance
of an Event of Default. Borrower shall promptly execute and deliver to Lender
any and all instruments reasonably required in connection with any such
proceeding after request therefor by Lender. Except as set forth above, Borrower
shall not adjust, compromise, settle or enter into any agreement with respect to
such proceedings without the prior written consent of Lender.
(l) Borrower shall not, without Lender's prior written consent, elect to
treat the Ground Lease as terminated under Section 365(h)(l) of the Bankruptcy
Code. Any such election made without Lender's prior written consent shall be
void.
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(m) If pursuant to Section 365(h)(2) of the Bankruptcy Code, Borrower seeks
to offset against the rent reserved in the Ground Lease the amount of any
damages caused by the non-performance by the Ground Lessor of any of the Ground
Lessor's obligations under the Ground Lease after the rejection by the Ground
Lessor of the Ground Lease under the Bankruptcy Code, Borrower shall, prior to
effecting such offset, notify Lender of its intention to do so, setting forth
the amounts proposed to be so offset and the basis therefor. If Lender has
failed to object as aforesaid within ten (10) days after notice from Borrower in
accordance with the first sentence of this subsection (m), Borrower may proceed
to effect such offset in the amounts set forth in Borrower's notice. Neither
Lender's failure to object as aforesaid nor any objection or other communication
between Lender and Borrower relating to such offset shall constitute an approval
of any such offset by Lender. Borrower shall indemnify and save Lender harmless
from and against any and all claims, demands, actions, suits, proceedings,
damages, losses, costs and expenses of every nature whatsoever (including
reasonable attorneys' fees and disbursements) arising from or relating to any
such offset by Borrower against the rent reserved in the Ground Lease, other
than to the extent arising from Lender's gross negligence or willful misconduct.
(n) If any action, proceeding, motion or notice shall be commenced or filed
in respect of Borrower or, after the occurrence and during the continuance of an
Event of Default, the Property in connection with any case under the Bankruptcy
Code, Lender shall have the option, to the exclusion of Borrower, exercisable
upon notice from Lender to Borrower, to conduct and control any such litigation
with respect to the Ground Lease with counsel of Lender's choice. Lender may
proceed in its own name or in the name of Borrower in connection with any such
litigation, and Borrower agrees to execute any and all powers, authorizations,
consents and other documents required by Lender in connection therewith.
Borrower shall pay to Lender all costs and expenses (including reasonable
attorneys' fees and disbursements) paid or incurred by Lender in connection with
the prosecution or conduct of any such proceedings within ten (10) days after
notice from Lender setting forth such costs and expenses in reasonable detail.
Any such costs or expenses not paid by Borrower as aforesaid shall be secured by
the lien of this Security Instrument, shall be added to the principal amount of
the Debt and shall bear interest at the Default Interest Rate. Borrower shall
not commence any action, suit, proceeding or case, or file any application or
make any motion, in respect of the Ground Lease in any such case under the
Bankruptcy Code without the prior written consent of Lender.
(o) Borrower shall immediately, after obtaining knowledge thereof, notify
Lender of any filing by or against the Ground Lessor of a petition under the
Bankruptcy Code. Borrower shall thereafter forthwith give written notice of such
filing to Lender, setting forth any information available to Borrower as to the
date of such filing, the court in which such petition was filed, and the relief
sought therein. Borrower shall promptly deliver to Lender following receipt any
and all notices, summonses, pleadings, applications and other documents received
by Borrower in connection with any such petition and any proceedings relating
thereto.
(p) If there shall be filed by or against Borrower a petition under the
Bankruptcy Code, and Borrower, as the tenant under the Ground Lease, shall
determine to reject the Ground
-22-
Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall
give Lender not less than ten (10) days' prior notice of the date on which
Borrower shall apply to the bankruptcy court for authority to reject the Ground
Lease. Lender shall have the right, but not the obligation, to serve upon
Borrower within such 10-day period a notice stating that (i) Lender demands that
Borrower assume and assign the Ground Lease to Lender pursuant to Section 365 of
the Bankruptcy Code and (ii) Lender covenants to cure or provide adequate
assurance of prompt cure of all defaults and provide adequate assurance of
future performance under the Ground Lease. If Lender serves upon Borrower the
notice described in the preceding sentence, Borrower shall not seek to reject
the Ground Lease and shall comply with the demand provided for in clause (i) of
the preceding sentence within thirty (30) days after the notice shall have been
given, subject to the performance by Lender of the covenant provided for in
clause (ii) of the preceding sentence.
(q) Effective upon the entry of an order for relief in respect of Borrower
under the Bankruptcy Code, Borrower hereby assigns and transfers to Lender a
non-exclusive right to apply to the Bankruptcy Code under Section 365(d)(4) of
the Bankruptcy Code for an order extending the period during which the Ground
Lease may be rejected or assumed.
Article 5 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section 5.1 Warranty of Title. Borrower warrants the title to the Land,
-----------------
the Improvements, the Personal Property and the Ground Lease, subject to
Permitted Encumbrances.
Section 5.2 Authority. Borrower (and the undersigned representative of
---------
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section 5.3 Legal Status and Authority. Borrower (a) is duly organized,
--------------------------
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section 5.4 Validity of Documents. (a) The execution, delivery and
---------------------
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the partnership
power of Borrower; (ii) have been authorized by all requisite partnership
action; (iii) have received all necessary approvals and consents,
-23-
corporate, governmental or otherwise; (iv) will not violate, conflict with,
result in a breach of or constitute (with notice or lapse of time, or both) a
default under any provision of law, any order or judgment of any court or
governmental authority, the partnership agreement or other governing instruments
of Borrower, or any indenture, agreement or other instrument to which Borrower
is a party or by which it or any of its assets or the Property is or may be
bound or affected; (v) will not result in the creation or imposition of any
lien, charge or encumbrance whatsoever upon any of its assets, except the lien
and security interest created hereby; and (vi) will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument and an Assignment of Leases
and Rents being given contemporaneously herewith by Borrower to Lender in
appropriate land records in the State where the Property is located and except
for Uniform Commercial Code filings relating to the security interest created
hereby); and (b) the Note, this Security Instrument and the Other Security
Documents constitute the legal, valid and binding obligations of Borrower.
Section 5.5 Litigation. There is no action, suit or proceeding,
----------
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of Borrower's knowledge, threatened or
contemplated against, or affecting, Borrower, a Guarantor, if any, an
Indemnitor, if any, or the Property that would be reasonably expected to have a
Material Adverse Effect (said term being used herein as defined in the Credit
Agreement) that has not been disclosed to Lender or is not adequately covered by
insurance, as determined by Lender in its sole and absolute discretion.
Section 5.6 Status of Property. (a) To Borrower's knowledge, no portion
------------------
of the Improvements is located in an area identified by the Secretary of Housing
and Urban Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, as amended, or any successor law, or, if
located within any such area, Borrower has obtained and will maintain the
insurance prescribed in Section 3.3(a)(i)(y) hereof.
(b) Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business with respect to the Property and all
required zoning, building code, land use, environmental and other similar
permits or approvals relating to the foregoing, all of which are in full force
and effect as of the date hereof and not subject to revocation, suspension,
forfeiture or modification.
(c) To the best of Borrower's knowledge, the Property and the present and
contemplated use and occupancy thereof are in full compliance with all
Applicable Laws, including zoning ordinances, building codes, land use and
environmental laws, laws relating to the disabled (including the ADA) and other
similar laws.
(d) The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
-24-
(e) All public roads and streets necessary for service of and access to the
Property for the current or contemplated use thereof have been completed, are
serviceable and all-weather and are physically and legally open for use by the
public.
(f) The Property is served by public water and sewer systems.
(g) The Property is presently free from damage caused by fire or other
casualty.
(h) All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements (i) have been paid in
full, or have been bonded, or adequate reserves therefor have been established,
or (ii) are not delinquent in payment.
(i) Borrower has paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby and
the other Permitted Encumbrances.
(j) All liquid and solid waste disposal, septic and sewer systems located
on the Property are in a good and safe condition and repair and in compliance
with all Applicable Laws.
(k) All Improvements lie within the boundary of the Land.
Section 5.7 No Foreign Person. Borrower is not a "foreign person"
-----------------
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
Section 5.8 Separate Tax Lot. The Property is assessed for real estate
----------------
tax purposes as one or more wholly independent tax lot or lots, separate from
any adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section 5.9 ERISA Compliance. (a) As of the date hereof and throughout
----------------
the term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to
Title I of ERISA, and (ii) the assets of Borrower do not and will not constitute
"plan assets" of one or more such plans for purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of this Security
Instrument (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
-25-
Section 5.10 Leases. (a) Borrower is the sole owner of the entire
------
lessor's interest in the Leases; (b) the Leases are valid and enforceable in
accordance with their terms; (c) the terms of all alterations, modifications and
amendments to the Leases are reflected in the certified rent roll delivered to
and approved by Lender contemporaneously herewith; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated;
(e) none of the Rents have been collected for more than one (1) month in
advance; (f) the premises demised under the Leases have been completed and the
tenants under the Leases have accepted the same and have taken possession of the
same on a rent-paying basis, except as disclosed in the tenant estoppel letters
delivered by Borrower to Lender on the date hereof; (g) there exist no offsets
or defenses to the payment of any portion of the Rents; (h) no Lease contains an
option to purchase, right of first refusal to purchase, or any other similar
provision; and (i) no person or entity has any possessory interest in, or right
to occupy, the Property except under and pursuant to a Lease.
Section 5.11 Financial Condition. (a) Borrower is solvent, and no
-------------------
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, and (b) Borrower has
received reasonably equivalent value for the granting of this Security
Instrument.
