UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-53649
KBS REAL ESTATE INVESTMENT TRUST II, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland | 26-0658752 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
620 Newport Center Drive, Suite 1300 Newport Beach, California |
92660 | |
(Address of Principal Executive Offices) | (Zip Code) |
(949) 417-6500
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered | |
None | None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment of this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ | |||
Non-Accelerated Filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | þ |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Securities Exchange Act). Yes ¨ No þ
While there is no established market for the Registrants shares of common stock, the Registrant has made an initial public offering of its shares of common stock pursuant to a Registration Statement on Form S-11. The Registrant ceased offering shares of common stock in its primary offering on December 31, 2010. The last price paid to acquire a share in the Registrants primary public offering was $10.00. There were approximately 123,385,548 shares of common stock held by non-affiliates at June 30, 2010, the last business day of the registrants most recently completed second fiscal quarter.
As of March 9, 2011, there were 188,044,880 outstanding shares of common stock of the Registrant.
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FORWARD-LOOKING STATEMENTS
Certain statements included in this annual report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Real Estate Investment Trust II, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as may, will, seeks, anticipates, believes, estimates, expects, plans, intends, should or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
| We have a limited operating history. This inexperience makes our future performance difficult to predict. |
| All of our executive officers, some of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the entity that acted as our dealer manager and other KBS-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our advisors compensation arrangements with us and other KBS-advised programs and investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions. Fees paid to our advisor in connection with transactions involving the origination, acquisition and management of our investments are based on the cost of the investment, not on the quality of the investment or services rendered to us. This arrangement could influence our advisor to recommend riskier transactions to us. |
| Because investment opportunities that are suitable for us may also be suitable for other KBS-advised programs or investors, our advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders. |
| We pay substantial fees to and expenses of our advisor and its affiliates and, in connection with our public offering, we paid substantial fees to participating broker-dealers. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase the risk of loss to our stockholders. |
| We have used and expect to continue to use proceeds from financings to fund a portion of our distributions until the proceeds from our initial public offering are fully invested and from time to time during our operational stage in anticipation of cash flow to be received in later periods. We may also fund such distributions from advances from our advisor or sponsors, from our advisors deferral of its asset management fee, from the net proceeds from the sale of real estate and from the receipt of principal payments on our real estate-related investments. |
| If we are unable to locate investments with attractive yields while we are investing the proceeds of our initial public offering, our distributions and the long-term returns of our investors may be lower than they otherwise would. |
| We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our debt service obligations and limiting our ability to pay distributions to our stockholders. |
| Our current and future investments in real estate, mortgage loans, mezzanine loans, bridge loans, mortgage-backed securities, collateralized debt obligations and other debt may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties and the properties and other assets directly securing our loan investments could decrease. Such events would make it more difficult for the borrowers under our loan investments to meet their payment obligations to us. It could also make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders. |
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| Continued disruptions in the financial markets and uncertain economic conditions could adversely affect the value of our investments. |
| Certain of our debt obligations have variable interest rates with interest and related payments that vary with the movement of LIBOR or other indexes. Increases in the indexes could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders. |
| We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes, including, but not limited to, the redemption of shares under our share redemption program, the funding of capital expenditures on our real estate investments, or the repayment of debt. If such funds are not available from the dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program. |
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of this annual report on Form 10-K.
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ITEM 1. | BUSINESS |
Overview
KBS Real Estate Investment Trust II, Inc. (the Company) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT) beginning with the taxable year ended December 31, 2008 and it intends to operate in such a manner. The Company has invested in a diverse portfolio of real estate and real estate-related investments. As used herein, the terms we, our and us refer to the Company and as required by context, KBS Limited Partnership II, a Delaware limited partnership (the Operating Partnership), and their subsidiaries. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by KBS Capital Advisors LLC (KBS Capital Advisors), our external advisor, pursuant to an advisory agreement. KBS Capital Advisors conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
On September 27, 2007, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the SEC) to offer a maximum of 280,000,000 shares of common stock for sale to the public, of which 200,000,000 shares were registered in our primary offering and 80,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on December 31, 2010 and are completing subscription processing procedures, as set forth in our prospectus. We continue to offer shares of common stock under our dividend reinvestment plan. From the commencement of our primary offering on April 22, 2008 through December 31, 2010, we had sold 179,185,669 shares of common stock for gross offering proceeds of $1.8 billion, including 6,999,082 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $66.5 million. Also as of December 31, 2010, we had redeemed 2,465,804 of the shares sold in our offering for $23.2 million.
As of December 31, 2010, we owned 17 real estate properties (consisting of 14 office properties, one office/flex property and two industrial properties), a leasehold interest in one industrial property and six real estate loans receivable.
Objectives and Strategies
Our primary investment objectives are:
| to provide our stockholders with attractive and stable cash distributions; and |
| to preserve and return our stockholders capital contributions. |
We intend to achieve these objectives by investing in and managing a diverse portfolio of real estate and real estate-related investments and by acquiring these investments through a combination of equity raised in our initial public offering and debt financing. We intend to diversify our portfolio by investment size, investment type, investment risk and geographic region. Based on our investments to date, we expect to allocate between 80% and 90% of our portfolio to investments in core properties and allocate between 10% and 20% of our portfolio to real estate-related investments such as mortgage, mezzanine, bridge and other loans; debt and derivative securities related to real estate assets, including mortgage-backed securities; and the equity securities of other REITs and real estate companies. Though these percentages represent our target portfolio, we will not forego a good investment because it does not precisely fit our expected portfolio composition and we may adjust our target portfolio based on real estate market conditions and investment opportunities. Thus, to the extent that our advisor presents us with good investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), the portfolio may consist of a greater percentage of real estate-related investments.
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The following chart illustrates the diversification of our investment portfolio as of December 31, 2010, across investment types based on the gross acquisition or origination price of the investments (including acquisition and origination costs and fees):
2010 Investment Highlights
During 2010, we purchased or originated:
| 10 office properties encompassing 4,607,860 rentable square feet located throughout the United States for $1.4 billion plus closing costs; |
| two industrial properties encompassing 545,358 rentable square feet located in Plano, Texas and Austell, Georgia for $27.4 million plus closing costs; |
| the rights to a ground lease with respect to an industrial property containing 400,000 rentable square feet located in Irving, Texas for $19.0 million plus closing costs; and |
| four first mortgage loans totaling $286.3 million plus closing costs. With respect to one of the first mortgage loans, we sold a pari passu participation interest with respect to 50% of the outstanding principal balance at par, or $87.5 million, to an unaffiliated buyer. |
Real Estate Portfolio
Real Estate Investments
We have made investments in core properties, which are generally lower risk, existing properties with at least 80% occupancy and minimal near-term lease rollover. To date we have invested in:
| office properties including low-rise, mid-rise and high-rise office buildings and office parks in urban and suburban locations, especially those that are in or near central business districts or have access to transportation; and |
| industrial properties including warehouse and distribution facilities, office/warehouse flex properties and light industrial properties. |
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We will generally hold fee title or a long-term leasehold estate in the properties we acquire. We may also invest in or acquire operating companies or other entities that own and operate assets that meet our investment objectives. We will make investments in other entities when we consider it more efficient to acquire an entity that already owns assets meeting our investment objectives than to acquire such assets directly. We may also participate with other entities (including non-affiliated entities) in property ownership through joint ventures, limited liability companies, partnerships and other types of common ownership.
We generally intend to hold our core properties for four to seven years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation of properties. However, economic and market conditions may influence us to hold our investments for different periods of time.
As of December 31, 2010, we owned 14 office properties, one office/flex property, two industrial properties and a leasehold interest in one industrial property encompassing 7.5 million square feet. The following charts illustrate our geographic distribution based on total leased square feet and total annualized base rent:
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* Other includes any states less than 2% of total.
We have a stable tenant base and we have tried to diversify our tenant base in order to limit exposure to any one tenant or industry. As of December 31, 2010, our largest tenant, Kirkland & Ellis, represented 13.6% of our total annualized base rent. We had no other tenants that represented more than 10% of our total annualized base rent and our top ten tenants represented approximately 42.7% of our total annualized base rent as of December 31, 2010. The chart below illustrates the diversity of tenant industries in our portfolio based on total annualized base rent:
* All others include any industry less than 2% of total.
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As of December 31, 2010, our real estate portfolios highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
Industry |
Number of Tenants |
Annualized Base Rent(1) (in thousands) |
Percentage
of Annualized Base Rent |
|||||||||
Legal Services |
52 | $ | 47,511 | 26 | % | |||||||
Finance |
52 | 38,060 | 20 | % | ||||||||
Other Professional Services |
50 | 19,373 | 10 | % | ||||||||
$ | 104,944 | 56 | % | |||||||||
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2010, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
The total cost of our real estate portfolio as of December 31, 2010 was $2.0 billion. Our real estate portfolio accounted for 82%, 77% and 99% of total revenues for the years ended December 31, 2010, 2009 and 2008, respectively.
Real Estate-Related Investments
As of December 31, 2010, we owned (i) four mortgage loans; (ii) an A-Note loan and (iii) a participation in a mortgage loan. During 2009, we acquired and then sold a CMBS investment. We generally intend to hold our real estate-related investments until maturity. However, economic and market conditions may influence the length of time that we hold these investments.
The total cost and book value of our real estate-related investments as of December 31, 2010 were $325.2 million and $336.8 million, respectively. Our real estate-related investments accounted for 18% and 23% of total revenues for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010, we had invested in fixed and variable rate loans receivable with book values of $248.3 million and $88.5 million, respectively, and the weighted-average annualized effective interest rates on the fixed and variable rate loans receivable were 11.7% and 7.2%, respectively.
Financing Objectives
We financed the majority of our real estate acquisitions with a combination of the proceeds we received from our initial public offering and debt. In addition, we purchased our real estate-related investments wholly with proceeds we received from our initial public offering. We used debt financing to increase the amount available for investment and to increase overall investment yields to us and our stockholders. As of December 31, 2010, the weighted-average interest rate on our debt was 4.4%.
We borrow funds at both fixed and variable rates; at December 31, 2010, we had $460.8 million and $367.4 million of fixed and variable rate debt outstanding, respectively. Of the variable rate debt outstanding, approximately $316.8 million was effectively fixed through the use of interest rate swap agreements. The weighted-average interest rates of our fixed rate debt and variable rate debt at December 31, 2010 were 4.7% and 4.1%, respectively. The weighted-average interest rate represents the actual interest rate in effect at December 31, 2010 (consisting of the contractual interest rate and the effect of interest rate swaps and floors), using interest rate indices as of December 31, 2010, where applicable.
We have tried to spread the maturity dates of our debt to minimize maturity and refinance risk in our portfolio. In addition, a majority of our debt allows us to extend the maturity dates, subject to certain conditions. Although we believe we will satisfy the conditions to extend the maturity of our debt obligations, we can give no assurance in this regard. The following table shows the contractual and fully extended maturities of our debt as of December 31, 2010:
Current Maturity | Extended Maturity | |||||||
2011 |
$ | 57,507 | $ | 57,507 | ||||
2012 |
| | ||||||
2013 |
13,000 | | ||||||
2014 |
213,850 | 93,850 | ||||||
2015 |
524,000 | 483,000 | ||||||
Thereafter |
19,800 | 193,800 | ||||||
$ | 828,157 | 828,157 | ||||||
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Our charter limits our borrowings to 75% of the cost (before deducting depreciation or other noncash reserves) of all of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. We did not exceed our charter limitation on borrowings during any quarter of 2010. Once we have fully invested the proceeds of our initial public offering, we expect our debt financing to be between 50% and 65% of the cost of our tangible assets (before deducting depreciation or other noncash reserves). From time to time, our debt financing may be below 50% of the cost of our tangible assets due to the lack of availability of debt financing. As of December 31, 2010, our borrowings were approximately 36% of both the cost (before depreciation or other noncash reserves) and book value (before depreciation) of our tangible assets.
Market Outlook Real Estate and Real Estate Finance Markets
During the past three years, significant and widespread concerns about credit risk and access to capital have been present in the U.S. and global financial markets. Economies throughout the world have experienced increased unemployment and sagging consumer confidence due to a downturn in economic activity. Despite improved stock market performance and some positive economic indicators, a lack of job creation, low consumer confidence and a growing federal budget deficit temper the positive indicators. Amid signs of recovery in the economic and financial markets, concerns remain regarding job growth, wage stagnation, credit restrictions and increased taxation.
Bank earnings and liquidity have rebounded, particularly among larger financial institutions. Smaller financial institutions have continued to work with borrowers to amend and extend existing loans; however, as these loans reach maturity, there is the potential for future credit losses. The FDICs list of troubled financial institutions is still quite large and the threat of more bank closings will weigh heavily on the financial markets.
Over the past several months, the U.S. commercial real estate industry has experienced a slow-down in the deterioration of fundamental benchmarks, such as occupancy, rental rates and pricing. Continued improvement in these fundamentals remains contingent upon sustainable economic growth. In general, borrower defaults may rise, and occupancy and rental rate stabilization will vary by market and by property type. Looking forward, it is widely assumed that mortgage delinquencies have not yet peaked.
Currently, benchmark interest rates, such as LIBOR, remain near historic lows. This has allowed borrowers with floating rate debt to continue to make debt service payments even as the properties securing these loans experience decreased occupancy and lower rental rates. Low short-term rates have allowed these borrowers to meet their debt obligations; however, they would not meet the current underwriting requirements needed to refinance this debt today. As these loans near maturity, borrowers may have to find new sources of funds in order to recapitalize their properties.
Throughout the financial crisis and economic downturn, commercial real estate transactions experienced a sharp decline in volume. Recent trends indicate a modest rebound in transaction activity. High-quality assets in top-tier markets experienced the largest increase in transaction volume. One of the significant barriers to deal flow is the spread between buyer/seller pricing expectations. It is expected that more commercial properties will come into the market as loans mature, marginally performing properties default and banks increase their foreclosure activity. From a financing perspective, new lending is expected to remain subdued in the near term. The commercial mortgage-backed securities (CMBS) market, formerly a significant source of liquidity and debt capital, was inactive in 2008 and 2009, and left a void in the market for long-term, affordable, fixed rate debt. During that time, the void was partially filled by portfolio lenders such as insurance companies, but at very different terms than were available in the past. These remaining lenders generally increased credit spreads, lowered the amount of available proceeds, required recourse security and credit enhancements, and otherwise tightened underwriting standards, while simultaneously limiting lending to existing relationships with borrowers that invest in high quality assets in top-tier markets. In addition, lenders have limited the amount of financing available to existing relationships in an effort to manage capital allocations and credit risk.
Recently, there have been signs that the credit markets have begun to thaw as the global economy has shown signs of recovery and growth. New CMBS issuances and the increased access to the capital markets for publicly-traded REITs has led many to believe that commercial real estate lending will be revived as the markets appetite for risk returns. Similarly, many lending institutions have increased their lending on commercial real estate, which, coupled with historically low interest rates and slightly-relaxed underwriting standards, has helped increase commercial real estate transaction volume. It is important to remember that these trends have only recently begun and an improvement in one aspect of the market does not provide an indication of a general market recovery or provide any indication of the duration of the existing downturn, or the speed of any expected recovery.