Section 5.12 Business Purposes. The Loan is solely for the business
-----------------
purpose of Borrower, and is not for personal, family, household, or agricultural
purposes.
Section 5.13 Taxes. Borrower, any Guarantor and any Indemnitor have
-----
filed all federal, state, county, municipal, and city income and other tax
returns relating to Taxes required to have been filed by them and have paid all
Taxes and related liabilities which have become due pursuant to such returns or
pursuant to any assessments received by them, except such material items as are
being contested in good faith, and with respect to which Borrower, Guarantor or
Indemnitor, as the case may be, has advised Lender. Neither Borrower, any
Guarantor nor any Indemnitor knows of any basis for any additional assessment in
respect of any such taxes and related liabilities for prior years.
Section 5.14 Mailing Address. Borrower's mailing address, as set forth
---------------
in the opening paragraph hereof or as changed in accordance with the provisions
hereof, is true and correct.
Section 5.15 No Change in Facts or Circumstances. All information
-----------------------------------
submitted by or on behalf of Borrower in all rent rolls, reports, certificates,
financial statements and other documents submitted in connection with the Loan
or in satisfaction of the terms thereof, are accurate, complete and correct in
all material respects. There has been no adverse change in any condition, fact,
circumstance or event that would make any such information materially
inaccurate, incomplete or otherwise misleading.
Section 5.16 Disclosure. Borrower has disclosed to Lender all material
----------
facts and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading.
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Section 5.17 Third Party Representations. To the best of Borrower's
---------------------------
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section 5.18 Illegal Activity. No portion of the Property has been or
----------------
will be purchased with proceeds of any illegal activity.
Article 6 - OBLIGATIONS AND RELIANCES
Section 6.1 Relationship of Borrower and Lender. The relationship
-----------------------------------
between Borrower and Lender is solely that of debtor and creditor, and Lender
has no fiduciary or other special relationship with Borrower, and no term or
condition of any of the Note, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.
Section 6.2 No Reliance on Lender. The Borrower is experienced in the
---------------------
ownership and operation of properties similar to the Property. Borrower is not
relying on Lender's expertise, business acumen or advice in connection with the
Property.
Section 6.3 No Lender Obligations. (a) Notwithstanding the provisions of
---------------------
Subsections 1.1(g) and 1.1(l) or Section 3.7, Lender is not undertaking the
performance of (i) any obligations under the Leases; or (ii) any obligations
with respect to such agreements, contracts, certificates, instruments,
franchises, permits, trademarks, licenses and other documents.
(b) By accepting or approving anything required to be observed, performed
or fulfilled or to be given to Lender pursuant to this Security Instrument, the
Note or the Other Security Documents, including any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal, or insurance policy, Lender shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall not
constitute any warranty or affirmation with respect thereto by Lender.
Section 6.4 Reliance. Borrower recognizes and acknowledges that in
--------
accepting the Note, this Security Instrument and the Other Security Documents,
Lender is expressly and primarily relying on the truth and accuracy of the
warranties and representations set forth in Article 5 and in the Credit
Agreement without any obligation to investigate the Property and notwithstanding
any investigation of the Property by Lender; that such reliance existed on the
part of Lender prior to the date hereof; that the warranties and representations
are a material inducement to Lender in accepting the Note, this Security
Instrument and the Other Security Documents; and that Lender would not be
willing to make the Loan, this Security Instrument and the Other Security
Documents and accept this Security Instrument in the absence of the warranties
and representations as set forth in Article 5 and in the Credit Agreement.
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Article 7 - FURTHER ASSURANCES
Section 7.1 Recording of Security Instrument, etc. Borrower forthwith
-------------------------------------
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section 7.2 Further Acts, etc. Borrower will, at the cost of Borrower,
-----------------
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower should
Borrower fail to so execute and deliver, or without the signature of Borrower to
the extent Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Lender in the Property. Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of exercising and
perfecting any and all rights and remedies available to Lender at law and in
equity, including such rights and remedies available to Lender pursuant to this
Section 7.2.
Section 7.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws. (a)
-------------------------------------------------------
If any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower shall assume the payment of such
tax as an Obligation hereunder, to the extent permitted by law, and will pay the
tax, with interest and penalties thereon, if any, in each case within thirty
(30) days of demand by Lender. If Lender is advised based upon an opinion of
counsel chosen by it that the
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payment of tax by Borrower would be unlawful, or taxable to Lender in a material
amount, or unenforceable or provide the basis for a defense of usury, then
Lender shall have the option by written notice of not less than ninety (90) days
to declare the Debt immediately due and payable.
(b) Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
(c) If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section 7.4 Estoppel Certificates. (a) After request by Lender,
---------------------
Borrower, within ten (10) days (but no more frequently than semi-annually),
shall furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, setting forth (i) the amount of the original
principal amount of the Note, (ii) the unpaid principal amount of the Note,
(iii) the then-current rate of interest of the Note, (iv) the terms of payment
and maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (v) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note, the Security
Instrument or the Ground Lease, (vi) that the Note and this Security Instrument
are valid, legal and binding obligations and have not been modified or if
modified, giving particulars of such modification, (vii) whether any offsets or
defenses exist against the obligations secured hereby and, if any are alleged to
exist, a detailed description thereof, (viii) that all Leases are in full force
and effect and have not been modified (or if modified, setting forth all
modifications), (ix) the date to which the Rents thereunder have been paid
pursuant to the Leases, (x) whether or not, to the best knowledge of Borrower,
any of the lessees under the Leases are in default under the Leases, and, if any
of the lessees are in default, setting forth the specific nature of all such
defaults, (xi) the amount of security deposits held by Borrower under each Lease
and that such amounts are consistent with the amounts required under each Lease,
and (xii) as to any other matters reasonably requested by Lender and reasonably
related to the Leases, the obligations secured hereby, the Property or this
Security Instrument.
(b) Borrower shall use commercially reasonable efforts to deliver to
Lender, promptly upon request, duly executed estoppel certificates from any one
or more lessees as reasonably required by Lender attesting to such facts
regarding the Lease as Lender may reasonably require, including attestations
that each Lease covered thereby is in full force and effect with no defaults
thereunder on the part of any party, that none of the Rents have been paid more
than one month in advance, and that the lessee claims no defense or offset
against the full and timely
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performance of its obligations under the Lease except as may be disclosed in
said estoppel certificate.
Section 7.5 Splitting of Security Instrument. This Security Instrument
--------------------------------
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered by the then owner
of the Property, to Lender and/or its designee or designees substitute notes and
security instruments in such principal amounts, aggregating not more than the
then unpaid principal amount of this Security Instrument, and containing terms,
provisions and clauses similar to those contained herein and in the Note, and
such other documents and instruments as may be required by Lender.
Section 7.6 Replacement Documents. Upon receipt of an affidavit of an
---------------------
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or Other
Security Document, Borrower will issue, in lieu thereof, a replacement Note or
Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor.
Article 8 - DUE ON SALE/ENCUMBRANCE
Section 8.1 Lender Reliance. Borrower acknowledges that Lender has
---------------
examined and relied on the experience of Borrower in owning and operating
properties such as the Property in agreeing to make the Loan, and will continue
to rely on Borrower's ownership of the Property as a means of maintaining the
value of the Property as security for repayment of the Debt and the performance
of the Other Obligations. Borrower acknowledges that Lender has a valid interest
in maintaining the value of the Property so as to ensure that, should Borrower
default in the repayment of the Debt or the performance of the Other
Obligations, Lender can recover the Debt by a sale of the Property.
Section 8.2 No Sale/Encumbrance. Borrower agrees that it shall not merge
-------------------
with or into, or consolidate with or into, or sell, convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or any portion of the Property, except as permitted by Section 7.1 of the
Credit Agreement or Section 3.7 of this Deed of Trust. Borrower shall not,
without the prior written consent of Lender, create, assume or permit to exist
any encumbrance upon all or any portion of the Property except for Permitted
Encumbrances.
Section 8.3 Sale/Encumbrance Defined. A sale, conveyance, mortgage,
------------------------
encumbrance or transfer within the meaning of this Article 8 shall be deemed to
include (a) an installment sales agreement wherein Borrower agrees to sell the
Property or any substantial part thereof for a price to be paid in installments;
(b) an agreement by Borrower leasing all or a substantial part of the
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Property for other than actual occupancy by a space tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower's right, title and interest in and to any Leases or any Rents; (c) the
change, removal or resignation of the general partner of Borrower, or the
transfer or pledge of the partnership interest of the general partner to less
than 50% of all partnership interests of Borrower.
Section 8.4 Lender's Rights. Lender reserves the right to condition the
---------------
consent required under Section 8.2 of this Security Instrument to a modification
of the terms hereof and on assumption of the Note, the Credit Agreement, this
Security Instrument and the Other Security Documents as so modified by the
proposed transferee, payment of a transfer fee and all of Lender's expenses
incurred in connection with such transfer, the proposed transferee's continued
compliance with the covenants set forth in Sections 4.2 hereof, or such other
conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, encumbrance or transfer of the Property in violation of
the Loan Documents. This provision shall apply to every sale, conveyance,
mortgage, grant, bargain, encumbrance or transfer of the Property regardless of
whether voluntary or not, or whether or not Lender has consented to any previous
sale, conveyance, mortgage, encumbrance or transfer of the Property.
Article 9 - PREPAYMENT
Section 9.1 Prepayment Before Event of Default. The Debt may be prepaid
----------------------------------
only in strict accordance with the express terms and conditions of the Credit
Agreement, including the payment of any prepayment consideration as may be set
forth therein.