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Despite certain recent positive economic indicators such as an improved stock market performance and improved access to capital for some companies, the aforementioned economic conditions have continued to impact the capital markets. Global government interventions in the banking system and the persistence of a highly expansionary monetary policy by the U.S. Treasury have introduced additional complexity and uncertainty to the markets. The U.S. governments recent introduction of additional regulation to the financial markets, including the banking, insurance and brokerage sectors, has resulted in general uncertainty as to the long-term impact on these markets and on the economy as a whole. Adding to this uncertainty are increased disclosure requirements and changes to accounting principles involving the valuation of investments. These conditions are expected to continue, and combined with a challenging macro-economic environment, may interfere with the implementation of our business strategy and/or force us to modify it.
Impact on Our Real Estate Investments
These market conditions have and will likely continue to have a significant impact on our real estate investments and create a highly competitive leasing environment. In addition, these market conditions have impacted our tenants businesses, which makes it more difficult for them to meet current lease obligations and places pressure on them to negotiate favorable lease terms upon renewal in order for their businesses to remain viable. Projected future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to retain tenants who are up for renewal or to sign new tenants, are expected to result in decreases in cash flow. Historically low interest rates could help offset some of the impact of decreases in operating cash flow for properties financed with variable rate mortgages; however, interest rates may not remain at these historically low levels for the life of many of our investments.
Impact on Our Real Estate-Related Investments
Our real estate-related investments are directly secured by commercial real estate. As a result, our real estate-related investments have been impacted to some degree by the same factors impacting our real estate investments.
As of December 31, 2010, we had fixed rate real estate loans receivable with a principal balance of $320.8 million and a carrying value of $248.3 million that mature between 2014 and 2017 and a variable rate real estate loan receivable with a principal balance of $87.5 million and a carrying value (including origination and closing costs) of $88.5 million that matures in 2013.
Impact on Our Financing Activities
In light of the risks associated with projected declines of operating cash flows on our properties and the current underwriting environment for commercial real estate mortgages, we may have difficulty refinancing some of our mortgage notes at maturity or may not be able to refinance our obligations at terms as favorable as the terms of our existing indebtedness. As of December 31, 2010, we had debt obligations in the aggregate principal amount of $828.2 million, all of which mature between 2011 and 2016. As of December 31, 2010, $57.5 million of our mortgage debt outstanding is scheduled to mature within 12 months of that date. We have a total of $460.8 million of fixed rate notes payable and $367.4 million of variable rate notes payable. The interest rates on $316.8 million of our variable rate notes payable are effectively fixed through interest rate swap agreements.
Economic Dependency
We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of our real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that our advisor is unable to provide these services, we will be required to obtain such services from other sources.
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Competitive Market Factors
The United States commercial real estate investment and leasing markets remain competitive. We face competition from various entities for investment opportunities in commercial and office properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships, and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of its investments. In addition, many of these entities have capital structures that allow them to make investments at higher prices than what we can prudently offer while still generating a return to their investors that is commensurate with the return we are seeking to provide our investors. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, we could be materially impacted by the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. A lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. Further, as a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to pay distributions to our stockholders may be adversely affected.
The success of our portfolio of real estate-related investments depends, in part, on our ability to acquire and originate investments with spreads over our borrowing cost. In acquiring and originating these investments, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities, many of which have greater financial resources and lower costs of capital available to them than we do. In addition, there are numerous REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, size of loans offered and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential loans than we are, our acquisition and origination volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well-positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.
Compliance with Federal, State and Local Environmental Law
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.
All of our properties have been subject to Phase I environmental assessments at the time they were acquired. Some of the properties we have acquired are subject to potential environmental liabilities arising primarily from historic activities at or in the vicinity of the properties. Based on our environmental diligence and assessments of our properties and our purchase of pollution and remediation legal liability insurance with respect to some of our properties, we do not believe that environmental conditions at our properties are likely to have a material adverse effect on our operations.
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Industry Segments
We operate in two business segments. Our segments are based on our method of internal reporting which classifies operations by investment type: real estate and real estate-related. For financial data by segment, see Note 11 Segment Information in the notes to our consolidated financial statements filed herewith.
Employees
We have no paid employees. The employees of our advisor or its affiliates provide management, acquisition, advisory and certain administrative services for us.
Principal Executive Office
Our principal executive offices are located at 620 Newport Center Drive, Suite 1300, Newport Beach, CA 92660. Our telephone number, general facsimile number and website address are (949) 417-6500, (949) 417-6520 and http://www.kbsreitii.com, respectively.
Available Information
Access to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from the following website, http://www.kbsreitii.com, through a link to the SECs website, http://www.sec.gov. These filings are available promptly after we file them with, or furnish them to, the SEC.
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ITEM 1A. | RISK FACTORS |
The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.
Risks Related to an Investment in Us
Because no public trading market for our shares currently exists, it will be difficult for our stockholders to sell their shares and, if they are able to sell their shares, it will likely be at a substantial discount to the public offering price. As such, investors should purchase shares in our dividend reinvestment plan only if they will not need to realize the cash value of their investment for an extended period.
Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. There is no public market for our shares and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our shares. In its sole discretion, our board of directors could amend, suspend or terminate our share redemption program upon 30 days notice. Further, the share redemption program includes numerous restrictions that would limit a stockholders ability to sell his or her shares. Therefore, it will be difficult for our stockholders to sell their shares promptly or at all. If a stockholder is able to sell his or her shares, it would likely be at a substantial discount to the public offering price. It is also likely that our shares would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our shares, investors should purchase shares in our dividend reinvestment plan only as a long-term investment and be prepared to hold them for an indefinite period of time.
If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.
Our ability to achieve our investment objectives and to pay distributions depends upon the performance of KBS Capital Advisors, our advisor, in the acquisition of our investments, including the determination of any financing arrangements, and the ability of our advisor to source loan origination opportunities for us. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage to other entities that have greater financial resources than we do. We will also depend upon the performance of our property managers in the selection of tenants and negotiation of leasing arrangements. Rising vacancies across commercial real estate have resulted in increased pressure on real estate investors and their property managers to find new tenants and keep existing tenants. In order to do so, we may have to offer inducements, such as free rent and tenant improvements, to compete for attractive tenants. We are also subject to competition in seeking to acquire real estate-related investments. Our investors must rely entirely on the management abilities of KBS Capital Advisors, the property managers KBS Capital Advisors selects and the oversight of our board of directors. We can give no assurance that KBS Capital Advisors will be successful in obtaining suitable investments on financially attractive terms or that, if KBS Capital Advisors makes investments on our behalf, our objectives will be achieved. If we, through KBS Capital Advisors, are unable to find suitable investments promptly, we will hold the proceeds from our public offering in an interest-bearing account or invest the proceeds in short-term assets. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.
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Continued disruptions in the financial markets and uncertain economic conditions could adversely impact the commercial mortgage market as well as the market for real estate-related debt investments generally, which could hinder our ability to implement our business strategy and generate returns to our stockholders.
Based on our investments to date, we expect to allocate approximately 10% to 20% of our portfolio to real estate-related investments such as mortgage, mezzanine, bridge and other loans; debt and derivative securities related to real estate assets, including mortgage-backed securities; and the equity securities of other REITs and real estate companies. The returns available to investors in these investments are determined by: (i) the supply and demand for such investments, (ii) the performance of the assets underlying the investments and (iii) the existence of a market for such investments, which includes the ability to sell or finance such investments.
During periods of volatility, the number of investors participating in the market may change at an accelerated pace. As liquidity or demand increases the returns available to investors on new investments will decrease. Conversely, a lack of liquidity will cause the returns available to investors on new investments to increase.
During the past three years, concerns pertaining to the deterioration of credit in the residential mortgage market have expanded to almost all areas of the debt capital markets including corporate bonds, asset-backed securities and commercial real estate bonds and loans. Amid signs of recovery in the economic and financial markets, we cannot foresee when these markets will stabilize. This instability may interfere with the successful implementation of our business strategy.
Continued disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to service our existing indebtedness, our ability to refinance or secure additional debt financing on attractive terms and the values of our investments.
Despite certain recent positive economic indicators such as an improved stock market performance and improved access to capital for some companies, the capital and credit markets continue to be affected by the extreme volatility and disruption during the past three years. Bank earnings and liquidity have rebounded, particularly among larger financial institutions. Smaller financial institutions have continued to work with borrowers to amend and extend existing loans. Looking forward, it is widely assumed that mortgage delinquencies have not yet peaked. Liquidity in the global credit market has been severely contracted by these market disruptions, and new lending is expected to remain subdued in the near term. We rely on debt financing to finance our properties and we expect to continue to use debt to acquire properties and possibly other real estate-related investments. As a result of the uncertainties in the credit market, we may not be able to refinance our existing indebtedness or to obtain additional debt financing on attractive terms. As such, we may be forced to use a greater proportion of our offering proceeds to finance our acquisitions, reducing the number of acquisitions we would otherwise make, and/or to dispose of some of our assets.
The recent positive economic developments do not provide an indication of a general market recovery or provide an indication of the duration of the existing downturn, or the speed of any expected recovery. Further disruptions in the financial markets and uncertain economic conditions could adversely affect the values of our investments. Turmoil in the capital markets has constrained equity and debt capital available for investment in commercial real estate, resulting in fewer buyers seeking to acquire commercial properties and possible increases in capitalization rates and lower property values. Furthermore, declining economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in the collateral securing our loan investments. These conditions could have the following negative effects on us:
| the values of our investments in commercial properties could decrease below the amounts paid for such investments; |
| the value of collateral securing our loan investments could decrease below the outstanding principal amounts of such loans; |
| revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to pay dividends or meet our debt service obligations on debt financing; and/or |
| revenues on the properties and other assets underlying our loan investments could decrease, making it more difficult for the borrower to meet its payment obligations to us, which could in turn make it more difficult for us to pay dividends or meet our debt service obligations on debt financing. |
All of these factors could impair our ability to make distributions to our investors and decrease the value of an investment in us.
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We may suffer from delays in locating suitable investments, which could limit our ability to make distributions and lower the overall return on our stockholders investment.
We rely upon our sponsors and the other real estate professionals at our advisor, including Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., to identify suitable investments. The private KBS-sponsored programs, especially those that are currently raising offering proceeds, as well as the institutional investors for whom KBS affiliates serve as investment advisors, also rely upon Messrs. Bren and Schreiber for investment opportunities. In addition, KBS Real Estate Investment Trust, Inc. (KBS REIT I), which is managed by our advisor, relies upon Messrs. Bren, Hall, McMillan and Schreiber to actively manage its assets, and the other public KBS programs KBS Strategic Opportunity REIT, Inc. (KBS Strategic Opportunity REIT), KBS Legacy Partners Apartment REIT, Inc. (KBS Legacy Partners Apartment REIT) and KBS Real Estate Investment Trust III, Inc. (KBS REIT III) rely on Messrs. Bren, Hall, McMillan and Schreiber to identify potential investment opportunities and to actively management their assets. To the extent that our sponsors and the other real estate professionals at our advisor face competing demands upon their time at times when we have capital ready for investment, we may face delays in locating suitable investments. Delays we encounter in the selection and acquisition or origination of income-producing assets would likely limit our ability to pay distributions to our stockholders and lower their overall returns. Further, if we acquire properties prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, our stockholders could suffer delays in the distribution of cash distributions attributable to those particular properties. Our stockholders should expect to wait at least several months after the closing of a property acquisition before receiving cash distributions attributable to that property.
Our stockholders will not have the opportunity to evaluate our investments before we make them, which makes our stockholders investment more speculative.
Because our stockholders will be unable to evaluate the economic merit of specific real estate projects before we invest in them, they will have to rely entirely on the ability of our advisor to select suitable and successful investment opportunities. Furthermore, our board of directors will have broad discretion in implementing policies regarding tenant or mortgagor creditworthiness and our stockholders will not have the opportunity to evaluate potential tenants, managers or borrowers. These factors increase the risk that our stockholders investment may not generate returns consistent with their expectations.
We have a limited operating history, which makes our future performance difficult to predict.
We are a recently formed company and have a limited operating history. We were incorporated in the State of Maryland on July 12, 2007. Our stockholders should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by affiliates of our advisor, including KBS REIT I.
KBS REIT I, which launched its initial public offering and commenced real estate operations in 2006, was the first publicly offered investment program sponsored by Messrs. Bren, Hall, McMillan and Schreiber and advised by KBS Capital Advisors. The private KBS-sponsored programs were not subject to the up-front commissions, fees and expenses associated with a public offering nor all of the laws and regulations that will apply to us. For all of these reasons, our stockholders should be especially cautious when drawing conclusions about our future performance and they should not assume that it will be similar to the prior performance of other KBS-sponsored programs. Our limited operating history and the differences between us and the private KBS-sponsored programs significantly increase the risk and uncertainty our stockholders face in making an investment in our shares.
Because we are dependent upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our operating performance and the return on our stockholders investment.
We are dependent on KBS Capital Advisors to manage our operations and our portfolio of real estate and real estate-related assets. Our advisor depends on the fees and other compensation that it receives from us and the other public KBS-sponsored programs in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes in the financial condition of KBS Capital Advisors or our relationship with KBS Capital Advisors could hinder its ability to successfully manage our operations and our portfolio of investments.
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If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investment in properties and other assets and the overall return to our stockholders may be reduced.
Our organizational documents permit us, to the extent permitted by Maryland law, to pay distributions from any source. If we fund distributions from financings, proceeds from our offering or sources other than our cash flow from operations, we will have less funds available for investment in properties and other real estate-related assets and the overall return to our stockholders may be reduced. To date, we have funded total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with operating cash flows and debt financing. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we have funded our distributions in part with third-party borrowings and expect to utilize third party borrowings in the future, if necessary, to help fund distributions. We may also fund such distributions from advances from our advisor or sponsors, from our advisors deferral of its asset management fee, from the net proceeds from the sale of real estate and from the receipt of principal payments on our real estate-related investments. To the extent distributions exceed cash flow from operations, a stockholders basis in our stock will be reduced and, to the extent distributions exceed a stockholders basis, the stockholder may recognize capital gain.
The loss of or the inability to obtain key real estate and debt finance professionals at our advisor could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of an investment in our shares.
Our success depends to a significant degree upon the contributions of Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., each of whom would be difficult to replace. Neither we nor our affiliates have employment agreements with Messrs. Bren, Hall, McMillan or Schreiber. Messrs. Bren, Hall, McMillan and Schreiber may not remain associated with us. If any of these persons were to cease their association with us, our operating results could suffer. We do not intend to maintain key person life insurance on any person. We believe that our future success depends, in large part, upon our advisors and its affiliates ability to attract and retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our advisor and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. Further, we intend to establish strategic relationships with firms that have special expertise in certain services or detailed knowledge regarding real properties in certain geographic regions. Maintaining such relationships will be important for us to effectively compete with other investors for properties and tenants in such regions. We may be unsuccessful in establishing and retaining such relationships. If we lose or are unable to obtain the services of highly skilled professionals or do not establish or maintain appropriate strategic relationships, our ability to implement our investment strategies could be delayed or hindered, and the value of our stockholders investments may decline.
Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our stockholders and our recovery against them if they negligently cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that no independent director shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, our stockholders and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce our stockholders and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to our stockholders.
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We may change our targeted investments without stockholder consent.
Based on our investments to date, we expect to allocate approximately 80% to 90% of our portfolio to investments in core properties and approximately 10% to 20% of our portfolio to real estate-related investments such as mortgage, mezzanine, bridge and other loans; debt and derivative securities related to real estate assets, including mortgage-backed securities; and the equity securities of other REITs and real estate companies. Though this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments as described. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.
Risks Related to Conflicts of Interest
KBS Capital Advisors and its affiliates, including all of our executive officers, some of our directors and other key real estate and debt finance professionals, face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
All of our executive officers, some of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in KBS Capital Advisors, our advisor, KBS Capital Markets Group, LLC (KBS Capital Markets Group), the entity that acted as our dealer manager, and other affiliated KBS entities. KBS Capital Advisors and its affiliates receive substantial fees from us. These fees could influence our advisors advice to us as well as the judgment of affiliates of KBS Capital Advisors. Among other matters, these compensation arrangements could affect their judgment with respect to:
| the continuation, renewal or enforcement of our agreements with KBS Capital Advisors and its affiliates, including the advisory agreement; |
| public offerings of equity by us, which would entitle KBS Capital Markets Group to dealer-manager fees and would likely entitle KBS Capital Advisors to increased acquisition, origination and asset-management fees; |
| sales of properties and other investments, which entitle KBS Capital Advisors to disposition fees and possible subordinated incentive fees; |
| acquisitions of properties and other investments and originations of loans, which entitle KBS Capital Advisors to acquisition or origination fees and asset-management fees, and, in the case of acquisitions of investments from other KBS-sponsored programs, might entitle affiliates of KBS Capital Advisors to disposition fees and possible subordinated incentive fees in connection with its services for the seller; |
| borrowings to acquire properties and other investments and to originate loans, which borrowings will increase the acquisition, origination and asset-management fees payable to KBS Capital Advisors; |
| whether and when we seek to list our common stock on a national securities exchange, which listing could entitle KBS Capital Advisors to a subordinated incentive listing fee; |
| whether we seek stockholder approval to internalize our management, which may entail acquiring assets (such as office space, furnishings and technology costs) and negotiating compensation for real estate, debt finance, management and accounting professionals at our advisor and its affiliates that may result in such individuals receiving more compensation from us than they currently receive from our advisor; and |
| whether and when we seek to sell the company or its assets, which sale could entitle KBS Capital Advisors to a subordinated incentive fee. |
The fees our advisor receives in connection with the acquisition, origination and management of assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.
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KBS Capital Advisors faces conflicts of interest relating to the acquisition and origination of assets and leasing of properties and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets and obtain less creditworthy tenants, which could limit our ability to make distributions and reduce our stockholders overall investment return.
We rely on our sponsors and other key real estate professionals at our advisor, including Peter M. Bren, Keith Hall, Peter McMillan III and Charles J. Schreiber, Jr., to identify suitable investment opportunities for us. KBS REIT I, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS REIT III are also advised by KBS Capital Advisors and rely on our sponsors and many of the same real estate, debt finance, management and accounting professionals as will future public KBS-sponsored programs. Messrs. Bren and Schreiber and several of the other key real estate professionals at KBS Capital Advisors are also the key real estate professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to institutional investors in real estate and real estate-related assets. As such, the other KBS-sponsored programs that are currently raising funds for investment and future programs all rely on many of the same group of real estate and debt finance professionals. Many investment opportunities that are suitable for us may also be suitable for other KBS programs and investors. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or KBS-advised investor, they, in their sole discretion, will offer the opportunity to the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase real estate or any significant asset related to real estate unless our advisor has recommended the investment to us. Thus, the real estate and debt finance professionals of KBS Capital Advisors could direct attractive investment opportunities to other entities or investors. Such events could result in us investing in properties that provide less attractive returns, which may reduce our ability to make distributions to our stockholders.
We and other KBS-sponsored programs and KBS-advised investors also rely on these real estate professionals to supervise the property management and leasing of properties. If the KBS team of real estate professionals direct creditworthy prospective tenants to properties owned by another KBS-sponsored program or KBS-advised investor when they could direct such tenants to our properties, our tenant base may have more inherent risk and our properties occupancy may be lower than might otherwise be the case.
Further, Messrs. Bren, Hall, McMillan and Schreiber and existing and future KBS-sponsored programs and KBS-advised investors are generally not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. Messrs. Bren, Hall, McMillan and Schreiber have agreed to restrictions with respect to sponsoring another multi-family REIT while the KBS Legacy Partners Apartment REIT offering is ongoing.
KBS Capital Advisors, the real estate and debt finance professionals assembled by our advisor, their affiliates and our officers face competing demands relating to their time and this may cause our operations and our stockholders investment to suffer.
We rely on KBS Capital Advisors and the real estate and debt finance professionals our advisor has assembled, including Messrs. Bren, Hall, McMillan, Schreiber and David E. Snyder and Ms. Stacie K. Yamane for the day-to-day operation of our business. KBS REIT I, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS REIT III are also advised by KBS Capital Advisors and rely on our sponsors and many of the same real estate, debt finance, management and accounting professionals as will future public KBS-sponsored programs. Further, our officers and directors are also officers and/or directors of some or all of the other public KBS-sponsored programs. In addition, Messrs. Bren and Schreiber are executive officers of KBS Realty Advisors and its affiliates, the advisors of the private KBS-sponsored programs and the investment advisors to institutional investors in real estate and real estate-related assets. As a result of their interests in other KBS programs, their obligations to other investors and the fact that they engage in and they will continue to engage in other business activities, on behalf of themselves and others, Messrs. Bren, Hall, McMillan, Schreiber and Snyder and Ms. Yamane face conflicts of interest in allocating their time among us, KBS REIT I, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III, KBS Capital Advisors, other KBS-sponsored programs and other business activities in which they are involved. In addition, KBS Capital Advisors and KBS Realty Advisors and its affiliates share many of the same real estate, management and accounting professionals. During times of intense activity in other programs and ventures, these individuals may devote less time and fewer resources to our business than are necessary or appropriate to manage our business. Furthermore, some or all of these individuals may become employees of another KBS-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other KBS-sponsored programs. If this occurs, the returns on our investments, and the value of our stockholders investment, may decline.
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All of our executive officers, some of our directors and the key real estate and debt finance professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in KBS Capital Advisors and its affiliates, which could hinder our ability to implement our business strategy and to generate returns to our stockholders.
All of our executive officers, some of our directors and the key real estate and debt finance professionals assembled by our advisor are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor and other affiliated KBS entities. Through KBS-affiliated entities, some of these persons also serve as the investment advisors to institutional investors in real estate and real estate-related assets and through KBS Capital Advisors and KBS Realty Advisors these persons serve as the advisor to other KBS programs, including KBS REIT I, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS REIT III. As a result, they owe fiduciary duties to each of these entities, their members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Further, Messrs. Bren, Hall, McMillan and Schreiber and existing and future KBS-sponsored programs and KBS-advised investors are generally not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. Messrs. Bren, Hall, McMillan and Schreiber have agreed to restrictions with respect to sponsoring another multi-family REIT while the KBS Legacy Partners Apartment REIT offering is ongoing. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to our stockholders and to maintain or increase the value of our assets.
Our boards loyalties to KBS REIT I, KBS Strategic Opportunity REIT, KBS REIT III and possibly to future KBS-sponsored programs could influence its judgment, resulting in actions that may not be in our stockholders best interest or that result in a disproportionate benefit to another KBS-sponsored program at our expense.
All of our directors are also directors of KBS REIT I and KBS REIT III. One of our directors is also a director of KBS Strategic Opportunity REIT. The loyalties of our directors serving on the boards of KBS REIT I, KBS REIT III and KBS Strategic Opportunity REIT, or possibly on the boards of future KBS-sponsored programs, may influence the judgment of our board of directors when considering issues for us that also may affect other KBS-sponsored programs, such as the following:
| The conflicts committee of our board of directors must evaluate the performance of KBS Capital Advisors with respect to whether KBS Capital Advisors is presenting to us our fair share of investment opportunities. If our advisor is not presenting a sufficient number of investment opportunities to us because it is presenting many opportunities to another KBS-sponsored program or if our advisor is giving preferential treatment to another KBS-sponsored program in this regard, our conflicts committee may not be well suited to enforce our rights under the terms of the advisory agreement or to seek a new advisor. |
| We could enter into transactions with other KBS-sponsored programs, such as property sales, acquisitions or financing arrangements. Decisions of the board or the conflicts committee regarding the terms of those transactions may be influenced by the boards or committees loyalties to such other KBS-sponsored programs. |
| A decision of the board or the conflicts committee regarding the timing of a debt or equity offering could be influenced by concerns that the offering would compete with an offering of other KBS-sponsored programs. |
| A decision of the board or the conflicts committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs. |
| A decision of the board or the conflicts committee regarding whether or when we seek to list our common shares on a national securities exchange could be influenced by concerns that such listing could adversely affect the sales efforts for other KBS-sponsored programs, depending on the price at which our shares trade. |
Because our independent directors are also independent directors of KBS REIT I and KBS REIT III, they receive compensation for service on the board of KBS REIT I and upon breaking escrow in KBS REIT IIIs initial public offering, they will receive compensation for service on the board of KBS REIT III. Like us, KBS REIT I pays and KBS REIT III will pay each independent director an annual retainer of $40,000 as well as compensation for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,500 for each committee meeting attended (except that the committee chairman is paid $3,000 for each meeting attended), (iii) $2,000 for each teleconference board meeting attended, and (iv) $2,000 for each teleconference committee meeting attended (except that the committee chairman is paid $3,000 for each teleconference committee meeting attended). In addition, KBS REIT I reimburses and KBS REIT III will reimburse directors for reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.
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For the year ended December 31, 2010, the independent directors of KBS REIT I earned compensation as follows:
Independent Director |
Compensation Earned in 2010 | Compensation Paid in 2010(1) | ||||||
Hank Adler |
$ | 91,996 | (2) | $ | 93,496 | |||
Barbara Cambon |
$ | 85,496 | (3) | $ | 87,996 | |||
Stuart A. Gabriel, Ph.D |
$ | 89,496 | (4) | $ | 90,496 |
(1) Compensation Paid in 2010 includes meeting fees earned during 2009 but paid or reimbursed in 2010 as follows: Mr. Adler $7,333; Ms. Cambon $8,333; and Mr. Gabriel $7,333.
(2) This amount includes (i) fees earned for attendance at nine board meetings, seven conflicts committee meetings and five audit committee meetings, (ii) the annual retainer and (iii) costs reimbursements for reasonable out-of-pocket expenses incurred in connection with attendance at meetings.
(3) This amount includes (i) fees earned for attendance at eight board meetings, six conflicts committee meetings and four audit committee meetings, (ii) the annual retainer and (iii) costs reimbursements for reasonable out-of-pocket expenses incurred in connection with attendance at meetings.
(4) This amount includes (i) fees earned for attendance at nine board meetings, seven conflicts committee meetings and five audit committee meetings, (ii) the annual retainer and (iii) costs reimbursements for reasonable out-of-pocket expenses incurred in connection with attendance at meetings.
Risks Related to Our Corporate Structure
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.
Our stockholders investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our subsidiaries become an unregistered investment company, we could not continue our business.
Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act. If we or our subsidiaries were obligated to register as investment companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
| limitations on capital structure; |
| restrictions on specified investments; |
| prohibitions on transactions with affiliates; and |
| compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses. |
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Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:
| is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the primarily engaged test); or |
| is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuers total assets on an unconsolidated basis (the 40% test). Investment securities excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies). |
We believe that we and our Operating Partnership satisfy both tests above. With respect to the 40% test, most of the entities through which we and our Operating Partnership own our assets are majority-owned subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).
With respect to the primarily engaged test, we and our Operating Partnership are holding companies. Through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries.
We believe that most of the subsidiaries of our Operating Partnership may rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Any other subsidiaries of our Operating Partnership should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staffs position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in mortgages and other liens on and interests in real estate, or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters.
If, however, the value of the subsidiaries of our Operating Partnership that must rely on Section 3(c)(1) or Section 3(c)(7) is greater than 40% of the value of the assets of our Operating Partnership, then we and our Operating Partnership may seek to rely on the exception from registration under Section 3(c)(6) if we and our Operating Partnership are primarily engaged, through majority-owned subsidiaries, in the business of purchasing or otherwise acquiring mortgages and other interests in real estate. The SEC staff has issued little interpretive guidance with respect to Section 3(c)(6); however, it is our view that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, majority-owned subsidiaries that rely on Section 3(c)(5)(C).
To maintain compliance with the Investment Company Act, our subsidiaries may be unable to sell assets we would otherwise want them to sell and may need to sell assets we would otherwise wish them to retain. In addition, our subsidiaries may have to acquire additional assets that they might not otherwise have acquired or may have to forego opportunities to make investments that we would otherwise want them to make and would be important to our investment strategy. Moreover, the SEC may issue interpretations with respect to various types of assets that are contrary to our views and current SEC staff interpretations are subject to change, which increases the risk of non-compliance and the risk that we may be forced to make adverse changes to our portfolio. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement and a court could appoint a receiver to take control of us and liquidate our business.
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Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.
If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered real estate-related assets under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered real estate-related assets under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.
Our stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.
Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our boards broad discretion in setting policies and our stockholders inability to exert control over those policies increases the uncertainty and risks our stockholders face.
Our stockholders may not be able to sell their shares under our share redemption program and, if our stockholders are able to sell their shares under the program, they may not be able to recover the amount of their investment in our shares.
Our share redemption program includes numerous restrictions that limit our stockholders ability to sell their shares. Our stockholders must hold their shares for at least one year in order to participate in the share redemption program, except for redemptions sought upon a stockholders death, qualifying disability (as defined in the plan) or determination of incompetence (as defined in the plan). We limit the number of shares we may redeem pursuant to the share redemption program as follows: (1) during any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year and (2) during each calendar year, redemptions will be limited to the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. Further, we have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all redemption requests made in any year. Our board may amend, suspend or terminate the share redemption program upon 30 days notice.
The prices at which we will initially redeem shares under the program are as follows:
| The lower of $9.25 or 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year; |
| The lower of $9.50 or 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years; |
| The lower of $9.75 or 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and |
| The lower of $10.00 or 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years. |
Notwithstanding the above, once we establish an estimated value per share of common stock that is not based on the price to acquire a share in our primary initial public offering or follow-on public offerings, the redemption price per share for all stockholders will be equal to the estimated value per share, as determined by our advisor or another firm chosen for that purpose. We currently expect to establish an estimated value per share no later than the expiration of the first 18-month period in which we do not sell shares in a public equity offering and every 12 to 18 months thereafter. Public equity offering for this purpose does not include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership. The restrictions of our share redemption program severely limit our stockholders ability to sell their shares should they require liquidity and limit their ability to recover the value they invested.
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If funds are not available from the dividend reinvestment plan offering for general corporate purposes, then we may have to use a greater proportion of our cash flow from operations to meet our general cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under the share redemption program.
We depend on the proceeds from our dividend reinvestment plan for general corporate purposes, including capital expenditures on our real estate investments, tenant improvement costs and leasing costs related to our investments in real estate properties; reserves required by financings of our investments in real estate properties; the repayment of debt; and the repurchase of shares under our share redemption program. We cannot predict with any certainty how much, if any, dividend reinvestment plan proceeds will be available for general corporate purposes. If such funds are not available from the dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet our general cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under the share redemption program.