Section 9.2 Prepayment on Casualty and Condemnation. Provided no Event
---------------------------------------
of Default exists and is continuing under the Note, this Security Instrument or
the Other Security Documents, in the event of any prepayment of the Debt
pursuant to the terms of Section 4.4 hereof, no prepayment premium shall be due
in connection therewith, but Borrower shall be responsible for all other amounts
due under the Note, this Security Instrument and the Other Security Documents.
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Section 9.3 Prepayment After Event of Default. If a Default Prepayment
---------------------------------
(defined below) occurs, Borrower shall pay to Lender the entire Debt, including
the Prepayment Compensation (as defined in the Credit Agreement), if any,
payable pursuant to the provisions of the Note and the Credit Agreement. For
purposes of this Section 9.3, the term "Default Prepayment" shall mean a
prepayment of the principal amount of the Note made after the occurrence and
during the continuance of any Event of Default or an acceleration of the
Maturity Date (as defined in the Note) under any circumstances, including a
prepayment occurring in connection with reinstatement of this Security
Instrument provided by statute under foreclosure proceedings or exercise of a
power of sale, any statutory right of redemption exercised by Borrower or any
other party having a statutory right to redeem or prevent foreclosure, any sale
in foreclosure or under exercise of a power of sale or otherwise. Borrower
agrees that if, at any time prior to the Maturity Date an Event of Default
shall occur and be continuing, then a tender of payment by Borrower, or by
anyone on behalf of Borrower, of the amount necessary to satisfy all sums due
hereunder made at any time prior to judicial, public or private sale of the
property encumbered by this Security Instrument or under any other instrument
given as collateral security for the obligation evidenced by the Note shall
constitute an evasion of the payment terms thereof and shall be deemed to be a
voluntary prepayment hereunder, and any such payment, to the extent permitted by
law, therefore must include the Prepayment Compensation, if any, required under
the Credit Agreement. Borrower hereby expressly (a) waives any rights it may
have under California Civil Code 2954.10 to prepay the Debt, in whole or in
part, without penalty, upon acceleration of the maturity of the Debt, and (b)
agrees that if a prepayment of any or all of the Debt is made, following any
acceleration of the Maturity Date by the holder hereof on account of any
transfer or disposition as prohibited or restricted by Section 8.2 of this
Security Instrument, then Borrower shall be obligated to pay, concurrently
therewith, as a prepayment fee, the applicable sum specified in this paragraph.
By initialing this provision in the space provided below, the undersigned hereby
declares that Borrower's agreement to make the Loan at the interest rate and for
the term set forth in the Credit Agreement constitutes adequate consideration,
given individual weight by the undersigned, for this waiver and agreement.
INITIALS: ___________
Article 10 - DEFAULT
Section 10.1 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default":
(a) if any portion of the Debt is not paid prior to the third (3rd)
Business Day after the same is due or if the entire Debt is not paid on or
before the Maturity Date;
(b) if any of the Taxes or Other Charges is not paid when the same is due
and payable except to the extent such Taxes and Other Charges have been
deposited with Lender in accordance with the terms of this Security Instrument;
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(c) if the Policies are not kept in full force and effect, or if the
Policies are not delivered to Lender upon request or Borrower has not delivered
evidence of the renewal of the Policies fifteen (15) days prior to their
expiration as provided in Section 3.3(b);
(d) if Borrower violates or does not comply with any of the provisions of
Sections 3.7 or Article 8;
(e) if any representation or warranty of Borrower, Indemnitor or any
person guaranteeing payment of the Debt or any portion thereof or performance by
Borrower of any of the terms of this Security Instrument (a "Guarantor"), or any
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity (defined below) or any guaranty, or in
any certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;
(f) if an Event of Default shall occur under Section 9.1(g) of the Credit
Agreement;
(g) if Borrower shall be in default beyond any applicable grace period
under any other mortgage, deed of trust, deed to secure debt or other security
agreement covering any part of the Property whether it be superior or junior in
lien to this Security Instrument;
(h) if the Property becomes subject to any mechanic's, materialman's or
other lien other than a lien for Taxes not then due and payable, and the lien
shall remain undischarged of record (by payment, bonding or otherwise) for a
period of forty-five (45) days;
(i) if any federal tax lien is filed against the Property and same is not
discharged of record (by payment, bonding or otherwise) for a period of forty-
five (45) days;
(j) if (i) Borrower fails to timely provide Lender with the written
certification and evidence referred to in Section 4.2(b) hereof, or (ii)
Borrower consummates a transaction which would cause this Security Instrument or
Lender's exercise of its rights under this Security Instrument, the Note or the
Other Security Documents to constitute a nonexempt prohibited transaction under
ERISA or result in a violation of a state statute regulating governmental plans,
subjecting Lender to liability for a violation of ERISA or a state statute;
(k) if Borrower shall default beyond any applicable grace period in the
observance or performance of any term, covenant or condition of the Ground Lease
on the part of Borrower, as tenant thereunder, to be observed or performed,
unless any such observance or performance shall have been waived or not required
by the landlord under the Ground Lease, or if any one or more of the events
referred to in the Ground Lease shall occur which would cause the Ground Lease
to terminate without notice or action by the landlord thereunder or which would
entitle the landlord under the Ground Lease to terminate the Ground Lease and
the term thereof by giving notice to Borrower, as tenant thereunder, or if the
leasehold estate created by the Ground Lease shall be surrendered or the Ground
Lease shall be terminated or canceled for any reason or under any circumstance
whatsoever, or if any of the terms, covenants or conditions of the Ground Lease
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shall in any manner be modified, changed, supplemented, altered or amended in
any material manner or in any manner adverse to Lender without the consent of
Lender;
(l) if any default occurs under that certain environmental indemnity
agreement dated the date hereof given by Borrower and Kilroy Realty Corporation
("Indemnitor") to Lender (the "Environmental Indemnity") and such default
continues after the expiration of applicable notice and grace periods, if any;
(m) if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any; or
(n) if Borrower shall continue to be in default beyond the expiration of
any applicable grace periods under any other term, covenant or condition of the
Note, the Credit Agreement, this Security Instrument or the Other Security
Documents.
Section 10.2 Late Payment Charge. If any monthly installment of
-------------------
principal and interest is not paid on or before the third (3rd) Business Day
after the date on which it is due, Borrower shall pay to Lender upon demand an
amount equal to the lesser of five percent (5%) of such unpaid portion of the
outstanding monthly installment of principal and interest then due or the
maximum amount permitted by applicable law, to defray the expense incurred by
Lender in handling and processing such delinquent payment and to compensate
Lender for the loss of the use of such delinquent payment, and such amount shall
be secured by this Security Instrument and the Other Security Documents.
Section 10.3 Default Interest. Borrower does hereby agree that Lender
----------------
shall be entitled to receive interest on the entire principal amount of the Note
at the "Default Rate" (as defined in the Credit Agreement) as provided in
Section 4.3(b) of the Credit Agreement, or the maximum interest rate that
Borrower may by law pay, whichever is lower. Interest calculated at the Default
Rate shall be added to the Debt, and shall be deemed secured by this Security
Instrument. This clause, however, shall not be construed as an agreement or
privilege to extend the date of the payment of the Debt, nor as a waiver of any
other right or remedy accruing to Lender by reason of the occurrence of any
Event of Default.
Article 11 - RIGHTS AND REMEDIES
Section 11.1 Remedies. Upon the occurrence and during the continuance of
--------
any Event of Default, Borrower agrees that Lender may take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Borrower and in and to the Property, including the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
(a) declare the entire unpaid Debt to be immediately due and payable;
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(b) institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
(c) with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
(d) sell for cash or upon credit the Property or any part thereof and all
estate, claim, demand, right, title and interest of Borrower therein and rights
of redemption thereof, pursuant to power of sale or otherwise, at one or more
sales, as an entity or in parcels, at such time and place, upon such terms and
after such notice thereof as may be required or permitted by law;
(e) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein, in the
Note or in the Other Security Documents;
(f) subject to the provisions of Section 15.1 of this Security Instrument,
recover judgment on the Note and the Credit Agreement either before, during or
after any proceedings for the enforcement of this Security Instrument or the
Other Security Documents;
(g) apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
(h) subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (i) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (ii) complete any construction on the Property in such manner and form
as Lender deems advisable; (iii) make alterations, additions, renewals,
replacements and improvements to or on the Property; (iv) exercise all rights
and powers of Borrower with respect to the Property, whether in the name of
Borrower or otherwise, including, the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive all
Rents of the Property and every part thereof; (v) require Borrower to pay
monthly in advance to Lender, or any receiver appointed to collect the Rents,
the fair and
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reasonable rental value for the use and occupation of such part of the Property
as may be occupied by Borrower; (vi) require Borrower to vacate and surrender
possession of the Property to Lender or to such receiver and, in default
thereof, Borrower may be evicted by summary proceedings or otherwise; and (vii)
apply the receipts from the Property to the payment of the Debt, in such order,
priority and proportions as Lender shall deem appropriate in its sole discretion
after deducting therefrom all expenses (including reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all amounts necessary
to pay the Taxes, Other Charges, insurance and other expenses in connection with
the Property, as well as just and reasonable compensation for the services of
Lender, its counsel, agents and employees;
(i) exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (i) the right to take possession of the Personal
Property or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Personal Property,
and (ii) request Borrower at its expense to assemble the Personal Property and
make it available to Lender at a convenient place acceptable to Lender. Any
notice of sale, disposition or other intended action by Lender with respect to
the Personal Property sent to Borrower in accordance with the provisions hereof
at least ten (10) days prior to such action, shall constitute commercially
reasonable notice to Borrower;
(j) apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its uncontrolled discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
(iii) Interest on the unpaid principal balance of the Note;
(iv) All other sums payable pursuant to the Note, this Security
Instrument and the Other Security Documents, including advances made by
Lender pursuant to the terms of this Security Instrument;
(k) surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
(l) pursue such other remedies as Lender may have under applicable law; or
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(m) apply the undisbursed balance of any Net Proceeds Deficiency deposit,
together with interest thereon, to the payment of the Debt in such order,
priority and proportions as Lender shall deem to be appropriate in its
discretion.