The offering price of our shares was not established on an independent basis; the actual value of our stockholders investment may be substantially less than what they paid. We may use the most recent price paid to acquire a share in our primary initial public offering or follow-on public offerings as the estimated value of our shares until we have completed our offering stage. Even when our advisor begins to use other valuation methods to estimate the value of our shares, the value of our shares will be based upon a number of assumptions that may not be accurate or complete.
We established the offering price of our shares on an arbitrary basis. The selling price of our shares bears no relationship to our book or asset values or to any other established criteria for valuing shares. Because the offering price was not based upon any independent valuation, the offering price may not be indicative of the proceeds that our stockholders would receive upon liquidation. Further, the offering price may be significantly more than the price at which the shares would trade if they were to be listed on an exchange or actively traded by broker-dealers.
To assist Financial Industry Regulatory Authority (FINRA) members and their associated persons that participated in our public offering of common stock, pursuant to FINRA Conduct Rule 5110, we disclose in each annual report distributed to stockholders a per share estimated value of the shares, the method by which it was developed, and the date of the data used to develop the estimated value. For this purpose, KBS Capital Advisors estimated the value of our common shares as $10.00 per share as of December 31, 2010. The basis for this valuation is the fact that the most recent public offering price of our shares of common stock in our primary offering was $10.00 per share (ignoring purchase price discounts for certain categories of purchasers). Our advisor has indicated that it may use the most recent price paid to acquire a share in our initial public offering (ignoring purchase price discounts for certain categories of purchasers) or follow-on public offerings as its estimated per share value of our shares until we have completed our offering stage. We will consider our offering stage complete when we are no longer publicly offering equity securities and have not done so for up to 18 months. We ceased offering shares in our initial public offering on December 31, 2010 but we may conduct follow-on public equity offerings in the future. (For purposes of this definition, we do not consider a public equity offering to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.) Once we establish an estimated value per share we currently expect to update the estimated value per share every 12 to 18 months thereafter. Our charter does not restrict our ability to conduct offerings in the future, and if our board of directors determines that it is in our best interest, we may conduct follow-on offerings.
Although the estimated value set forth above represents the most recent price at which most investors were willing to purchase shares in our primary offering, this reported value is likely to differ from the price at which a stockholder could resell his or her shares because (i) there is no public trading market for the shares at this time; (ii) the estimated value does not reflect, and is not derived from, the fair market value of our properties and other assets, nor does it represent the amount of net proceeds that would result from an immediate liquidation of those assets, because the amount of proceeds available for investment from our primary public offering was net of selling commissions, dealer manager fees, other organization and offering costs and acquisition and origination fees and expenses; (iii) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current disruptions in the financial and real estate markets may affect the values of our investments; and (iv) the estimated value does not take into account how developments related to individual assets may have increased or decreased the value of our portfolio.
When determining the estimated value of our shares by methods other than the last price paid to acquire a share in an offering, our advisor, or another firm we choose for that purpose, will estimate the value of our shares based upon a number of assumptions that may not be accurate or complete. Accordingly, these estimates may or may not be an accurate reflection of the fair market value of our investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.
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Our investors interest in us will be diluted if we issue additional shares, which could reduce the overall value of their investment.
Our common stockholders do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. After our investors purchase shares in our public offering, our board may elect to (1) sell additional shares in future public offerings (including through the dividend reinvestment plan), (2) issue equity interests in private offerings, (3) issue shares to our advisor, or its successors or assigns, in payment of an outstanding obligation or (4) issue shares of our common stock to sellers of properties or assets we acquire in connection with an exchange of limited partnership interests of the Operating Partnership. To the extent we issue additional equity interests after our investors purchase shares in our initial public offering, their percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings, the use of the proceeds and the value of our real estate investments, our investors may also experience dilution in the book value and fair value of their shares.
Payment of fees to KBS Capital Advisors and its affiliates reduces cash available for investment and distribution and increases the risk that our stockholders will not be able to recover the amount of their investment in our shares.
KBS Capital Advisors and its affiliates perform services for us in connection with the selection and acquisition or origination of our investments, the management, leasing and disposition of our properties and the management, structuring and administration of our other investments. We pay them substantial fees for these services, which results in immediate dilution to the value of our stockholders investment and reduces the amount of cash available for investment or distribution to stockholders.
We may also pay significant fees during our listing/liquidation stage. Although most of the fees expected to be paid during our listing/liquidation stage are contingent on our investors first receiving agreed-upon investment returns, affiliates of KBS Capital Advisors could also receive significant payments even without our reaching the investment-return thresholds should we ever seek to become self-managed. Due to the apparent preference of the public markets for self-managed companies, a decision to list our shares on a national securities exchange might be preceded by a decision to become self-managed. Given our advisors familiarity with our assets and operations, if our board of directors ever did decide that we should become self-managed, then we may prefer to become self-managed by acquiring entities affiliated with our advisor. Such an internalization transaction could result in significant payments to affiliates of our advisor irrespective of whether our stockholders enjoyed the returns on which we have conditioned other incentive compensation.
Therefore, these fees increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than stockholders paid for our shares. These substantial fees and other payments also increase the risk that our stockholders will not be able to resell their shares at a profit, even if our shares are listed on a national securities exchange.
If we are unable to obtain funding for future capital needs, cash distributions to our stockholders and the value of our investments could decline.
When tenants do not renew their leases or otherwise vacate their space, we will often need to expend substantial funds for improvements to the vacated space in order to attract replacement tenants. Even when tenants do renew their leases we may agree to make improvements to their space as part of our negotiation. If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain funding from sources other than our cash flow from operations, such as borrowings or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to our stockholders and could reduce the value of our stockholders investment.
Our stockholders may be more likely to sustain a loss on their investment because our sponsors do not have as strong an economic incentive to avoid losses as do sponsors who have made significant equity investments in their companies.
Our sponsors have only invested $200,000 in us through the purchase of 20,000 shares of our common stock at $10 per share. With this limited exposure, our investors may be at a greater risk of loss because our sponsors do not have as much to lose from a decrease in the value of our shares as do those sponsors who make more significant equity investments in their companies.
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Although we will not currently be afforded the protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, business combinations between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection.
General Risks Related to Investments in Real Estate
Economic and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.
Our properties and their performance are subject to the risks typically associated with real estate, including:
| downturns in national, regional and local economic conditions; |
| competition from other office and industrial buildings; |
| adverse local conditions, such as oversupply or reduction in demand for office and industrial buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area; |
| vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space; |
| changes in the supply of or the demand for similar or competing properties in an area; |
| changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive; |
| changes in tax (including real property tax laws), real estate, environmental and zoning laws; and |
| periods of high interest rates and tight money supply. |
Any of the above factors, or a combination thereof, could result in a decrease in our cash flows from operations and a decrease in the value of our investments, which would have an adverse effect on our operations, on our ability to pay distributions to our stockholders and on the value of our stockholders investment.
If our acquisitions fail to perform as expected, cash distributions to our stockholders may decline.
Since breaking escrow in June 2008, we have made acquisitions of properties and other real estate-related assets based on an underwriting analysis with respect to each asset and how the asset fits into our portfolio. If these assets do not perform as expected we may have less cash flow from operations available to fund distributions and investor returns may be reduced.
We acquired the 300 N. LaSalle Building on July 29, 2010. A significant percentage of our assets is invested in the 300 N. LaSalle Building and the value of our stockholders investment in us will fluctuate with the performance of this investment.
The 300 N. LaSalle Building represents approximately 26% of our total assets and represents approximately 24% of our total annualized base rent as of December 31, 2010. In addition, the largest tenant at the property, Kirkland and Ellis, leases approximately 53% of the 300 N. LaSalle Building and represents approximately 14% of our total annualized base rent as of December 31, 2010. Further, as a result of this acquisition, the geographic concentration of our portfolio makes us particularly susceptible to adverse economic developments in the Chicago real estate market. Any adverse economic or real estate developments in this market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our operating results and our ability to make distributions to our stockholders.
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Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties.
A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available to distribute to stockholders. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction on the resale value of a property could also reduce the value of our stockholders investment.
We depend on tenants for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders is dependent upon the success and economic viability of our tenants.
The success of our investments materially depends upon the financial stability of the tenants leasing the properties we own. The inability of a single major tenant or a number of smaller tenants to meet their rental obligations would lower our net income. A default by a tenant on its lease payments would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord of a property and may incur substantial costs in protecting our investment and re-letting the property. Tenants may have the right to terminate their leases upon the occurrence of certain customary events of default and, in other circumstances, may not renew their leases or, because of market conditions, may be able to renew their leases on terms that are less favorable to us than the terms of their initial leases. Further, some of the properties in which we invest may be outfitted to suit the particular needs of the tenants. We may have difficulty replacing the tenants of these properties if the outfitted space limits the types of businesses that could lease that space without major renovation. Because the market value of a property depends principally upon the value of the leases associated with such property, we may incur a loss upon the sale of a property with significant vacant space. These events could cause us to reduce the amount of distributions to stockholders.
Our inability to sell a property when we want could limit our ability to pay cash distributions to our stockholders.
Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to our stockholders and could reduce the value of our stockholders investment.
If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce the distributions available to our stockholders.
If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash; however, in some instances, we may sell our properties by providing financing to purchasers. When we provide financing to a purchaser, we will bear the risk that the purchaser may default, which could reduce our cash distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of the sale to our stockholders, or the reinvestment of the proceeds in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed.
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Potential development and construction delays and resultant increased costs and risks may hinder our operating results and decrease our net income.
Although we expect that we will invest primarily in properties that have operating histories or whose construction is complete, from time to time we may acquire unimproved real property or properties that are under development or construction. Investments in such properties will be subject to the uncertainties associated with the development and construction of real property, including those related to re-zoning land for development, environmental concerns of governmental entities and/or community groups and our builders ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builders performance may also be affected or delayed by conditions beyond the builders control. Delays in completing construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a purchase price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.
Competition with third parties in acquiring properties and other investments may reduce our profitability and the return on our stockholders investment.
We face competition from various entities for investment opportunities in commercial and office properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships, and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of its investments. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we acquire properties and other investments at higher prices and/or by using less-than-ideal capital structures, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets. If such events occur, our stockholders may experience a lower return on their investment.
Our joint venture partners could take actions that decrease the value of an investment to us and lower our stockholders overall return.
We may enter into joint ventures with third parties to acquire properties and other assets. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:
| that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt; |
| that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; or |
| that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. |
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and the value of our stockholders investment.
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Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.
Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Our tenants operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of our stockholders investment.
The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders. All of our properties were subject to Phase I environmental assessments at the time they were acquired.
Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions.
Our properties may be subject to the Americans with Disabilities Act of 1990, as amended. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for public accommodations and commercial facilities that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Acts requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for Disabilities Act compliance will reduce our net income and the amount of cash available for distributions to our stockholders.
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Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on our stockholders investment.
There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition to providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which may reduce the value of our stockholders investment. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to stockholders.
Terrorist attacks and other acts of violence or war may affect the markets in which we plan to operate, which could delay or hinder our ability to meet our investment objectives and reduce our stockholders overall return.
Terrorist attacks or armed conflicts may directly impact the value of our properties through damage, destruction, loss or increased security costs. Many of our investments are in major metropolitan areas. Insurance risks associated with potential acts of terrorism against office and other properties in major metropolitan areas could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that specific coverage against terrorism be purchased by commercial owners as a condition for providing loans. We may not be able to obtain insurance against the risk of terrorism because it may not be available or may not be available on terms that are economically feasible. The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks. In addition, certain losses resulting from these types of events are uninsurable and others may not be covered by our terrorism insurance. The costs of obtaining terrorism insurance and any uninsured losses we may suffer as a result of terrorist attacks could reduce the returns on our investments and limit our ability to make distributions to our stockholders.
Risks Related to Real Estate-Related Investments
Our investments in real estate-related investments are subject to the risks typically associated with real estate.
Our investments in mortgage, mezzanine or other real estate loans will generally be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our taking ownership of the property. The values of the properties ultimately securing our loans may change after we acquire or originate those loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in mortgage-backed securities and other real estate-related investments may be similarly affected by real estate property values. Therefore, our real estate-related investments will be subject to the risks typically associated with real estate, which are described above under the heading General Risks Related to Investments in Real Estate.
Our investments in mortgage, mezzanine, bridge or other real estate loans are subject to interest rate fluctuations that will affect our returns as compared to market interest rates; accordingly, the value of our stockholders investment in us is subject to fluctuations in interest rates.
With respect to our fixed rate, long-term loans, if interest rates rise, the loans could yield a return that is lower than then-current market rates. If interest rates decrease, we will be adversely affected to the extent that loans are prepaid because we may not be able to reinvest the proceeds at as high of an interest rate. With respect to our variable-rate loans, if interest rates decrease, our revenues will also decrease. For these reasons, our returns on these loans and the value of our stockholders investment in us will be subject to fluctuations in interest rates.
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The mortgage loans we invest in and the mortgage loans underlying the mortgage securities we may invest in are subject to delinquency, foreclosure and loss, which could result in losses to us.
Commercial real estate loans are secured by multifamily or commercial property and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrowers ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, including environmental legislation, natural disasters, terrorism, social unrest and civil disturbances.
In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations. Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
Delays in liquidating defaulted mortgage loans could reduce our investment returns.
If there are defaults under our mortgage loan investments, we may not be able to repossess and sell the underlying properties quickly. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans. An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by the same properties.
We may invest in mezzanine loans that take the form of subordinated loans secured by a pledge of the ownership interests of the entity owning (directly or indirectly) the real property. These types of investments may involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.
The B-Notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.
We may invest in B-Notes. A B-Note is a mortgage loan typically (i) secured by a first mortgage on a single large commercial property or group of related properties and (ii) subordinated to an A-Note secured by the same first mortgage on the same collateral. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-Note holders after payment to the A-Note holders. Since each transaction is privately negotiated, B-Notes can vary in their structural characteristics and risks. For example, the rights of holders of B-Notes to control the process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-Note investment. Further, B-Notes typically are secured by a single property, and so reflect the increased risks associated with a single property compared to a pool of properties.
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Bridge loans may involve a greater risk of loss than conventional mortgage loans.
We may provide bridge loans secured by first-lien mortgages on properties to borrowers who are typically seeking short-term capital to be used in an acquisition, development or refinancing of real estate. The borrower may have identified an undervalued asset that has been undermanaged or is located in a recovering market. If the market in which the asset is located fails to recover according to the borrowers projections, or if the borrower fails to improve the quality of the assets management or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the bridge loan, and we may not recover some or all of our investment.
In addition, owners usually borrow funds under a conventional mortgage loan to repay a bridge loan. We may, therefore, be dependent on a borrowers ability to obtain permanent financing to repay our bridge loan, which could depend on market conditions and other factors. Bridge loans are also subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under bridge loans held by us, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount of the bridge loan. To the extent we suffer such losses with respect to our investments in bridge loans, the value of our company and of our common stock may be adversely affected.
Investment in non-conforming and non-investment grade loans may involve increased risk of loss.
Loans we may acquire or originate may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non-investment grade. Non-investment grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers credit history, the properties underlying cash flow or other factors. As a result, loans we acquire or originate may have a higher risk of default and loss than conventional loans. Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.
We may invest in subordinated loans and subordinated mortgage-backed securities that may be subject to losses.
We may acquire or originate subordinated loans and invest in subordinated mortgage-backed securities. In the event a borrower defaults on a subordinated loan and lacks sufficient assets to satisfy our loan, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through standstill periods), and control decisions made in bankruptcy proceedings relating to borrowers.
In general, losses on a mortgage loan included in a securitization will be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, and then by the first loss subordinated security holder. In the event of default and the exhaustion of any equity support, reserve fund, letter of credit and any classes of securities junior to those in which we invest, we may not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage-backed securities, the securities in which we invest may effectively become the first loss position behind the more senior securities, which may result in significant losses to us.
Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we make or acquire may materially adversely affect our investment.
The renovation, refurbishment or expansion by a borrower under a mortgaged or leveraged property involves risks of cost overruns and non-completion. Costs of construction or improvements to bring a property up to standards established for the market position intended for that property may exceed original estimates, possibly making a project uneconomical. Other risks may include: environmental risks and construction, rehabilitation and subsequent leasing of the property not being completed on schedule. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment and we may not recover some or all of our investment.
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To close transactions within a time frame that meets the needs of borrowers of loans we may originate, we may perform underwriting analyses in a very short period of time, which may result in credit decisions based on limited information.
We may gain a competitive advantage by, from time to time, being able to analyze and close transactions within a very short period of time. Our underwriting guidelines require a thorough analysis of many factors, including the underlying propertys financial performance and condition, geographic market assessment, experience and financial strength of the borrower and future prospects of the property within the market. If we make the decision to extend credit to a borrower prior to the completion of one or more of these analyses, we may fail to identify certain credit risks that we would otherwise have identified.
The CMBS in which we may invest are subject to all of the risks of the underlying mortgage loans and the risks of the securitization process.
CMBS, or commercial mortgage-backed securities, are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans.
In a rising interest rate environment, the value of CMBS may be adversely affected when payments on underlying mortgages do not occur as anticipated, resulting in the extension of the securitys effective maturity and the related increase in interest rate sensitivity of a longer-term instrument. The value of CMBS may also change due to shifts in the markets perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole. In addition, CMBS are subject to the credit risk associated with the performance of the underlying mortgage properties. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.
CMBS are also subject to several risks created through the securitization process. Subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes delinquent loans, there is a risk that interest payments on subordinate CMBS will not be fully paid. Subordinate CMBS are also subject to greater credit risk than those CMBS that are more highly rated.
To the extent that we make investments in real estate-related securities and loans, a portion of those investments may be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.
Certain of the real estate-related securities that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited. The mezzanine and bridge loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrowers default.
Delays in restructuring or liquidating non-performing real estate securities could reduce the return on our stockholders investment.
Real estate securities may become non-performing after acquisition for a wide variety of reasons. Such non-performing real estate investments may require a substantial amount of workout negotiations and/or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of such loan or asset. However, even if a restructuring is successfully accomplished, upon maturity of such real estate security, replacement takeout financing may not be available. We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments. Intercreditor provisions may substantially interfere with our ability to do so. Even if foreclosure is an option, the foreclosure process can be lengthy and expensive. Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including, without limitation, lender liability claims and defenses, in an effort to prolong the foreclosure action. In some states, foreclosure actions can take up to several years or more to litigate. At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the foreclosure process. Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property. Foreclosure actions by senior lenders may substantially affect the amount that we may earn or recover from an investment.
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We depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders is dependent upon the success and economic viability of such debtors.
The success of our real estate-related investments such as loans and debt and derivative securities will materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses. In the event of a debtor default or bankruptcy, we may experience delays in enforcing our rights as a creditor, and such rights may be subordinated to the rights of other creditors. These events could negatively affect the cash available for distribution to our stockholders and the value of our stockholders investment.
Prepayments can adversely affect the yields on our investments.
The yields on our debt investments may be affected by the rate of prepayments differing from our projections. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such prepayments received, the yield on our portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, our anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain investments.
If credit spreads widen before we obtain long-term financing for our assets, the value of our assets may suffer.
We will price our assets based on our assumptions about future credit spreads for financing of those assets. We expect to obtain longer-term financing for our assets using structured financing techniques in the future. In such financings, interest rates are typically set at a spread over a certain benchmark, such as the yield on United States Treasury obligations, swaps, or LIBOR. If the spread that borrowers will pay over the benchmark widens and the rates we charge on our assets to be securitized are not increased accordingly, this may reduce our income or cause losses.
Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.
We have entered and in the future may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:
| interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; |
| available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; |
| the duration of the hedge may not match the duration of the related liability or asset; |
| the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by federal tax provisions governing REITs; |
| the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; |
| the party owing money in the hedging transaction may default on its obligation to pay; and |
| we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money. |
Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended accounting treatment and may expose us to risk of loss.
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Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs.
The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then-current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot be certain that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.
There can be no assurance that the direct or indirect effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010 for the purpose of stabilizing or reforming the financial markets, will not have an adverse effect on our interest rate hedging activities.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) became law in the United States. Title VII of the Dodd-Frank Act contains a sweeping overhaul of the regulation of privately negotiated derivatives. The provisions of Title VII become effective on July 16, 2011 or, with respect to particular provisions, on such other date specified in the Dodd-Frank Act or by subsequent rulemaking. While the full impact of the Dodd-Frank Act on our interest rate hedging activities cannot be assessed until implementing rules and regulations are promulgated, the requirements of Title VII may affect our ability to enter into hedging or other risk management transactions, may increase our costs in entering into such transactions, and may result in us entering into such transactions on more unfavorable terms than prior to effectiveness of the Dodd-Frank Act. The occurrence of any of the foregoing events may have an adverse effect on our business.
Our investments in real estate-related debt securities and preferred and common equity securities will be subject to the specific risks relating to the particular issuer of the securities and may involve greater risk of loss than secured debt financings.
We may make equity investments in REITs and other real estate companies. We may target a public company that owns commercial real estate or real estate-related assets when we believe its stock is trading at a discount to that companys net asset value. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds we received from our initial public offering or to represent a substantial portion of our assets at any one time. We may also invest in debt securities and preferred equity securities issued by REITs and other real estate companies. Our investments in debt securities and preferred and common equity securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers that are REITs and other real estate companies are subject to the inherent risks associated with real estate and real estate-related investments. Furthermore, debt securities and preferred and common equity securities may involve greater risk of loss than secured debt financings due to a variety of factors, including that such investments are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in debt securities and preferred and common equity securities are subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders to the issuer, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (vi) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. These risks may adversely affect the value of outstanding debt securities and preferred and common equity securities and the ability of the issuers thereof to make principal, interest and/or distribution payments to us.
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Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.
A portion of our assets may be classified for accounting purposes as available-for-sale. These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security below its amortized value is other-than-temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.
A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.
Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.
Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.
Some of our portfolio investments may be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.
Some of our portfolio investments may be in the form of securities that are recorded at fair value but that have limited liquidity or are not publicly traded. The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable. We will estimate the fair value of any such investments on a quarterly basis. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.
Risks Associated with Debt Financing
We obtain lines of credit, mortgage indebtedness and other borrowings, which increases our risk of loss due to potential foreclosure.
We may obtain lines of credit and long-term financing that may be secured by our properties and other assets. We have acquired many of our real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties, to fund property improvements and other capital expenditures, to pay distributions and for other purposes. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gain). We, however, can give our stockholders no assurance that we will be able to obtain such borrowings on satisfactory terms.
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If we mortgage a property and there is a shortfall between the cash flow from that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the value of our stockholders investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We may give full or partial guaranties to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.
We may utilize repurchase agreements as a component of our financing strategy. Repurchase agreements economically resemble short-term, variable rate financing and usually require the maintenance of specific loan-to-collateral value ratios. If the market value of the assets subject to a repurchase agreement decline, we may be required to provide additional collateral or make cash payments to maintain the loan-to-collateral value ratios.
We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and our stockholders could lose all or part of their investment.
High mortgage rates or changes in underwriting standards may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flows from operations and the amount of cash distributions we can make.
If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on a property, we run the risk of being unable to refinance part or all of the property when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance properties, our income could be reduced. We may be unable to refinance or may only be able to partly refinance properties if underwriting standards, including loan to value ratios and yield requirements, among other requirements, are more strict than when we originally financed the properties. If any of these events occurs, our cash flow could be reduced and/or we might have to pay down existing mortgages. This, in turn, would reduce cash available for distribution to our stockholders, could cause us to require additional capital and may hinder our ability to raise capital by issuing more stock or by borrowing more money.
We expect to use leverage in connection with our investments in real estate-related assets, which increases the risk of loss associated with this type of investment.
We may finance the acquisition and origination of certain real estate-related investments with warehouse lines of credit and repurchase agreements. In addition, we may engage in various types of securitizations in order to finance our loan originations. Although the use of leverage may enhance returns and increase the number of investments that we can make, it may also substantially increase the risk of loss. There can be no assurance that leveraged financing will be available to us on favorable terms or that, among other factors, the terms of such financing will parallel the maturities of the underlying assets acquired. If alternative financing is not available, we may have to liquidate assets at unfavorable prices to pay off such financing. The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions cause the cost of our financing to increase relative to the income that we can derive from the assets we acquire.
Our debt service payments will reduce our cash flow available for distributions. We may not be able to meet our debt service obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to foreclosure or sale to satisfy our debt obligations. We may utilize repurchase agreements as a component of our financing strategy. Repurchase agreements economically resemble short-term, variable-rate financing and usually require the maintenance of specific loan-to-collateral value ratios. If the market value of the assets subject to a repurchase agreement decline, we may be required to provide additional collateral or make cash payments to maintain the loan-to-collateral value ratio. If we are unable to provide such collateral or cash repayments, we may lose our economic interest in the underlying assets. Further, credit facility providers and warehouse facility providers may require us to maintain a certain amount of cash reserves or to set aside unleveraged assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.
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Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan agreements we enter may contain covenants that limit our ability to further mortgage a property or that prohibit us from discontinuing insurance coverage or replacing KBS Capital Advisors as our advisor. These or other limitations would decrease our operating flexibility and our ability to achieve our operating objectives.
Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.
We expect that we will incur additional debt in the future and increases in interest rates will increase the cost of that debt, which could reduce the cash we have available for distributions. Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to pay distributions to our stockholders. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.
We have broad authority to incur debt and high debt levels could hinder our ability to make distributions and decrease the value of our stockholders investment.
Our policies do not limit us from incurring debt until our borrowings would exceed 75% of the cost of our tangible assets (before deducting depreciation or other noncash reserves) and we may exceed this limit with the approval of the conflicts committee of our board of directors. As of December 31, 2010, our borrowings were approximately 36% of both the cost (before depreciation or other noncash reserves) and book value (before depreciation) of our tangible assets, respectively. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of our stockholders investment.
Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to our stockholders.
We expect to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. While we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.
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Our stockholders may have current tax liability on distributions they elect to reinvest in our common stock.
If our stockholders participate in our dividend reinvestment plan, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, our stockholders will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value, if any. As a result, unless our stockholders are tax-exempt entities, they may have to use funds from other sources to pay their tax liability on the value of the shares of common stock received.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to our stockholders.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:
| In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income. |
| We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. |
| If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as foreclosure property, we may avoid the 100% tax on gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate. |
| If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% prohibited transaction tax unless such sale were made by one of our taxable REIT subsidiaries. |
We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders overall return.
To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders investment.
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The taxable mortgage pool rules may increase the taxes that we or our stockholders incur and may limit the manner in which we conduct securitizations.
We may be deemed to be, or make investments in entities that own or are themselves deemed to be taxable mortgage pools. Similarly, certain securitizations or other borrowings we may make could be considered to result in the creation of a taxable mortgage pool for federal income tax purposes. As a REIT, provided that we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by tax-exempt disqualified organizations, such as certain government-related entities that are not subject to tax on unrelated business income, we will incur a corporate-level tax on a portion of our income from the taxable mortgage pool. In that case, we are authorized to reduce and intend to reduce the amount of our distributions to any disqualified organization whose stock ownership gave rise to the tax by the amount of such tax paid by us that is attributable to such stockholders ownership. Moreover, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.
The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for federal income tax purposes.
A REITs net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level, and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.
It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.
The IRS may challenge our characterization of certain income from offshore taxable REIT subsidiaries.
We may form offshore corporate entities treated as taxable REIT subsidiaries. If we form such subsidiaries, we may receive certain income inclusions with respect to our equity investments in these entities. We intend to treat such income inclusions, to the extent matched by repatriations of cash in the same taxable year, as qualifying income for purposes of the 95% gross income test but not the 75% gross income test. Because there is no clear precedent with respect to the qualification of such income inclusions for purposes of the REIT gross income tests, no assurance can be given that the Internal Revenue Service will not assert a contrary position. If such income does not qualify for the 95% gross income test, we could be subject to a penalty tax or we could fail to qualify as a REIT, in both events only if such inclusions (along with certain other non-qualifying income) exceed 5% of our gross income.
We may be subject to adverse legislative or regulatory tax changes.
At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.
Dividends payable by REITs do not qualify for the reduced tax rates.
Legislation enacted in 2003 and modified in 2005 and 2010 generally reduces the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates to 15% (through 2012). Dividends payable by REITs, however, are generally not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
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Retirement Plan Risks
If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account (IRA)) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.
There are special considerations that apply to employee benefit plans subject to the Employee Retirement Income Security Act (ERISA) (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares. Fiduciaries and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:
| the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code; |
| the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plans or accounts investment policy; |
| the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code; |
| the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA; |
| the investment will not produce an unacceptable amount of unrelated business taxable income for the plan or IRA; |
| our stockholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and |
| the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code. |
With respect to the annual valuation requirements described above, we will provide an estimated value for our shares annually. For information regarding our estimated value per share, see Part II, Item 5, Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information of this Annual Report on Form 10-K. We can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common shares. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In addition, the investment transaction must be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common shares.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
We have no unresolved staff comments.
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ITEM 2. | PROPERTIES |
As of December 31, 2010, we owned 17 real estate properties (consisting of 14 office properties, one office/flex property and two industrial properties) and a leasehold interest in one industrial property, encompassing in the aggregate 7.5 million rentable square feet. The total cost of our real estate portfolio was $2.0 billion. At December 31, 2010, our portfolio was approximately 96% occupied and the average annualized base rent per square foot of our real estate portfolio was $25.83. The weighted-average remaining lease term of our real estate portfolio is 6.9 years. As of December 31, 2010, the following property represented more than 10% of our total assets:
Property |
Location | Rentable Square Feet |
Total Real Estate, Net (in thousands) |
Percentage of Total Assets |
Annualized Base Rent (in thousands)(1) |
Average Annualized Base Rent per sq. ft. |
Occupancy | |||||||||||||||||||||
300 N. LaSalle Building |
Chicago, IL | 1,302,901 | $ | 607,044 | 25.5 | % | $ | 43,838 | $ | 34.16 | 98.5 | % |
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2010, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
For a discussion of our real estate portfolio, see Part I, Item 1, Business of this annual report on Form 10-K.