In the event of a sale, by foreclosure, power of sale, or otherwise, of less
than all of the Property, this Security Instrument shall continue as a lien and
security interest on the remaining portion of the Property unimpaired and
without loss of priority. Notwithstanding the provisions of this Section 11.1 to
the contrary, if any Event of Default as described in clauses (i) or (ii) of
Subsection 9.1(g) of the Credit Agreement shall occur, the entire unpaid Debt
shall be automatically due and payable, without any further notice, demand or
other action by Lender.
Section 11.2 Application of Proceeds. The purchase money, proceeds and
-----------------------
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
Section 11.3 Right to Cure Defaults. Upon the occurrence and during the
----------------------
continuance of any Event of Default or if Borrower fails to make any payment or
to do any act as herein provided, Lender may, but without any obligation to do
so and without notice to or demand on Borrower and without releasing Borrower
from any obligation hereunder, make or do the same in such manner and to such
extent as Lender may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Instrument or collect the Debt, and the cost and expense
thereof (including reasonable attorneys' fees to the extent permitted by law),
with interest as provided in this Section 11.3, shall constitute a portion of
the Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or such failed
payment or act or in appearing in, defending, or bringing any such action or
proceeding shall bear interest at the Default Rate, for the period after notice
from Lender that such cost or expense was incurred to the date of payment to
Lender. All such costs and expenses incurred by Lender together with interest
thereon calculated at the Default Rate shall be deemed to constitute a portion
of the Debt and be secured by this Security Instrument and the Other Security
Documents and shall be immediately due and payable upon demand by Lender
therefor.
Section 11.4 Actions and Proceedings. Lender has the right to appear in
-----------------------
and defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.
Section 11.5 Recovery of Sums Required To Be Paid. Lender shall have the
------------------------------------
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any
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other action, for a default or defaults by Borrower existing at the time such
earlier action was commenced.
Section 11.6 Examination of Books and Records. Lender, its agents,
--------------------------------
accountants and attorneys shall have the right as provided in the Credit
Agreement to examine the records, books, management and other papers of Borrower
and its affiliates or of any Guarantor or Indemnitor, and to make copies and
extracts from the foregoing records and other papers, and to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property.
This Section 11.6 shall apply throughout the term of the Loan and without regard
to whether an Event of Default has occurred or is continuing.
Section 11.7 Other Rights, etc. (a) The failure of Lender to insist upon
-----------------
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument. Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower, any Guarantor or any Indemnitor to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the Other Security Documents, (ii) the release,
regardless of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the Other
Security Documents.
(b) It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
(c) Upon the occurrence of an Event of Default, Lender may resort for the
payment of the Debt to any other security held by Lender in such order and
manner as Lender, in its discretion, may elect. Lender may take action to
recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Lender thereafter to foreclose this Security
Instrument. The rights of Lender under this Security Instrument shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provision.
Lender shall not be limited exclusively to the rights and remedies herein stated
but shall be entitled to every right and remedy now or hereafter afforded at law
or in equity.
Section 11.8 Right to Release Any Portion of the Property. Lender may
--------------------------------------------
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument,
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or improving the position of any subordinate lienholder with respect thereto,
except to the extent that the obligations hereunder shall have been reduced by
the actual monetary consideration, if any, received by Lender for such release,
and may accept by assignment, pledge or otherwise any other property in place
thereof as Lender may require without being accountable for so doing to any
other lienholder. This Security Instrument shall continue as a lien and security
interest in the remaining portion of the Property.
Section 11.9 Recourse and Choice of Remedies. Notwithstanding any other
-------------------------------
provision of this Security Instrument, including Article 15 hereof, Lender and
other Indemnified Parties (defined in Section 13.1 below) are entitled to
enforce the obligations of Borrower, Guarantor and Indemnitor contained in
Sections 13.2,13.3 and 13.4 without first resorting to or exhausting any
security or collateral and without first having recourse to the Note or any of
the Property, through foreclosure or acceptance of a deed in lieu of foreclosure
or otherwise, and in the event Lender commences a foreclosure action against the
Property, Lender is entitled to pursue a deficiency judgment with respect to
such obligations against Borrower, Guarantor and Indemnitor. The provisions of
Sections 13.2, 13.3, 13.4, 15.3 and 15.4 are exceptions to any non-recourse or
exculpation provisions in the Note, this Security Instrument or the Other
Security Documents, and Borrower, Guarantor and Indemnitor are fully and
personally liable for the obligations to the extent provided pursuant to
Sections 13.2, 13.3, 13.4, 15.3 and 15.4. The liability of Borrower, Guarantor
and Indemnitor are not limited to the original principal amount of the Note.
Notwithstanding the foregoing, nothing herein shall inhibit or prevent Lender
from foreclosing pursuant to this Security Instrument or exercising any other
rights and remedies pursuant to the Note, this Security Instrument and the Other
Security Documents, whether simultaneously with foreclosure proceedings or in
any other sequence. A separate action or actions may be brought and prosecuted
against Borrower, whether or not action is brought against any other person or
entity or whether or not any other person or entity is joined in the action or
actions. In addition, Lender shall have the right but not the obligation to join
and participate in, as a party if it so elects, any administrative or judicial
proceedings or actions initiated in connection with any matter addressed in
Article 12 or Section 13.4.
Section 11.10 Right of Entry. Lender and its agents shall have the right
--------------
to enter and inspect the Property at all reasonable times, upon reasonable prior
notice except (i) in the event of an emergency, and (ii) if an Event of Default
has occurred and is continuing.
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Article 12 - ENVIRONMENTAL HAZARDS
Section 12.1 Environmental Representations and Warranties. To Borrower's
--------------------------------------------
knowledge: (a) there are no Hazardous Substances (defined below) or underground
storage tanks in, on, or under the Property, except those that are both (i) in
compliance with Environmental Laws (defined below) and with permits issued
pursuant thereto and (ii) fully disclosed to Lender in writing pursuant to the
written reports resulting from the environmental assessments of the Property
delivered to Lender (collectively, the "Environmental Report"); (b) there are no
past, present or threatened Releases (defined below) of Hazardous Substances in,
on, under or from the Property except as described in the Environmental Report;
(c) there is no threat of any Release of Hazardous Substances migrating to the
Property except as described in the Environmental Report; (d) there is no past
or present non-compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with the Property except as described in the
Environmental Report; (e) Borrower does not know of, and has not received, any
written or oral notice or other communication from any person or entity
(including a governmental entity) relating to Hazardous Substances or
Remediation (defined below) thereof, of possible liability of any person or
entity pursuant to any Environmental Law, other environmental conditions in
connection with the Property, or any actual or potential administrative or
judicial proceedings in connection with any of the foregoing that has not
otherwise been disclosed to Lender; and (f) Borrower has truthfully and fully
provided to Lender, in writing, any and all material information relating to
conditions in, on, under or from the Property that is known to Borrower and that
is contained in Borrower's files and records, including any reports relating to
Hazardous Substances in, on, under or from the Property and/or to the
environmental condition of the Property, that is not otherwise set forth in the
Environmental Report.
"Environmental Law" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger of Hazardous Substances to human
health or the environment. "Environmental Law" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including, but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal
Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the Endangered Species Act; the National Environmental Policy Act; and the
River and Harbors Appropriation Act, Sections 25115, 25117, 25122.7, 25140,
25249.8, 25281, 25501 and 25316 of the California Health and Safety Code,
Section 2782.6(d) of the California Civil Code and Title 22 of the California
Code of Regulations. "Environmental Law" also includes, but is not limited to,
any present and future federal, state and local laws, statutes, ordinances,
rules, regulations and the like, as well as common law: conditioning transfer of
property upon a negative declaration or other approval of a governmental
authority of the
-40-
environmental condition of the property; and requiring notification or
disclosure of Releases of Hazardous Substances or other environmental condition
of the Property to any governmental authority or other person or entity, whether
or not in connection with transfer of title to or interest in property.
"Hazardous Substances" include but are not limited to any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present or future Environmental Laws or that may have a
negative impact on human health or the environment, including but not limited to
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives.
"Release" of any Hazardous Substance includes but is not limited to any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Substances.
"Remediation" includes but is not limited to any response, remedial,
removal, or corrective action, any activity to cleanup, detoxify, decontaminate,
contain or otherwise remediate any Hazardous Substance, any actions to prevent,
cure or mitigate any Release of any Hazardous Substance, any action to comply
with any Environmental Laws or with any permits issued pursuant thereto, any
inspection, investigation, study, monitoring, assessment, audit, sampling and
testing, laboratory or other analysis, or evaluation relating to any Hazardous
Substances or to anything referred to in Article 12.
Section 12.2 Environmental Covenants. Borrower covenants and agrees
-----------------------
that: (a) all uses and operations on or of the Property, whether by Borrower or
any other person or entity, shall be in compliance with all Environmental Laws
and permits issued pursuant thereto (if necessary pursuant to Environmental
Laws); (b) there shall be no Releases of Hazardous Substances in, on, under or
from the Property; (c) there shall be no Hazardous Substances in, on, or under
the Property, except those that are both (i) in compliance with all
Environmental Laws and with permits issued pursuant thereto and (ii) used in the
ordinary course of the respective tenant's business or otherwise fully disclosed
to Lender in writing; (d) Borrower shall keep the Property free and clear of all
liens and other encumbrances imposed pursuant to any Environmental Law, whether
due to any act or omission of Borrower or any other person or entity (the
"Environmental Liens"); (e) Borrower shall, at its sole cost and expense, fully
and expeditiously cooperate in all activities pursuant to Section 12.3 below,
including but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender (including but not limited
to sampling, testing and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas), and share with
Lender the reports and other results thereof, and Lender and other Indemnified
Parties shall be entitled to rely on such reports and other results
-41-
thereof; (g) Borrower shall, at its sole cost and expense, comply with all
reasonable written requests of Lender to (i) reasonably effectuate Remediation
of any condition (including but not limited to a Release of a Hazardous
Substance) in, on, under or from the Property; (ii) comply with any
Environmental Law; (iii) comply with any directive from any governmental
authority; and (iv) take any other reasonable action with respect to the
Property necessary or appropriate for protection of human health or the
environment; (h) Borrower shall not do or allow any tenant or other user of the
Property to do any act that materially increases the dangers to human health or
the environment, poses an unreasonable risk of harm to any person or entity
(whether on or off the Property), impairs or may impair the value of the
Property, is contrary to any requirement of any insurer, constitutes a public or
private nuisance, constitutes waste, or violates any covenant, condition,
agreement or easement applicable to the Property; and (i) Borrower shall
immediately notify Lender in writing of (A) any presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards the Property; (B) any non-compliance with any Environmental Laws related
in any way to the Property; (C) any actual or potential Environmental Lien; (D)
any required or proposed Remediation of environmental conditions relating to the
Property; and (E) any notice or other communication which Borrower receives from
any source whatsoever (including but not limited to a governmental entity)
relating in any way to Hazardous Substances or Remediation thereof, possible
liability of any person or entity pursuant to any Environmental Law, other
environmental conditions in connection with the Property, or any actual or
potential administrative or judicial proceedings in connection with anything
referred to in this Article 12.
Section 12.3 Lender's Rights. Lender and any other person or entity
---------------
designated by Lender, including but not limited to any receiver, any
representative of a governmental entity, and any environmental consultant, shall
have the right, but not the obligation, to enter upon the Property at all
reasonable times upon reasonable prior notice to assess any and all aspects of
the environmental condition of the Property and its use, including but not
limited to conducting any environmental assessment or audit (the scope of which
shall be determined in Lender's sole and absolute discretion) and taking samples
of soil, groundwater or other water, air, or building materials, and conducting
other invasive testing. Borrower shall cooperate with and provide access to
Lender and any such person or entity designated by Lender.
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Article 13 - INDEMNIFICATION
Section 13.1 General Indemnification. Borrower shall, at its sole cost
-----------------------
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive
damages, foreseeable and unforeseeable consequential damages, of whatever kind
or nature (including reasonable attorneys' fees and other costs of defense) (the
"Losses") as provided, and subject to the limitations contained, in Section 12.8
of the Credit Agreement. For purposes of this Article 13, the term "Indemnified
Parties" means Lender, the Banks and any person or entity who is or will have
been involved in the origination of the Loan, any person or entity who is or
will have been involved in the servicing of the Loan, any person or entity in
whose name the encumbrance created by this Security Instrument is or will have
been recorded, persons and entities who may hold or acquire or will have held a
full or partial interest in the Loan as well as the respective directors,
officers, shareholders, partners, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including any other person or
entity who holds or acquires or will have held a participation or other full or
partial interest in the Loan or the Property, whether during the term of the
Loan or as a part of or following a foreclosure of the Loan and including any
successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).
Section 13.2 Mortgage and/or Intangible Tax. Borrower shall, at its sole
------------------------------
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents.
Section 13.3 ERISA Indemnification. Borrower shall, at its sole cost and
---------------------
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including reasonable attorneys'
fees and costs incurred in the investigation, defense, and settlement of Losses
incurred in correcting any prohibited transaction or in the sale of a prohibited
loan, and in obtaining any individual prohibited transaction exemption under
ERISA that may be required, in Lender's sole discretion) that Lender may incur,
directly or indirectly, as a result of a default under Sections 4.2 or 5.9
hereof.
Section 13.4 Environmental Indemnification. Borrower shall, at its sole
-----------------------------
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including sampling, testing, and
analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas) imposed upon or incurred by or asserted
against any Indemnified Parties, and directly or indirectly arising out of or in
any way relating to any one or more of the
-43-
following: (a) any presence of any Hazardous Substances in, on, above, or under
the Property; (b) any past, present or threatened Release of Hazardous
Substances in, on, above, under or from the Property; (c) any activity by
Borrower, any person or entity affiliated with Borrower or any tenant or other
user of the Property in connection with any actual, proposed or threatened use,
treatment, storage, holding, existence, disposition or other Release,
generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
the Property of any Hazardous Substances at any time located in, under, on or
above the Property; (d) any activity by Borrower, any person or entity
affiliated with Borrower or any tenant or other user of the Property in
connection with any actual or proposed Remediation of any Hazardous Substances
at any time located in, under, on or above the Property, whether or not such
Remediation is voluntary or pursuant to court or administrative order, including
any removal, remedial or corrective action; (e) any past or present non-
compliance or violations of any Environmental Laws (or permits issued pursuant
to any Environmental Law) in connection with the Property or operations thereon,
including any failure by Borrower, any person or entity affiliated with Borrower
or any tenant or other user of the Property to comply with any order of any
governmental authority in connection with any Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including
costs to investigate and assess such injury, destruction or loss; (i) any acts
of Borrower or other users of the Property in arranging for disposal or
treatment, or arranging with a transporter for transport for disposal or
treatment, of Hazardous Substances owned or possessed by such Borrower or other
users, at any facility or incineration vessel owned or operated by another
person or entity and containing such or any similar Hazardous Substance; (j) any
acts of Borrower or other users of the Property, in accepting any Hazardous
Substances for transport to disposal or treatment facilities, incineration
vessels or sites selected by Borrower or such other users, from which there is a
Release, or a threatened Release of any Hazardous Substance which causes the
incurrence of costs for Remediation; (k) any personal injury, wrongful death, or
property damage arising under any statutory or common law or tort law theory,
including damages assessed for the maintenance of a private or public nuisance
or for the conducting of an abnormally dangerous activity on or near the
Property; and (l) any misrepresentation or inaccuracy in any representation or
warranty or material breach or failure to perform any covenants or other
obligations pursuant to Article 12. This indemnity shall survive any
termination, satisfaction or foreclosure of this Security Instrument.
Notwithstanding the foregoing, however, the indemnity under this Section 13.4
shall not apply for Losses and costs of Remediation, the underlying causes of
which (i) did not directly or indirectly result from the acts or omissions of
Borrower and (ii) arose after Borrower has been divested of title to the
relevant Individual Property by reason of foreclosure, deed in lieu of
foreclosure, or assignment of lease in lieu of foreclosure.
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
-----------------------------------------------------------
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other
-44-
professionals reasonably approved by the Indemnified Parties. Notwithstanding
the foregoing, any Indemnified Parties may, in their sole and absolute
discretion, engage their own attorneys and other professionals to defend or
assist them, and, at the option of Indemnified Parties, upon and during the
continuance of an Event of Default, their attorneys shall control the resolution
of claim or proceeding. Upon demand, Borrower shall pay or, in the sole and
absolute discretion of the Indemnified Parties, reimburse, the Indemnified
Parties for the payment of reasonable fees and disbursements of attorneys,
engineers, environmental consultants, laboratories and other professionals in
connection therewith.
Article 14 - WAIVERS
Section 14.1 Waiver of Counterclaim. Borrower hereby waives the right to
----------------------
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section 14.2 Marshalling and Other Matters. Borrower hereby waives, to
-----------------------------
the extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by applicable law.
Section 14.3 Waiver of Notice. Borrower shall not be entitled to any
----------------
notices of any nature whatsoever from Lender except with respect to matters for
which this Security Instrument or any other Loan Document specifically and
expressly provides for the giving of notice by Lender to Borrower and except
with respect to matters for which Lender is required by applicable law to give
notice, and Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Security Instrument or any
other Loan Document does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section 14.4 Waiver of Statute of Limitations. Borrower hereby expressly
--------------------------------
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section 14.5 Sole Discretion of Lender. Wherever pursuant to this
-------------------------
Security Instrument (a) Lender exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c)
any other decision or determination is to be made by Lender, the decision of
Lender to approve or disapprove, all decisions that arrangements or terms are
satisfactory or not satisfactory and all other decisions and determinations made
by Lender,
-45-
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section 14.6 Survival. The indemnifications made pursuant to Sections
--------
13.2, 13.3 and 13.4 and the representations and warranties, covenants, and other
obligations arising under Article 12, shall continue indefinitely in full force
and effect and shall survive and shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument; any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee); any exercise of Lender's rights and
remedies pursuant hereto including foreclosure or acceptance of a deed in lieu
of foreclosure; any exercise of any rights and remedies pursuant to the Note,
the Credit Agreement or any of the Other Security Documents; any transfer of all
or any portion of the Property (whether by Borrower or by Lender following
foreclosure or acceptance of a deed in lieu of foreclosure or at any other
time); any amendment to this Security Instrument, the Note, the Credit Agreement
or the Other Security Documents; and any act or omission that might otherwise be
construed as a release or discharge of Borrower from the obligations pursuant
hereto.