Portfolio Lease Expirations
The following table sets forth a schedule of expiring leases for our real estate portfolio by square footage and by average annualized base rent as of December 31, 2010:
Year of Expiration |
Number
of Leases Expiring |
Annualized Base Rent(1) (in thousands) |
% of
Portfolio Annualized Base Rent |
Leased Rentable Square Feet Expiring |
% of
Portfolio Rentable Square Feet Expiring |
|||||||||||||||
Month to Month |
19 | $ | 599 | 0.3 | % | 56,849 | 0.8 | % | ||||||||||||
2011 |
52 | 11,789 | 6.3 | % | 450,444 | 6.2 | % | |||||||||||||
2012 |
48 | 13,619 | 7.3 | % | 517,196 | 7.2 | % | |||||||||||||
2013 |
38 | 8,533 | 4.6 | % | 382,212 | 5.3 | % | |||||||||||||
2014 |
42 | 23,013 | 12.3 | % | 860,473 | 11.9 | % | |||||||||||||
2015 |
36 | 18,498 | 9.9 | % | 904,989 | 12.5 | % | |||||||||||||
2016 |
18 | 13,571 | 7.3 | % | 564,432 | 7.8 | % | |||||||||||||
2017 |
17 | 6,891 | 3.7 | % | 301,350 | 4.2 | % | |||||||||||||
2018 |
11 | 13,996 | 7.5 | % | 536,111 | 7.4 | % | |||||||||||||
2019 |
12 | 10,102 | 5.4 | % | 348,304 | 4.8 | % | |||||||||||||
2020 |
14 | 3,956 | 2.1 | % | 505,407 | 7.0 | % | |||||||||||||
Thereafter (2) |
17 | 61,927 | 33.3 | % | 1,790,901 | 24.9 | % | |||||||||||||
324 | $ | 186,494 | 100.0 | % | 7,218,668 | 100.0 | % | |||||||||||||
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2010, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
(2) Represents leases expiring from 2021 through 2029.
ITEM 3. | LEGAL PROCEEDINGS |
From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition. Nor are we aware of any such legal proceedings contemplated by government agencies.
ITEM 4. | (REMOVED AND RESERVED) |
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ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Stockholder Information
As of March 9, 2011, we had approximately 188.0 million shares of common stock outstanding held by a total of approximately 52,000 stockholders. The number of stockholders is based on the records of DST Systems, Inc., who serves as our transfer agent.
Market Information
No public market currently exists for our shares of common stock, and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.
To assist the Financial Industry Regulatory Authority (FINRA) members and their associated persons that participated in our public offering of common stock, pursuant to FINRA Conduct Rule 5110, we disclose in each annual report distributed to stockholders a per share estimated value of the shares, the method by which it was developed, and the date of the data used to develop the estimated value. For this purpose, KBS Capital Advisors estimated the value of our common shares as $10.00 per share as of December 31, 2010. The basis for this valuation is the fact that the most recent public offering price for our shares of common stock in our primary offering was $10.00 per share (ignoring purchase price discounts for certain categories of purchasers). Our advisor has indicated that it may use the most recent price paid to acquire a share in our primary initial public offering (ignoring purchase price discounts for certain categories of purchasers) or follow-on public offerings as its estimated per share value of our shares until we have completed our offering stage. We will consider our offering stage complete when we are no longer publicly offering equity securities and have not done so for up to 18 months. We ceased offering shares in our initial public offering on December 31, 2010, but we may conduct follow-on public equity offerings in the future. (For purposes of this definition, we do not consider a public equity offering to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.) Once we establish an estimated value per share we currently expect to update the estimated value per share every 12 to 18 months thereafter. Our charter does not restrict our ability to conduct offerings in the future, and if our board of directors determines that it is in our best interest, we may conduct follow-on offerings.
Although the estimated value set forth above represents the most recent price at which most investors were willing to purchase shares in our primary offering, this reported value is likely to differ from the price at which a stockholder could resell his or her shares because (i) there is no public trading market for the shares at this time; (ii) the estimated value does not reflect, and is not derived from, the fair market value of our properties and other assets, nor does it represent the amount of net proceeds that would result from an immediate liquidation of those assets, because the amount of proceeds available for investment from our primary public offering was net of selling commissions, dealer manager fees, other organization and offering costs and acquisition and origination fees and expenses; (iii) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current disruptions in the financial and real estate markets may affect the values of our investments; and (iv) the estimated value does not take into account how developments related to individual assets may have increased or decreased the value of our portfolio.
Distribution Information
We intend to authorize and declare distributions based on daily record dates that will be paid on a monthly basis. We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with our taxable year ended December 31, 2008. To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. generally accepted accounting principles (GAAP)). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
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During 2009 and 2010, we declared distributions based on daily record dates for each day during the period commencing January 1, 2009 through December 31, 2010. Distributions for all record dates of a given month are paid approximately 15 days after month-end. Distributions declared during 2009 and 2010, aggregated by quarter, are as follows (dollars in thousands, except per share amounts):
2010 | ||||||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Total | ||||||||||||||||
Total Distributions Declared |
$ | 15,803 | $ | 18,438 | $ | 21,972 | $ | 25,630 | $ | 81,843 | ||||||||||
Total Per Share Distribution |
$ | 0.160 | $ | 0.162 | $ | 0.164 | $ | 0.164 | $ | 0.650 | ||||||||||
Annualized Rate Based on |
||||||||||||||||||||
Purchase Price of $10.00 Per Share |
6.5 | % | 6.5 | % | 6.5 | % | 6.5 | % | 6.5 | % | ||||||||||
2009 | ||||||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Total | ||||||||||||||||
Total Distributions Declared |
$ | 6,117 | $ | 9,160 | $ | 11,877 | $ | 14,118 | $ | 41,272 | ||||||||||
Total Per Share Distribution |
$ | 0.160 | $ | 0.162 | $ | 0.164 | $ | 0.164 | $ | 0.650 | ||||||||||
Annualized Rate Based on |
||||||||||||||||||||
Purchase Price of $10.00 Per Share |
6.5 | % | 6.5 | % | 6.5 | % | 6.5 | % | 6.5 | % |
The tax composition of our distributions declared for the years ended December 31, 2010 and 2009 was as follows:
2010 | 2009 | |||||||||||
Ordinary Income |
61 | % | 46 | % | ||||||||
Return of Capital |
39 | % | 54 | % | ||||||||
Total |
100 | % | 100 | % | ||||||||
On November 5, 2010, our board of directors declared distributions based on daily record dates for the period from January 1, 2011 through January 31, 2011, which we paid on February 15, 2011. On January 21, 2011, our board of directors declared distributions based on daily record dates for the period from February 1, 2011 through February 28, 2011, which we expect to pay in March 2011, and distributions based on daily record dates for the period from March 1, 2011 through March 31, 2011, which we expect to pay in April 2011. On March 4, 2011, our board of directors declared distributions based on daily record dates for the period from April 1, 2011 through April 30, 2011, which we expect to pay in May 2011, and distributions based on daily record dates for the period from May 1, 2011 through May 31, 2011, which we expect to pay in June 2011. Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periods are calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and if paid each day for a 365-day period, would equal a 6.5% annualized rate based on a purchase price of $10.00 per share.
Use of Proceeds from Sales of Registered Securities and Unregistered Sales of Equity Securities
On April 22, 2008, our Registration Statement on Form S-11 (File No. 333-146341), covering a public offering of up to 200,000,000 shares of common stock in our primary offering and 80,000,000 shares of common stock under our dividend reinvestment plan, was declared effective under the Securities Act of 1933. We commenced our initial public offering on April 22, 2008 upon retaining KBS Capital Markets Group LLC, an affiliate of our advisor, as the dealer manager of our offering. We ceased offering shares of common stock in our primary offering on December 31, 2010 and are completing subscription processing procedures, as set forth in our prospectus. We may sell shares under the dividend reinvestment plan until we have sold all the shares under the plan.
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We offered 200,000,000 shares of common stock in our primary offering at an aggregate offering price of up to $2.0 billion, or $10.00 per share with discounts available to certain categories of purchasers. The 80,000,000 shares offered under our dividend reinvestment plan are initially being offered at an aggregate offering price of $760 million, or $9.50 per share. As of December 31, 2010, we had sold 179,185,669 shares of common stock in our initial public offering for gross offering proceeds of $1.8 billion, including 6,999,082 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $66.5 million. Also as of December 31, 2010, we had redeemed 2,465,804 of the shares sold in the offering for $23.2 million pursuant to our share redemption program. As of December 31, 2010, we had incurred selling commissions, dealer manager fees, other underwriting compensation and other organization and offering costs in the amounts set forth below. We pay selling commissions and dealer manager fees to KBS Capital Markets Group, and KBS Capital Markets Group reallows all selling commissions and a portion of the dealer manager fees to participating broker-dealers. In addition, we reimburse KBS Capital Advisors and KBS Capital Markets Group for certain offering expenses as described in our prospectus, as amended and supplemented.
Type of Expense Amount |
Amount | Estimated/ Actual |
||||||
(in thousands) | ||||||||
Selling commissions and dealer manager fees |
$ | 158,343 | Actual | |||||
Finders fees |
| Actual | ||||||
Other underwriting compensation |
9,717 | Actual | ||||||
Other organization and offering costs (excluding underwriting compensation) |
9,675 | Actual | ||||||
Total expenses |
$ | 177,735 | ||||||
From the commencement of our initial public offering through December 31, 2010, the net offering proceeds to us, after deducting the total expenses incurred as described above, were approximately $1.6 billion, including net offering proceeds from our dividend reinvestment plan of $66.5 million.
We have used substantially all of the net proceeds from our initial public offering to invest in and manage a diverse portfolio of real estate and real estate-related investments. We may use the net proceeds from the sale of shares under our dividend reinvestment plan for general corporate purposes, including, but not limited to, the redemption of shares under our share redemption program; capital expenditures; tenant improvement costs and other funding obligations. As of December 31, 2010, we have used the net proceeds from our initial public offering and debt financing to purchase $2.3 billion in real estate and real estate-related investments, including $28.9 million of acquisition and origination fees and expenses.
During the fiscal year ended December 31, 2010, we did not sell any equity securities that were not registered under the Securities Act of 1933.
Share Redemption Program
We have adopted a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.
Pursuant to the share redemption program, as amended to date, there are several limitations on our ability to redeem shares:
| Unless the shares are being redeemed in connection with a stockholders death, qualifying disability or determination of incompetence (each as defined under the share redemption program), we may not redeem shares until the stockholder has held the shares for one year. |
| During any calendar year, the share redemption program limits the number of shares we may redeem to those that we could purchase with the amount of the net proceeds from the issuance of shares under the dividend reinvestment plan during the prior calendar year. |
| During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year. |
| We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. |
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We may amend, suspend or terminate the program upon 30 days notice to our stockholders. We may provide this notice by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.
During the year ended December 31, 2010, we redeemed shares pursuant to our share redemption program as follows:
Month |
Total Number of Shares Redeemed (1) |
Average Price Paid Per Share (2) |
Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program |
|||||||||
January 2010 |
311,769 | $ | 9.39 | (3) | ||||||||
February 2010 |
111,461 | $ | 9.46 | (3) | ||||||||
March 2010 |
190,153 | $ | 9.39 | (3) | ||||||||
April 2010 |
107,402 | $ | 9.43 | (3) | ||||||||
May 2010 |
312,251 | $ | 9.30 | (3) | ||||||||
June 2010 |
278,060 | $ | 9.24 | (3) | ||||||||
July 2010 |
163,746 | $ | 9.45 | (3) | ||||||||
August 2010 |
239,038 | $ | 9.42 | (3) | ||||||||
September 2010 |
121,698 | $ | 9.48 | (3) | ||||||||
October 2010 |
186,733 | $ | 9.47 | (3) | ||||||||
November 2010 |
154,413 | $ | 9.38 | (3) | ||||||||
December 2010 |
89,197 | $ | 9.38 | (3) | ||||||||
Total |
2,265,921 | |||||||||||
(1) We announced the adoption and commencement of the program on April 8, 2008. We announced amendments to the program on May 13, 2009 (which amendment became effective on June 12, 2009) and on March 11, 2011 (which amendment will become effective on April 10, 2011). See Part II, Item 9B, Other Information.
(2) Pursuant to the program, as amended, we currently redeem shares at prices determined as follows:
| The lower of $9.25 or 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year; |
| The lower of $9.50 or 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years; |
| The lower of $9.75 or 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and |
| The lower of $10.00 or 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years. |
Notwithstanding the above, the redemption price for redemptions sought upon a stockholders death, qualifying disability or determination of incompetence will initially be the amount paid to acquire the shares from us. Furthermore, once we establish an estimated value per share of common stock, the redemption price per share for all stockholders will be equal to the estimated value per share, as determined by our advisor or another firm chosen for that purpose. We currently expect to establish an estimated value per share no later than the expiration of the first 18-month period in which we do not sell shares in a public equity offering and every 12 to 18 months thereafter. Public equity offering for this purpose does not include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership. We ceased offering shares in our initial public offering on December 31, 2010, but we may conduct follow-on public equity offerings in the future.
(3) We limit the dollar value of shares that may be redeemed under the program as described above. For the year ended December 31, 2010, we received investor redemption requests of $21.8 million. As of the December 2010 redemption date, we had redeemed $21.3 million of shares, which represents the dollar value of the number of shares that we could purchase with the amount of the net proceeds from the issuance of shares under the dividend reinvestment plan in 2009. Effective January 2011, this limitation was re-set, and based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2010, we have $43.3 million available for redemption in 2011. We redeemed the remaining outstanding and unfulfilled redemptions as of December 31, 2010 of $0.5 million on the January 31, 2011 redemption date.
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ITEM 6. | SELECTED FINANCIAL DATA |
The following selected financial data as of December 31, 2010, 2009, 2008 and 2007 and for the years ended December 31, 2010, 2009 and 2008 should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations (in thousands, except share and per share amounts):
As of December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | |||||||||||||
Balance sheet data |
||||||||||||||||
Total real estate and real estate-related investments, net |
$ | 2,210,162 | $ | 672,169 | $ | 512,495 | $ | | ||||||||
Total assets |
2,379,654 | 953,868 | 572,862 | 200 | ||||||||||||
Notes payable |
828,157 | 126,660 | 271,446 | | ||||||||||||
Total liabilities |
912,019 | 158,046 | 300,557 | | ||||||||||||
Redeemable common stock |
43,306 | 21,260 | 1,921 | | ||||||||||||
Total stockholders equity |
1,424,329 | 774,562 | 270,384 | 200 | ||||||||||||
For the Years Ended December 31, | ||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
Operating data |
||||||||||||||||
Total revenues |
$ | 160,133 | $ | 75,387 | $ | 14,087 | ||||||||||
Net income (loss) |
5,508 | 12,419 | (2,582 | ) | ||||||||||||
Net income (loss) per common share - basic and diluted |
0.04 | 0.20 | (0.33 | ) | ||||||||||||
Other data |
||||||||||||||||
Cash flows provided by operations |
$ | 59,523 | $ | 29,937 | $ | 4,870 | ||||||||||
Cash flows used in investing activities |
(1,598,259 | ) | (181,717 | ) | (495,535 | ) | ||||||||||
Cash flows provided by financing activities |
1,347,328 | 368,992 | 547,074 | |||||||||||||
Distributions declared |
81,843 | 41,272 | 4,941 | |||||||||||||
Distributions declared per common share (1) |
0.650 | 0.650 | 0.263 | |||||||||||||
Weighted-average number of common shares outstanding, basic and diluted |
125,894,756 | 63,494,969 | 7,926,366 | |||||||||||||
Reconciliation of funds from operations (2) |
||||||||||||||||
Net income (loss) |
$ | 5,508 | $ | 12,419 | $ | (2,582 | ) | |||||||||
Depreciation of real estate assets |
20,924 | 9,919 | 2,315 | |||||||||||||
Amortization of lease-related costs |
40,762 | 18,186 | 4,659 | |||||||||||||
Gain on sale of real estate securities |
| (119 | ) | | ||||||||||||
FFO |
$ | 67,194 | $ | 40,405 | $ | 4,392 | ||||||||||
(1) Distributions declared per common share assumes each share was issued and outstanding each day from July 16, 2008 through the last day of the period presented. Distributions for the period from July 16, 2008 through August 15, 2008 are based on daily record dates and calculated at a rate of $0.00054795 per share per day. Distributions for the period from August 16, 2008 through December 31, 2010 are based on daily record dates and calculated at a rate of $0.00178082 per share per day.