SECTION 14.7 WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE
-----------------------
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN, THE NOTE, THE CREDIT AGREEMENT, THIS
SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF
LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 15 - EXCULPATION
Section 15.1 Exculpation. Except as otherwise provided, Lender shall not
-----------
enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding wherein a money judgment shall be sought against Borrower, except
that Lender may bring a foreclosure action, action for specific performance or
other appropriate action or proceeding to enable Lender to enforce and realize
upon this Security Instrument, the Other Security Documents, and the interest in
the Property, the Rents and any other collateral given to Lender created by this
Security Instrument and the Other Security Documents; provided, however, that
any judgment in any action or proceeding shall be enforceable against Borrower
only to the extent of Borrower's interest in the Property, in the Rents and in
any other collateral given to Lender. Lender, by accepting the Note and this
Security Instrument, agrees that it shall not, except as otherwise provided in
Section 15.3 or Section 15.4, sue for, seek or demand any deficiency judgment
against Borrower in any action or proceeding, under or by reason of or under or
in connection with the Note, the Other Security Documents or this Security
Instrument.
-46-
Section 15.2 Reservation of Certain Rights. The provisions of Section 15.1
-----------------------------
shall not (a) constitute a waiver, release or impairment of any obligation
evidenced or secured by the Note, the Other Security Documents or this Security
Instrument; (b) impair the right of Lender to name Borrower as a party defendant
in any action or suit for judicial foreclosure and sale under this Security
Instrument; (c) affect the validity or enforceability of any indemnity,
guaranty, master lease or similar instrument made in connection with the Note,
this Security Instrument, or the Other Security Documents; (d) impair the right
of Lender to obtain the appointment of a receiver; (e) impair the enforcement of
the Assignment of Leases and Rents executed in connection herewith; (f) impair
the right of Lender to obtain a deficiency judgment or judgment on the Note
against Borrower if necessary to obtain any insurance proceeds or condemnation
awards to which Lender would be otherwise entitled under this Security
Instrument, provided, however, Lender shall only enforce such judgment against
the insurance proceeds and/or condemnation awards; or (g) impair the right of
Lender to enforce the provisions of Sections 11.9, 13.1, 13.2, 13.3 and 13.4 of
this Security Instrument.
Section 15.3 Exceptions to Exculpation. Notwithstanding the provisions of
-------------------------
this Article 15 to the contrary, Borrower shall be personally liable to Lender
for the Losses it incurs due to: (i) fraud or intentional misrepresentation by
Borrower, Guarantor or any other person or entity affiliated with either
Borrower or Guarantor in connection with the execution and the delivery of the
Note, this Security Instrument, the Credit Agreement or the Other Security
Documents; (ii) Borrower's misapplication or misappropriation of Rents received
by Borrower after the occurrence and during the continuance of an Event of
Default; (iii) Borrower's misappropriation of tenant security deposits or Rents
collected in advance; (iv) the misapplication or the misappropriation of
insurance proceeds or condemnation awards; (v) Borrower's failure to pay Taxes
or Insurance Premiums except in accordance with the terms and provisions of the
Loan Documents; (vi) Borrower's failure to carry the insurance coverages
required pursuant to Section 3.3(a) of this Security Instrument; or (vii)
Borrower's failure to comply with the provisions of Sections 3.9, 12.1 or 12.2
of this Security Instrument.
Section 15.4 Recourse. Notwithstanding the foregoing, the agreement of
--------
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect if Borrower
shall contest any judicial or non-judicial enforcement action by Lender for the
sole purpose of delaying Lender's realization on its collateral for the Loan.
Section 15.5 Bankruptcy Claims. Nothing herein shall be deemed to be a
-----------------
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
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Article 16 - NOTICES
Section 16.1 Notices. All notices or other written communications
-------
hereunder shall be deemed to have been properly given (i) upon delivery, if
delivered in person or by facsimile transmission with receipt acknowledged by
the recipient thereof, (ii) one (1) Business Day (defined below) after having
been deposited for overnight delivery with any reputable overnight courier
service, or (iii) three (3) Business Days after having been deposited in any
post office or mail depository regularly maintained by the U.S. Postal Service
and sent by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Borrower: Kilroy Realty, L.P.
2250 East Imperial Highway
El Segundo, California 90245
Attention: Mr. Tyler Rose, Treasurer
Facsimile No.: (310) 322-5981
With a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Jennifer Upham Saunders, Esq.
Facsimile No.: (213) 891-8763
If to Lender: Commerzbank Aktiengesellschaft, New York Branch
2 World Financial Center
New York, New York 10251-1050
Attention: David Schwarz
Facsimile No. (212) 266-7632
With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael B. Levy, Esq.
Facsimile No. (212) 541-4630
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.
For purposes of this Subsection 16.1, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in New
York, New York.
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Article 17 - SERVICE OF PROCESS
Section 17.1 Consent to Service. Borrower irrevocably consents to
------------------
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to the first paragraph hereof.
Section 17.2 Submission to Jurisdiction. With respect to any claim or
--------------------------
action arising hereunder or under the Note or the Other Security Documents,
Borrower (a) irrevocably submits to the nonexclusive jurisdiction of the courts
of the State of New York and the State where the Property is located and the
United States District Court located in the Borough of Manhattan in New York,
New York and the county in which the Property is located, and appellate courts
from any thereof, and (b) irrevocably waives any objection which it may have at
any time to the laying on venue of any suit, action or proceeding arising out of
or relating to this Security Instrument brought in any such court, irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 17.3 Jurisdiction Not Exclusive. Nothing in this Security
--------------------------
Instrument will be deemed to preclude Lender from bringing an action or
proceeding with respect hereto in any other jurisdiction.
Article 18 - APPLICABLE LAW
Section 18.1 Choice of Law. This Security Instrument shall be governed,
-------------
construed, applied and enforced in accordance with the laws of the state in
which the Property is located and the applicable laws of the United States of
America.
Section 18.2 Usury Laws. This Security Instrument and the Note are
----------
subject to the express condition that at no time shall Borrower be obligated or
required to pay interest on the Debt at a rate which could subject the holder of
the Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay. If by the terms of this Security Instrument or the
Note, Borrower is at any time required or obligated to pay interest on the Debt
at a rate in excess of such maximum rate, the rate of interest under the
Security Instrument and the Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Note. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.
Section 18.3 Provisions Subject to Applicable Law. All rights, powers and
------------------------------------
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof
-49-
does not violate any applicable provisions of law and are intended to be limited
to the extent necessary so that they will not render this Security Instrument
invalid, unenforceable or not entitled to be recorded, registered or filed under
the provisions of any applicable law. If any term of this Security Instrument or
any application thereof shall be invalid or unenforceable, the remainder of this
Security Instrument and any other application of the term shall not be affected
thereby.
Article 19 - Intentionally Deleted
Article 20 - COSTS
Section 20.1 Performance at Borrower's Expense. Borrower acknowledges and
---------------------------------
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, (c) obtaining certain consents, waivers and approvals with
respect to the Property, or (d) the review of any Lease or proposed lease or the
preparation or review of any subordination, non-disturbance agreement (the
occurrence of any of the above shall be called an "Event"). Borrower further
acknowledges and confirms that it shall be responsible for the payment of all
costs of reappraisal of the Property or any part thereof, whether required by
law, regulation, Lender or any governmental or quasi-governmental authority.
Borrower hereby acknowledges and agrees to pay, upon demand, all such fees (as
the same may be increased or decreased from time to time), and any additional
fees of a similar type or nature which may be imposed by Lender from time to
time, upon the occurrence of any Event or otherwise. Wherever it is provided for
herein that Borrower pay any costs and expenses, such costs and expenses shall
include all reasonable legal fees and disbursements of Lender, whether of
retained firms, the reimbursement for the expenses of in-house staff or
otherwise.
Section 20.2 Attorney's Fees for Enforcement. (a) Borrower shall pay all
-------------------------------
reasonable legal fees incurred by Lender in connection with (i) the preparation
of the Note, this Security Instrument and the Other Security Documents and (ii)
the items set forth in Section 20.1 above, and (b) Borrower shall pay to Lender
on demand any and all expenses, including legal expenses and reasonable
attorneys' fees, incurred or paid by Lender in protecting its interest in the
Property or Personal Property or in collecting any amount payable hereunder or
in enforcing its rights hereunder with respect to the Property or Personal
Property, whether or not any legal proceeding is commenced hereunder or
thereunder and whether or not any default or Event of Default shall have
occurred and is continuing, together with interest thereon at the Default Rate
from the date paid or incurred by Lender until such expenses are paid by
Borrower.
Article 21 - DEFINITIONS
-50-
Section 21.1 General Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the word "Property" shall include
any portion of the Property and any interest therein, and the phrases
"attorneys' fees", "legal fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to, fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights hereunder. The terms "including,"
"include" and similar terms shall be construed as if followed by the phrase
"without being limited to."
Article 22 - MISCELLANEOUS PROVISIONS
Section 22.1 No Oral Change. This Security Instrument, and any provisions
--------------
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section 22.2 Liability. If Borrower consists of more than one person, the
---------
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section 22.3 Inapplicable Provisions. If any term, covenant or condition
-----------------------
of the Note, the Credit Agreement or this Security Instrument is held to be
invalid, illegal or unenforceable in any respect, the Note, the Credit Agreement
and this Security Instrument shall be construed without such provision.
Section 22.4 Headings, etc. The headings and captions of various Sections
-------------
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Section 22.5 Duplicate Originals; Counterparts. This Security Instrument
---------------------------------
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument. The failure of any party hereto to execute this Security Instrument,
or any counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.