(2) We believe that funds from operations (FFO) is a beneficial indicator of the performance of an equity REIT. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and among other REITs. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (NAREIT) definition. Our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.
FFO is a non-GAAP financial measure and does not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO includes adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization. Accordingly, FFO should not be considered as an alternative to net income as an indicator of our operating performance.
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ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with the Selected Financial Data above and our accompanying consolidated financial statements and the notes thereto. Also see Forward-Looking Statements preceding Part I and Part I, Item 1A, Risk Factors.
Overview
We were formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a REIT beginning with the taxable year ended December 31, 2008 and intend to operate in such a manner. We have invested in a diverse portfolio of real estate and real estate-related investments. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by KBS Capital Advisors, our external advisor, pursuant to an advisory agreement. KBS Capital Advisors conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
The types of properties that we may invest in include office, industrial and retail properties located throughout the United States. Although we may invest in any of these types of properties, we expect to invest primarily in office and industrial properties. All such real estate assets may be acquired directly by us or the Operating Partnership, though we may invest in other entities that make similar investments. We also expect to invest in real estate-related investments, including mortgage, mezzanine, bridge and other loans. As of December 31, 2010, we owned 17 real estate properties (consisting of 14 office properties, one office/flex property and two industrial properties), a leasehold interest in one industrial property and six real estate loans receivable.
On September 27, 2007, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the SEC) to offer a maximum of 280,000,000 shares of common stock for sale to the public, of which 200,000,000 shares were registered in our primary offering and 80,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on December 31, 2010 and are completing subscription processing procedures, as set forth in our prospectus. From the commencement of the offering on April 22, 2008 through December 31, 2010, we had sold 179,185,669 shares of common stock in our public offering for gross offering proceeds of $1.8 billion, including 6,999,082 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $66.5 million. Also as of December 31, 2010, we had redeemed 2,465,804 of the shares sold in the offering for $23.2 million. We intend to use substantially all of the net proceeds from the initial public offering to invest in a diverse portfolio of real estate and real estate-related investments as described above.
Market Outlook Real Estate and Real Estate Finance Markets
During the past three years, significant and widespread concerns about credit risk and access to capital have been present in the U.S. and global financial markets. Economies throughout the world have experienced increased unemployment and sagging consumer confidence due to a downturn in economic activity. Despite improved stock market performance and some positive economic indicators, a lack of job creation, low consumer confidence and a growing federal budget deficit temper the positive indicators. Amid signs of recovery in the economic and financial markets, concerns remain regarding job growth, wage stagnation, credit restrictions and increased taxation. Over the past several months, the U.S. commercial real estate industry has experienced a slow-down in the deterioration of fundamental benchmarks. However, the current economic conditions continue to create a highly competitive leasing environment which impacts our investments in real estate properties, as well as the collateral securing a majority of our real estate-related investments. If these challenging economic conditions persist or if recovery is slower than expected, our liquidity and financial condition (as well as the liquidity and financial condition of our tenants and borrowers) may be adversely affected. For further discussion of current market conditions, see Part I, Item 1, Business Market Outlook Real Estate and Real Estate Finance Markets.
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Impact on Our Real Estate Investments
These market conditions have and will likely continue to have a significant impact on our real estate investments and create a highly competitive leasing environment. In addition, these market conditions have impacted our tenants businesses, which makes it more difficult for them to meet current lease obligations and places pressure on them to negotiate favorable lease terms upon renewal in order for their businesses to remain viable. Projected future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to retain tenants who are up for renewal or to sign new tenants, are expected to result in decreases in cash flow. Historically low interest rates could help offset some of the impact of decreases in operating cash flow for properties financed with variable rate mortgages; however, interest rates may not remain at these historically low levels for the life of many of our investments.
Impact on Our Real Estate-Related Investments
Our real estate-related investments are directly secured by commercial real estate. As a result, our real estate-related investments have been impacted to some degree by the same factors impacting our real estate investments.
As of December 31, 2010, we had fixed rate real estate loans receivable with a principal balance of $320.8 million and a carrying value of $248.3 million that mature between 2014 and 2017 and a variable rate real estate loan receivable with a principal balance of $87.5 million and a carrying value (including origination and closing costs) of $88.5 million that matures in 2013.
Impact on Our Financing Activities
In light of the risks associated with projected declines of operating cash flows on our properties and the current underwriting environment for commercial real estate mortgages, we may have difficulty refinancing some of our mortgage notes at maturity or may not be able to refinance our obligations at terms as favorable as the terms of our existing indebtedness. As of December 31, 2010, we had debt obligations in the aggregate principal amount of $828.2 million, all of which mature between 2011 and 2016. We have a total of $460.8 million of fixed rate notes payable and $367.4 million of variable rate notes payable. As of December 31, 2010, $57.5 million of our mortgage debt outstanding is scheduled to mature within 12 months of that date. The interest rates on $316.8 million of our variable rate notes payable are effectively fixed through interest rate swap agreements.
Liquidity and Capital Resources
Our principal demand for funds during the short and long-term is and will be for the acquisition of properties, loans and other real estate-related investments; the payment of operating expenses, capital expenditures and general and administrative expenses; payments under debt obligations; redemptions of common stock; and payments of distributions to stockholders. To date, we have had four primary sources of capital for meeting our cash requirements:
| Proceeds from our initial public offering; |
| Proceeds from common stock issued under our dividend reinvestment plan; |
| Debt financings; and |
| Cash flow generated by our real estate operations and real estaterelated investments. |
We ceased offering shares of common stock in our primary offering on December 31, 2010 and continue to offer shares under our dividend reinvestment plan. To date, we have invested a significant amount of the proceeds from our initial public offering and anticipate making several more investments in the future. We intend to use our cash on hand, cash flow generated by our real estate operations and real estate-related investments, proceeds from our dividend reinvestment plan and principal repayments on our real estate loans receivable as our primary sources of immediate and long-term liquidity. During the year ended December 31, 2010, we entered into three secured credit facilities that further enhance our liquidity. As of December 31, 2010, we have an aggregate of $96.6 million available for future disbursements under these three credit facilities, subject to certain conditions set forth in the respective loan agreements.
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Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, debt service payments and corporate general and administrative expenses. Cash flow from operations from real estate investments is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures. As of December 31, 2010, our real estate portfolio was 96% occupied and our bad debt reserve was less than 1% of annualized base rent. As of December 31, 2010, we had one tenant with a rent balance outstanding for over 90 days. Our real estate-related investments generate cash flow in the form of interest income, which is reduced by loan servicing fees. Cash flows from operations from our real estate-related investments are primarily dependent on the operating performance of the underlying collateral and the borrowers ability to make their debt service payments. As of December 31, 2010, the borrowers under our real estate loans receivable were all current.
For the year ended December 31, 2010, our cash needs for acquisitions, capital expenditures and payment of debt obligations were met with the proceeds from our initial public offering, including our dividend reinvestment plan. Operating cash needs during the same period were met through cash flow generated by our real estate and real estate-related investments. We made distributions to our stockholders during the year ended December 31, 2010 using a combination of cumulative cash flows from operations and debt financing. We believe that our cash on hand, uninvested proceeds from our primary public offering, proceeds from our dividend reinvestment plan, cash flow from operations, availability under our credit facility and anticipated financing activities are sufficient to meet our liquidity needs for the foreseeable future.
Cash Flows from Operating Activities
We commenced real estate operations with the acquisition of our first real estate investment on July 30, 2008. As of December 31, 2010, we owned 17 real estate properties (consisting of 14 office properties, one office/flex property and two industrial properties), a leasehold interest in one industrial property and six real estate loans receivable. During the year ended December 31, 2010, net cash provided by operating activities was $59.5 million, compared to $29.9 million during the year ended December 31, 2009. Net cash from operations increased in 2010 primarily as a result of acquisitions of real estate and real estate-related investments in 2010 as well as owning investments acquired in 2009 for an entire year. We expect that our cash flows from operating activities will increase in future periods as a result of owning investments acquired in 2010 for an entire year and anticipated future acquisitions of real estate and real estate-related investments.
Cash Flows from Investing Activities
Net cash used in investing activities was $1.6 billion for the year ended December 31, 2010 and primarily consisted of the following:
| Acquisitions of 13 real estate investments for an aggregate purchase price of $1.4 billion; |
| Originations of four real estate loans receivable for $287.1 million; and |
| Proceeds to us from the sale of a 50% participation interest in a first mortgage for $87.5 million. |
Cash Flows from Financing Activities
Our cash flows from financing activities consist primarily of proceeds from our initial public offering, debt financings and distributions paid to our stockholders. During the year ended December 31, 2010, net cash provided by financing activities was $1.3 billion and primarily consisted of the following:
| $728.4 million of cash provided by offering proceeds related to our initial public offering, net of payments of commissions, dealer manager fees and other organization and offering expenses of $81.6 million; |
| $677.4 million of net cash provided by debt and other financings as a result of proceeds from notes payable of $717.4 million, partially offset by principal payments on notes payable of $32.9 million and payments of deferred financing costs of $7.1 million; |
| $34.4 million of net cash distributions, after giving effect to dividends reinvested by stockholders of $43.3 million; and |
| $21.3 million of cash used for redemptions of common stock. |
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Contractual Commitments and Contingencies
In order to execute our investment strategy, we primarily utilize secured debt, and, to the extent available, may in the future utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinance and interest rate risks, are properly balanced with the benefit of using leverage. We may elect to obtain financing subsequent to the acquisition date on future real estate acquisitions and initially acquire investments without debt financing. Once we have fully invested the proceeds of our initial public offering, we expect our debt financing to be between 50% and 65% of the cost of our tangible assets (before deducting depreciation or other noncash reserves). Our charter limits our borrowings to 75% of the cost (before deducting depreciation or other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. From time to time, our debt financing may be below 50% of the cost of our tangible assets due to the lack of availability of debt financing or repayment of debt. As of December 31, 2010, our borrowings were approximately 36% of both the cost (before depreciation or other noncash reserves) and book value (before depreciation) of our tangible assets.
In addition to using our capital resources for investing purposes and meeting our debt obligations, we use our capital resources to make certain payments to our advisor and the dealer manager. During our offering stage, these payments include payments to the dealer manager for selling commissions and dealer manager fees and payments to the dealer manager and our advisor for reimbursement of certain organization and other offering expenses. However, our advisor has agreed to reimburse us to the extent that selling commissions, dealer manager fees and organization and other offering expenses incurred by us exceed 15% of our gross offering proceeds. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets and costs incurred by our advisor in providing services to us. The advisory agreement is in effect through May 21, 2011 and has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and our conflicts committee.
The following is a summary of our contractual obligations as of December 31, 2010 (in thousands):
Contractual Obligations |
Total | Payments Due During the Years Ending December 31, | ||||||||||||||||||
2011 | 2012-2013 | 2014-2015 | Thereafter | |||||||||||||||||
Outstanding debt obligations (1) |
$ | 828,157 | $ | 57,507 | $ | 13,000 | $ | 737,850 | $ | 19,800 | ||||||||||
Interest payments on outstanding debt obligations (2) |
144,020 | 35,377 | 68,527 | 40,113 | 3 | |||||||||||||||
Outstanding funding obligations under real estate loans receivable |
18,000 | (3 | ) | (3 | ) | (3 | ) | |
(1) Amounts include principal payments only.
(2) Projected interest payments are based on the outstanding principal amounts and interest rates in effect at December 31, 2010 (consisting of the contractual interest rate and the effect of interest rate floors). We incurred interest expense of $18.0 million, excluding amortization of deferred financing costs totaling $1.2 million, during the year ended December 31, 2010.
(3) As of December 31, 2010, $31.9 million had been disbursed under the Pappas Commerce First Mortgage Origination and another $18.0 million remains available for future funding, subject to certain conditions set forth in the loan agreement. This amount does not have a fixed funding date, but may be funded in any future year, subject to certain conditions set forth in the loan agreement. The Pappas Commerce First Mortgage matures on July 1, 2014.
Results of Operations
Overview
As of December 31, 2009, we owned four office properties, one office/flex property and two real estate loans receivable. As of December 31, 2010, we owned 14 office properties, one office/flex property, two industrial properties, a leasehold interest in one industrial property and six real estate loans receivable. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of owning investments acquired in 2010 for an entire year and anticipated future acquisitions of real estate and real estate-related investments. The results of operations presented for the years ended December 31, 2010 and 2009 are not directly comparable because we were still investing the proceeds of our initial public offering in 2010.
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Comparison of the year ended December 31, 2010 versus year ended December 31, 2009
The following table provides summary information about our results of operations for the years ended December 31, 2010 and 2009 (dollar amounts in thousands):
For the Year
Ended December 31, 2010 |
Increase (Decrease) |
Percentage Change |
$ Change Due
to Acquisitions/ Originations (1) |
$ Change Due to Properties Held Throughout Both Periods (2) |
||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Rental income |
$ | 110,294 | 49,548 | $ | 60,746 | 123 | % | $ | 62,487 | $ | (1,741 | ) | ||||||||||||
Tenant reimbursements |
18,066 | 8,762 | 9,304 | 106 | % | 10,401 | (1,097 | ) | ||||||||||||||||
Interest income from |
28,255 | 16,885 | 11,370 | 67 | % | 11,040 | 330 | |||||||||||||||||
Other operating income |
3,518 | 192 | 3,326 | 1732 | % | 3,502 | (176 | ) | ||||||||||||||||
Property operating, maintenance, and |
28,715 | 12,265 | 16,450 | 134 | % | 16,543 | (93 | ) | ||||||||||||||||
Real estate taxes, property-related taxes, |
12,977 | 4,515 | 8,462 | 187 | % | 8,491 | (29 | ) | ||||||||||||||||
Asset management fees to affiliate |
10,005 | 4,482 | 5,523 | 123 | % | 5,518 | 5 | |||||||||||||||||
Real estate acquisition fees to affiliates |
10,692 | 846 | 9,846 | 1164 | % | 9,846 | | |||||||||||||||||
Real estate acquisition fees and expenses |
7,487 | 678 | 6,809 | 1004 | % | 6,809 | | |||||||||||||||||
General and administrative expenses |
3,947 | 2,678 | 1,269 | 47 | % | n/a | n/a | |||||||||||||||||
Depreciation and amortization expense |
61,686 | 28,105 | 33,581 | 119 | % | 36,134 | (2,553 | ) | ||||||||||||||||
Interest expense |
19,389 | 10,164 | 9,225 | 91 | % | 11,129 | (1,904 | ) | ||||||||||||||||
Other interest income |
273 | 646 | (373 | ) | (58 | %) | n/a | n/a | ||||||||||||||||
Gain on sale of real estate securities |
| 119 | (119 | ) | (100 | %) | n/a | n/a |
(1) Represents the dollar amount increase for the year ended December 31, 2010 compared to the year ended December 31, 2009 as a result of properties and other real estate-related assets acquired after January 1, 2009.