-51-
Section 22.6 Number and Gender. Whenever the context may require, any
-----------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa
Section 22.7 Subrogation. If any or all of the proceeds of the Note have
-----------
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note, the Credit Agreement and
the Other Security Documents and the performance and discharge of the Other
Obligations.
Section 22.8 Entire Agreement. The Note, the Credit Agreement, this
----------------
Security Instrument and the Other Security Documents constitute the entire
understanding and agreement between Borrower and Lender with respect to the
transactions arising in connection with the Debt and supersede all prior written
or oral understandings and agreements between Borrower and Lender with respect
thereto. Borrower hereby acknowledges that, except as incorporated in writing in
the Note, the Credit Agreement, this Security Instrument and the Other Security
Documents, there are not, and were not, and no persons are or were authorized by
Lender to make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the transaction which is the subject
of the Note, the Credit Agreement, this Security Instrument and the Other
Security Documents.
Section 22.9 Trustee. (a) Trustee, by its acceptance hereof, covenants
-------
faithfully to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof, for
any services rendered by it in accordance with the terms hereof.
(b) Trustee, upon presentation to it of an affidavit signed by or on
behalf of Lender, setting forth any fact or facts showing a default by Borrower
under any of the terms or conditions of this Security Instrument, is authorized
to accept as true and conclusive all facts and statements in such affidavit and
to act hereunder in complete reliance thereon.
(c) Trustee may resign at any time upon giving thirty (30) days' notice in
writing to Borrower and to Lender.
(d) In the event of Trustee's death, removal, resignation, refusal to act,
or inability to act or, in the sole discretion of Lender for any reason
whatsoever, Lender may, at any time or from time to time without notice and
without specifying any reason therefor and without applying to any court, select
and appoint a successor trustee and all powers, rights, duties and
-52-
authority of Trustee, as aforesaid, shall thereupon become vested in such
successor without conveyance from the predecessor trustee. Such substitute
trustee shall not be required to give bond for the faithful performance of his
duties unless required by Lender. Such substitute trustee shall be appointed by
written instrument duly recorded in the county where the Premises are located,
which appointment may be executed by any authorized agent of Lender and if
Lender is a business trust or corporation, such appointment be executed on its
behalf by any officer of such business trust or corporation, such appointment
shall be conclusively presumed to have been executed with authority and shall be
valid and sufficient without proof of any action by the Board of Trustees or
Board of Directors or any superior officer of the business trust or corporation.
Borrower hereby ratifies and confirms any and all acts which the herein-named
trustee, or its successor or successors in this trust, shall do lawfully by
virtue hereof. Borrower hereby agrees, on behalf of itself and of its heirs,
executors, administrators and assigns, that the recitals contained in any deed
or deeds executed in due form by Trustee or any substitute trustee, acting under
the provisions of this Security Instrument, shall be prima facie evidence of the
facts recited, and that it shall not be necessary to prove in any court,
otherwise than by such recitals, the existence of the facts essential to
authorize the execution and delivery of such deed or deeds and the passing of
title thereby.
(e) At any time and from time to time, without liability therefor and
without notice, upon written request of Lender, Trustee shall (i) consent in
writing to the making of any map or plat of the Property, (ii) join in granting
any easement thereon, (iii) join in any extension agreement or any agreement
subordinating the lien or charge hereof, or (iv) upon presentation of this
Security Instrument and the Note or notes secured hereby for endorsement, and
without affecting the personal liability of any person for the payment of the
Obligations or the effect of this Security Instrument upon the remainder of the
Property, reconvey any part of the Property.
(f) The trust created hereby is irrevocable by Borrower.
Article 23 - CERTAIN MATTERS RELATING TO THE STATE OF CALIFORNIA
Notwithstanding anything contained herein to the contrary:
Section 23.1 Full Reconveyance. Upon written request of Lender stating
-----------------
that all sums secured hereby have been paid, upon surrender to Trustee of the
Note and the original or a certified copy of this Security Instrument for
cancellation and retention, and upon payment of its fees, Trustee shall fully
reconvey, without warranty, the entire remaining Property then held hereunder.
The recitals in such reconveyance of any matters of facts shall be conclusive
proof of the truthfulness thereof. The grantee in such reconveyance may be
described as "the person or persons legally entitled thereto."
Section 23.2 Dwellings. No portion of the proceeds of the Loan shall be
---------
used by Borrower to finance the purchase or construction of real property
containing four (4) or fewer residential units or on which four (4) or fewer
residential units are to be constructed. No portion
-53-
of the Property is or will be a "dwelling" within the meaning of Section 10240.1
or Section 10240.2 of the California Business and Professions Code.
Section 23.4 Indemnity; Expenses. Borrower will pay or reimburse Trustee
-------------------
and Lender for all reasonable attorneys' fees, costs and expenses incurred by
either of them in any suit, action, legal proceeding or dispute of any kind in
which either of them is made a party or appears as party plaintiff or defendant,
affecting the Debt, this Security Instrument or the interest created herein, or
the Property, or any appeal thereof, including activities related to enforcement
of the remedies of Lender, activities related to protection of Lender's
collateral, any foreclosure action or exercise of the power of sale, any
condemnation action involving the Property or any action to protect the security
hereof, any bankruptcy or other insolvency proceeding commenced by or against
Borrower, and any such amounts paid or incurred by Trustee or Lender shall be
added to the Debt and shall be secured by this Security Instrument. The
agreements of this subsection shall expressly survive in perpetuity satisfaction
of this Security Instrument and repayment of the Debt, any release,
reconveyance, discharge of foreclosure of this Security Instrument, conveyance
by deed in lieu of foreclosure, sale, and any subsequent transfer by trustee's
conveyance of the Property.
Section 23.5 Supplemental Environmental Provisions. In the event that any
-------------------------------------
portion of the Property is determined to be "environmentally impaired" (as
"environmentally impaired" is defined in California Code of Civil Procedure
Section 726.5(e)(3)) or to be an "affected parcel" (as "affected parcel" is
defined in California Code of Civil Procedure Section 726.5(e)(1)), then,
without otherwise limiting or in any way affecting Lender's or Trustee's rights
and remedies under this Security Instrument, Lender may elect to exercise its
right under California Code of Civil Procedure Section 726.5(a) to (i) waive its
lien on such environmentally impaired or affected portion of the Property, and
(ii) exercise the rights and remedies of an unsecured creditor, including
reduction of its claim against Borrower to judgment and any other rights and
remedies permitted by law. For purposes of determining Lender's right to proceed
as an unsecured creditor under California Code of Civil Procedure Section
726.5(a), Borrower shall be deemed to have willfully permitted or acquiesced in
a release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726.5(d)(1), if (i) the release or
threatened release of Hazardous Substances was knowingly or negligently caused
or contributed to by any lessee, occupant or user of any portion of the Property
and (ii) Borrower had prior knowledge of the activity by such lessee, occupant
or user which caused or contributed to the release or threatened release but
failed to take commercially reasonable action to prevent such release or
threatened release.
-54-
IN WITNESS WHEREOF, this Security Instrument has been executed by Borrower
as of the day and year first above written.
KILROY REALTY, L.P.,
a Delaware limited partnership
By Kilroy Realty Corporation,
a Maryland corporation, its
general partner
By: /s/ Tyler H. Rose
_________________________________
Name: Tyler H. Rose
Title: Senior Vice President and
Treasurer
-55-
Exhibits
- --------
Exhibit A Description of Land
Exhibit B Ground Lease
-ii-
EXHIBIT A
---------
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being as described in Exhibits A-1
through A-13 attached hereto. The parcel described in Exhibit A-13 constitutes
the Leased Land, as defined in the Deed of Trust. The parcels described in
Exhibits A-1 through A-12 collectively constitute the Fee Land, as defined in
the Deed of Trust.
-1-
EXHIBIT A-1
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcel 4 of Parcel Map No. 15064, in the City of San Diego, County of San Diego,
State of California, filed in the Office of the County Recorder of San Diego
County, December 17, 1987 as File No. 87-694386 of Official Records.
-2-
EXHIBIT A-2
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcel 1 of Parcel Map No. 17755, in the City of San Diego, County of San Diego,
State of California, filed in the Office of the County Recorder of San Diego
County, September 17, 1996 as File No. 1996-474607 of Official Records.
------------------
-3-
EXHIBIT A-3
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcel 2 of Parcel Map No. 17755, in the City of San Diego, County of San Diego,
State of California, filed in the Office of the County Recorder of San Diego
County, September 17, 1996 as File No. 1996-474607 of Official Records.
------------------
-4-
EXHIBIT A-4
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcel 2 of Parcel Map No. 13090, in the City of San Diego, County of San Diego,
State of California, according to the map thereof filed in the Office of the
County Recorder of San Diego County, December 29, 1983 as File No. 83-474919 of
Official Records.
-5-
EXHIBIT A-5
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Lot 7 of Collins Business Park, in the City of San Diego, County of San Diego,
State of California, according to map thereof No. 9245, filed in the Office of
the County Recorder of San Diego County, June 8, 1979.
-6-
EXHIBIT A-6
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcels 2 and 3 of Parcel Map No. 17965, in the City of San Diego, County of San
Diego, State of California, recorded in the Office of the County Recorder of San
Diego County on December 19, 1997 as File No. 1997-0646743 of Official Records.
-7-
EXHIBIT A-7
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
PARCEL A:
Parcel 2 of Parcel Map No. 15605, in the City of San Diego, County of San Diego,
State of California filed in the Office of the County Recorder of San Diego
County, March 16, 1989 as File No. 89-134442 of Official Records.
PARCEL B:
An easement for ingress and egress over and along the southeasterly 28 feet of
the northeasterly 83 feet of Parcel 1 of Said Parcel Map No. 15605, as set forth
in Article VI, Section 6.02 in the Declaration of Covenants, Conditions and
Restrictions recorded April 7, 1989 as File No. 89-181579, Official Records.
-8-
EXHIBIT A-8
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
PARCEL A:
Parcel 1 of Parcel Map No. 18159, in the City of San Diego, County of San Diego,
State Of California, according to map thereof filed in the Office of the County
Recorder of San Diego County, on December 4, 1998.
PARCEL B:
An easement for access over Parcel 2 of Parcel Map No. 18159, in the City of San
Diego, County of San Diego, State Of California, according to map thereof filed
in the Office of the County Recorder of San Diego County, on December 4, 1998 as
described in the Reciprocal Grant of Easements recorded July 23, 1999 as File
No. 1999-0511150 of Official Records.
-9-
EXHIBIT A-9
-----------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
PARCEL A:
Parcel 1 of Parcel Map No. 17927 in the City of San Diego , County of San Diego,
State of California, recorded in the Office of the County Recorder for San Diego
County on October 29, 1997 as File No. 1997-0541874 of Official Records.
PARCEL B:
A non-exclusive easement for vehicular and pedestrian access, ingress and egress
and installation, operation, use, maintenance, repair, improvement, replacement
and removal of underground utilities over, under and across the private driveway
located within Parcels 1 and 2 of Parcel Map No. 14590, as more particularly set
out in that certain Reciprocal Easement Agreement recorded October 9, 1997 as
File No. 1997-0503692, Official Records of San Diego County, and that certain
Amended and Restated Easement Agreement recorded January 12, 1998 as File No.
1998-0015638, Official Records of San Diego County.
-10-
EXHIBIT A-10
------------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
PARCEL A:
LOT 6 OF CARLSBAD TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF
CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO.
13357, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER
11, 1996 AS FILE NO. 1996-0463214 OF OFFICIAL RECORDS.
TOGETHER WITH ALL THAT PORTION OF LOT 7 OF CARLSBAD TRACT NO. 94-09, CARLSBAD
- -------------
RANCH, UNIT NO. 1, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13357, FILED IN THE OFFICE OF THE
COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 11, 1996 AS FILE NO. 1996-0463214
OF OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 7; THENCE ALONG THE NORTHERLY
LINE OF SAID LOT 7, NORTH 67(degrees) 30' 48" EAST, 434.00 FEET TO THE
NORTHEASTERLY CORNER OF SAID LOT 7; THENCE ALONG THE EASTERLY LINE OF SAID LOT
7, SOUTH 22(degrees) 29' 12" EAST, 25.13 FEET THENCE LEAVING SAID EASTERLY LINE,
SOUTH 67(degrees) 30' 48" WEST, 434.00 FEET TO A POINT ON THE WESTERLY LINE OF
SAID LOT 7; THENCE ALONG SAID WESTERLY LINE, NORTH 22(degrees) 29' 12" WEST,
25.13 FEET TO THE POINT OF BEGINNING.
(SAID PROPERTY BEING DESCRIBED AS PARCEL A (ADJUSTED LOT 6), IN CERTIFICATE OF
COMPLIANCE RECORDED ON JULY 1, 1997 AS FILE NO. 1997-0311133 OF OFFICIAL
RECORDS.)
PARCEL B:
AN EASEMENT FOR DRIVEWAY ACCESS OVER, ALONG AND ACROSS A PORTION OF LOT 7 OF
CARLSBAD TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF CARLSBAD,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13357,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 11,
1996 AS FILE NO. 1996-0463214, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
-11-
BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 7; THENCE ALONG THE WESTERLY
LINE OF SAID LOT 7, SOUTH 22(degrees) 29' 12" EAST, 25.13 FEET TO THE TRUE POINT
OF BEGINNING; THENCE LEAVING SAID WESTERLY LINE, NORTH 67(degrees) 30' 48" EAST,
40.00 FEET; THENCE SOUTH 22(degrees) 29' 12" EAST, 18.00 FEET; THENCE SOUTH
67(degrees) 30' 48" WEST, 40.00 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT
7; THENCE ALONG SAID WESTERLY LINE, NORTH 22(degrees) 29' 12" WEST, 18.00 FEET
TO THE TRUE POINT OF BEGINNING.
-12-
EXHIBIT A-11
------------
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
PARCEL A:
LOT 7 OF CARLSBAD TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF
CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO.
13357, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER
11, 1996 EXCEPTING THEREFROM ALL THAT PORTION OF SAID LOT 7, MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 7; THENCE ALONG THE NORTHERLY
LINE OF SAID LOT 7, NORTH 67(degrees) 30' 48" EAST, 434.00 FEET TO THE
NORTHEASTERLY CORNER OF SAID LOT 7; THENCE ALONG THE EASTERLY LINE OF SAID LOT
7, SOUTH 22(degrees) 29' 12" EAST, 25.13 FEET THENCE LEAVING SAID EASTERLY LINE,
SOUTH 67(degrees) 30' 48" WEST, 434.00 FEET TO A POINT ON THE WESTERLY LINE OF
SAID LOT 7; THENCE ALONG SAID WESTERLY LINE, NORTH 22(degrees) 29' 12" WEST,
25.13 FEET TO THE POINT OF BEGINNING.
PARCEL B:
AN EASEMENT FOR DRIVEWAY ACCESS OVER, ALONG AND ACROSS A PORTION OF LOT 8 OF
CARLSBAD TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF CARLSBAD,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13357,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 11,
1996, BEING DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF SAID LOT 8, THENCE ALONG THE
NORTHWESTERLY LINE THEREOF, NORTH 67(degrees) 30' 48" EAST 80.00 FEET, THENCE
SOUTH 22(degrees) 29' 12" EAST 17.50 FEET; THENCE SOUTH 67(degrees) 30' 48" WEST
80.00 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT 8, SAID LINE BEING ALSO THE
NORTHEASTERLY LINE OF ARMADA DRIVE; THENCE ALONG THE SOUTHWESTERLY LINE OF SAID
LOT 8, NORTH 22(degrees) 29' 12" WEST 17.50 FEET TO THE POINT OF BEGINNING.
PARCEL C:
-13-
AN EASEMENT FOR DRIVEWAY ACCESS OVER, ALONG AND ACROSS A PORTION OF LOT 7 OF
CARLSBAD TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF CARLSBAD,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13357,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 11,
1996 AS FILE NO. 1996-0463214, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 7; THENCE ALONG THE WESTERLY
- ---------
LINE OF SAID LOT 7, SOUTH 22(degrees) 29' 12" EAST, 7.13 FEET TO THE TRUE POINT
----------
OF BEGINNING; THENCE LEAVING SAID WESTERLY LINE, NORTH 67(degrees) 30' 48" EAST,
- ------------
40.00 FEET; THENCE SOUTH 22(degrees) 29' 12" EAST, 18.00 FEET; THENCE SOUTH
67(degrees) 30' 48" WEST, 40.00 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT
7; THENCE ALONG SAID WESTERLY LINE, NORTH 22(degrees) 29' 12" WEST, 18.00 FEET
TO THE TRUE POINT OF BEGINNING.
-----------------------
PARCEL D:
AN NON-EXCLUSIVE EASEMENT FOR GENERAL ACCESS AND UTILITY, TOGETHER WITH THE
RIGHT TO CONVEY TO OTHERS, OVER, ALONG AND ACROSS A PORTION OF LOT 7 OF CARLSBAD
TRACT NO. 94-09, CARLSBAD RANCH, UNIT NO. 1, IN THE CITY OF CARLSBAD, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13357, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, SEPTEMBER 11, 1996 AS FILE
NO. 1996-0463214, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 7; THENCE ALONG THE NORTHERLY
LINE OF SAID LOT 7, NORTH 67(degrees) 30' 48" EAST, 27.00 FEET; THENCE LEAVING
SAID NORTHERLY LINE, SOUTH 22(degrees) 29' 12" EAST, 25.13 FEET; THENCE SOUTH
67(degrees) 30' 48" WEST, 27.00 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT
7; THENCE ALONG SAID WESTERLY LINE NORTH 22(degrees) 29' 12" WEST, 25.13 FEET TO
THE POINT OF BEGINNING.
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EXHIBIT A-12
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ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Lot 25 of Carlsbad Tract 81-10 Unit No. 2A, in the City of Carlsbad, County of
San Diego, State of California, according to map thereof No. 11134, filed in the
Office of the County Recorder of San Diego County, January 31, 1985.
-15-
EXHIBIT A-13
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ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being in the State of California,
County of San Diego, and described as follows:
Parcel 3 of Parcel Map No. 16265, in the City of San Diego, County of San Diego,
State of California, according to map thereof filed in the Office of the County
Recorder of said San Diego County, October 18, 1990, as File No. 90-0567278 of
Official Records.
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EXHIBIT B
(Description of Ground Lease)
Agreement for Ground Lease Development and Use of Real Property dated September
22, 1988 executed by and between The City of San Diego, as lessor, and JOSP
Partners, as lessee, and recorded on April 21, 1989 as Instrument No. 89-209941
of the Official Records of San Diego County, California (the "Official
--------
Records"), as amended by First Amendment dated March 31, 1989 between such
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parties and recorded on April 21, 1989 as File No. 1989-209942 of the Official
Records, as further amended by Second Amendment dated March 26, 1990 between
such parties and recorded on May 17, 1990 as File No. 90-270833 of the Official
Records as further amended by that Consent and Estoppel Certificate executed as
of June 18, 1998 by such parties and Borrower, and as assigned by JOSP Partners
to Borrower pursuant to Assignment dated ____________ and recorded on June 18,
1998 as File No. 98-0375194 of the Official Records.
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