(2) Represents dollar amount increase (decrease) for the year ended December 31, 2010 compared to the year ended December 31, 2009 with respect to properties and other real estate-related investments owned by us as of January 1, 2009.
Rental income and tenant reimbursements increased from $58.3 million for the year ended December 31, 2009 to $128.4 million for the year ended December 31, 2010, primarily as a result of the growth in our real estate portfolio. The increase was partially offset by a $2.8 million net decrease in rental income and tenant reimbursements from properties held throughout both periods, which is primarily due to lease incentives provided to new tenants at these properties and lease expirations subsequent to December 31, 2009. We expect rental income and tenant reimbursements to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate.
Interest income from our real estate loans receivable, recognized using the interest method, increased from $16.9 million for the year ended December 31, 2009 to $28.3 million for the year ended December 31, 2010, primarily as a result of the growth in our real estate loans receivable portfolio. Interest income included $6.4 million and $5.2 million in accretion of purchase price discounts, net of amortization of closing costs, for the years ended December 31, 2010 and 2009, respectively. We expect interest income to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate-related investments.
Other operating income increased from $0.2 million for the year ended December 31, 2009 to $3.5 million for the year ended December 31, 2010, primarily as a result of the growth in our real estate portfolio. Other operating income consisted primarily of parking revenues related to properties acquired during the year ended December 31, 2010. We expect other operating income to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate.
Property operating, maintenance and management costs increased from $12.3 million for the year ended December 31, 2009 to $28.7 million for the year ended December 31, 2010, primarily as a result of the growth in our real estate portfolio. We expect property operating, maintenance and management costs to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate.
Real estate taxes and insurance increased from $4.5 million for the year ended December 31, 2009 to $13.0 million for the year ended December 31, 2010, primarily as a result of the growth in our real estate portfolio. We expect real estate taxes and insurance to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate.
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Asset management fees with respect to our real estate and real estate-related investments increased from $4.5 million for the year ended December 31, 2009 to $10.0 million for the year ended December 31, 2010, as a result of the growth in our real estate and real estate-related investment portfolio. All asset management fees incurred as of December 31, 2010 have been paid. We expect asset management fees to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate and real estate-related investments.
Real estate acquisition fees and expenses increased from $1.5 million for year ended December 31, 2009 to $18.2 million for the year ended December 31, 2010 due to the growth in our real estate portfolio. We expect real estate acquisition fees and expenses to decrease in future periods as we have invested the majority of the proceeds from our public offering.
General and administrative expenses increased from $2.7 million for the year ended December 31, 2009 to $3.9 million for the year ended December 31, 2010. These general and administrative costs consisted primarily of legal fees, audit fees, transfer agent fees and other professional fees. We expect general and administrative costs to vary in future periods.
Depreciation and amortization expenses increased from $28.1 million for the year ended December 31, 2009 to $61.7 million for the year ended December 31, 2010, primarily due to the growth in our real estate portfolio. This increase was partially offset by a $2.6 million decrease in amortization due to lease expirations subsequent to December 31, 2009 from properties held throughout both periods. We expect these amounts to increase in future periods as a result of owning the assets acquired during 2010 for an entire year and anticipated future acquisitions of real estate.
Interest expense increased from $10.2 million for the year ended December 31, 2009 to $19.4 million for the year ended December 31, 2010. Included in interest expense is the amortization of deferred financing costs of $1.0 million for the year ended December 31, 2009 and $1.2 million for the year ended December 31, 2010. The increase in interest expense is primarily a result of our use of debt in acquiring real property investments subsequent to January 1, 2010. This increase was partially offset by a $1.9 million decrease due to the decrease in the average loan balance and interest rate related to debt outstanding for properties held throughout both periods. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the availability and cost of debt financing, draws on our credit facilities and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.
Other interest income decreased from $0.6 million for the year ended December 31, 2009 to $0.3 million for the year ended December 31, 2010 and consisted of interest earned on our cash and cash equivalent accounts. The decrease in other interest income is primarily due to a decrease in our average cash balance as a result of an increase in investing activities during the year ended December 31, 2010. Other interest income in future periods will vary based on the interest rates earned on our cash and cash equivalent accounts and the level of cash on hand, which will depend in part on how quickly we invest those funds.
Comparison of the year ended December 31, 2009 versus year ended December 31, 2008
Our results of operations for the years ended December 31, 2009 and 2008 are not indicative of those expected in future periods as we broke escrow in our initial public offering on June 24, 2008 and as of December 31, 2009 had not yet met our capital raise or investment goals. We commenced real estate operations on July 30, 2008 in connection with the acquisition of our first investment. We acquired four real estate properties and one real loan receivable during the year ended December 31, 2008 and acquired one real estate property, one real estate loan receivable and an investment in CMBS during the year ended December 31, 2009. During the year ended December 31, 2009, we subsequently disposed of our interest in the CMBS investment. As of December 31, 2009, we owned four office properties, one office/flex property and two real estate loans receivable. Therefore, our results of operations for year ended December 31, 2009 are not directly comparable to the year ended December 31, 2008.
Rental income and tenant reimbursements increased from $14.1 million for the year ended December 31, 2008 to $58.3 million for the year ended December 31, 2009, primarily as a result of the growth in our real estate portfolio and holding the properties acquired in 2008 for an entire year.
Interest income from our real estate loans receivable, recognized using the interest method, increased from $21,000 for the year ended December 31, 2008 to $16.9 million for the year ended December 31, 2009, primarily as a result of the growth in our real estate loans receivable portfolio and holding the loan acquired on December 31, 2008 for an entire year. Interest income included $5.2 million and $6,000 of accretion of purchase price discounts, net of amortization of closing costs, for the years ended December 31, 2009 and 2008, respectively.
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Interest income from real estate securities totaled $0.1 million for the year ended December 31, 2009 and relates to the floating rate CMBS we purchased on August 3, 2009. On November 16, 2009, we disposed of this investment and as a result, we recognized a gain of $0.1 million.
Property operating costs increased from $3.3 million for the year ended December 31, 2008 to $12.3 million for the year ended December 31, 2009. Real estate taxes and insurance increased from $0.9 million for the year ended December 31, 2008 to $4.5 million for the year ended December 31, 2009. The increase in property operating costs, real estate taxes and insurance was due to the growth in our real estate portfolio and holding the properties acquired in 2008 for an entire year.
Asset management fees with respect to our real estate and real estate-related investments increased from $0.9 million for the year ended December 31, 2008 to $4.5 million for the year ended December 31, 2009, as a result of the growth in our real estate and real estate-related investment portfolio and the amount of time we held these investments in 2009 as compared to 2008. All asset management fees incurred as of December 31, 2008 and 2009 have been paid.
Real estate acquisition fees and expenses were $1.5 million for year ended December 31, 2009 and relate to the acquisition of one real estate property. Prior to January 1, 2009, expenses and fees related to the acquisition of real estate were capitalized.
General and administrative expenses increased from $0.8 million for the year ended December 31, 2008 to $2.7 million for the year ended December 31, 2009. These general and administrative costs consisted primarily of insurance premiums and professional fees.
Depreciation and amortization expenses increased from $7.0 million for the year ended December 31, 2008 to $28.1 million for the year ended December 31, 2009, primarily due to the growth in our real estate portfolio and holding the properties acquired in 2008 for an entire year.
Interest expense increased from $4.3 million for the year ended December 31, 2008 to $10.2 million for the year ended December 31, 2009. Included in interest expense is the amortization of deferred financing costs of $0.5 million for the year ended December 31, 2008 and $1.0 million for the year ended December 31, 2009. The increase in interest expense is due to the increase in average principal outstanding during the year ended December 31, 2009 compared to the year ended December 31, 2008.
Other interest income was $0.6 million for the years ended December 31, 2008 and 2009 and consisted of interest earned on our cash and cash equivalent accounts. Average interest rates earned on our cash and cash equivalent accounts decreased from the year ended December 31, 2008 to December 31, 2009. The decrease in interest rates was offset by the increase in our average cash balance during the same periods.
Organization and Offering Costs
Organization and offering costs (other than selling commissions and dealer manager fees) of the primary offering were paid in part by our advisor, the dealer manager or their affiliates on our behalf and they may continue to pay these costs on our behalf with respect to the offering under our dividend reinvestment plan. Other offering costs include all expenses to be incurred by us in connection with our public offering. Organization costs include all expenses incurred by us in connection with our formation, including but not limited to legal fees and other costs to incorporate. Organization costs are expensed as incurred and offering costs, which include selling commissions and dealer manager fees, are charged as incurred as a reduction to stockholders equity.
Pursuant to the advisory agreement and the dealer manager agreement, we are obligated to reimburse our advisor, the dealer manager or their affiliates, as applicable, for organization and other offering costs paid by them on our behalf; however, our advisor is obligated to reimburse us to the extent selling commissions, dealer manager fees and organization and other offering costs incurred by us exceed 15% of gross proceeds from our initial public offering. As of December 31, 2010, selling commissions, dealer manager fees, and organization and other offering costs did not exceed 15% of the gross offering proceeds. Through December 31, 2010, including shares issued through our dividend reinvestment plan, we had sold 179,185,669 shares in the offering for gross offering proceeds of $1.8 billion and recorded organization and other offering costs of $19.4 million and selling commissions and dealer manager fees of $158.3 million.
We ceased offering shares of common stock in our primary offering on December 31, 2010 and are completing subscription processing procedures, as forth in our prospectus. We may sell shares under the dividend reinvestment plan until we have sold all the shares under the plan.
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Funds from Operations
We believe that funds from operations (FFO) is a beneficial indicator of the performance of an equity REIT. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and among other REITs. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (GAAP) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (NAREIT) definition. Our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do.
FFO is a non-GAAP financial measure and does not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO includes adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization. Accordingly, FFO should not be considered as an alternative to net income as an indicator of our operating performance.
Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table for the years ended December 31, 2010, 2009 and 2008, respectively (in thousands):
For the Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net income (loss) |
$ | 5,508 | $ | 12,419 | $ | (2,582 | ) | |||||
Add: |
||||||||||||
Depreciation of real estate assets |
20,924 | 9,919 | 2,315 | |||||||||
Amortization of lease-related costs |
40,762 | 18,186 | 4,659 | |||||||||
Less: |
||||||||||||
Gain on sale of real estate securities |
| (119 | ) | | ||||||||
FFO |
$ | 67,194 | $ | 40,405 | $ | 4,392 | ||||||
Set forth below is additional information related to certain items included in net income (loss) above, which may be helpful in assessing our operating results. Please see the accompanying consolidated statements of cash flows for details of our operating, investing, and financing cash activities.
Significant Items Included in Net Income (Loss):
| Revenues in excess of actual cash received as a result of straight-line rent of $8.7 million for the year ended December 31, 2010, $2.2 million for the year ended December 31, 2009 and $0.6 million for the year ended December 31, 2008; |
| Revenues in excess of actual cash received as a result of amortization of above-market/below-market in-place leases of $4.3 million for the year ended December 31, 2010, $5.7 million for the year ended December 31, 2009 and $1.7 million for the year ended December 31, 2008; |
| Interest income from the accretion of discounts on real estate loans receivable and real estate securities, net of amortization of closing costs, of $6.4 million for the year ended December 31, 2010 and $5.3 million for the year ended December 31, 2009; |
| Acquisition fees and expenses related to the purchase of real estate of approximately $18.2 million for the year ended December 31, 2010 and approximately $1.5 million for the year ended December 31, 2009. Prior to January 1, 2009, acquisition fees and expenses related to the purchase of real estate were capitalized; |
| Interest expense from the amortization of deferred financing costs related to notes payable of approximately $1.2 million for the year ended December 31, 2010, approximately $1.0 million for the year ended December 31, 2009 and approximately $0.5 million for the year ended December 31, 2008; and |
| Adjustment to valuation of contingent consideration related to the purchase of real estate of approximately $0.3 million for the year ended December 31, 2010. |
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Operating cash flow and FFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO, such as tenant improvements, building improvements and deferred leasing costs.
Distributions
Until we have fully invested the proceeds of our primary offering, and for some period after our offering stage, we may not be able to pay distributions solely from our cash flow from operations or FFO, in which case distributions may be paid in part from debt financing. Distributions declared, distributions paid and cash flows from operations were as follows during 2010 (in thousands, except per share amounts):
Period |
Distributions Declared (1) |
Distributions Declared Per Share (1) (2) |
Distributions Paid (3) | Cash
Flows From Operations |
||||||||||||||||||||
Cash | Reinvested | Total | ||||||||||||||||||||||
First Quarter 2010 |
$ | 15,803 | $ | 0.160 | $ | 6,790 | $ | 8,369 | $ | 15,159 | $ | 8,215 | ||||||||||||
Second Quarter 2010 |
18,438 | 0.162 | 7,836 | 9,842 | 17,678 | 14,495 | ||||||||||||||||||
Third Quarter 2010 |
21,972 | 0.164 | 9,185 | 11,640 | 20,825 | 12,655 | ||||||||||||||||||
Fourth Quarter 2010 |
25,630 | 0.164 | 10,560 | 13,455 | 24,015 | 24,158 | ||||||||||||||||||
$ | 81,843 | $ | 0.650 | $ | 34,371 | $ | 43,306 | $ | 77,677 | $ | 59,523 | |||||||||||||
(1) Distributions for the period from January 1, 2010 through December 31, 2010 are based on daily record dates and calculated at a rate of $0.00178082 per share per day.
(2) Assumes share was issued and outstanding each day during the periods presented.
(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 15 days following month end.
For the year ended December 31, 2010, we paid aggregate distributions of $77.7 million, including $34.4 million of distributions paid in cash and $43.3 million of distributions reinvested through our dividend reinvestment plan. FFO for the year ended December 31, 2010 was $67.2 million and cash flow from operations was $59.5 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $59.5 million of current period operating cash flows and $18.2 million of debt financing. See the reconciliation of FFO to net income (loss) above.
Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flow from operations and FFO (except with respect to distributions related to sales of our assets and distributions related to the repayment of principal under investments we make in mortgage, mezzanine and other loans). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under Forward-Looking Statements, Part I, Item 1, BusinessMarket Outlook Real Estate and Real Estate Finance Markets, Part I, Item 1A, Risk Factors and Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations. Those factors include: the future operating performance of our investments in the existing real estate and financial environment; our ability to identify investments that are suitable to execute our investment objectives; the success and economic viability of our tenants; the ability of our borrowers and their sponsors to continue to make their debt service payments and/or to repay their loans upon maturity; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on our variable rate debt obligations; and the level of participation in our dividend reinvestment plan. In the event our FFO and/or cash flow from operations decrease in the future, the level of our distributions may also decrease. In addition, future distributions declared and paid may exceed FFO and/or cash flow from operations.
Critical Accounting Policies
Below is a discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.
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Revenue Recognition
Real Estate
We recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is reasonably assured and record amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or by us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
| whether the lease stipulates how a tenant improvement allowance may be spent; |
| whether the amount of a tenant improvement allowance is in excess of market rates; |
| whether the tenant or landlord retains legal title to the improvements at the end of the lease term; |
| whether the tenant improvements are unique to the tenant or general-purpose in nature; and |
| whether the tenant improvements are expected to have any residual value at the end of the lease. |
During the years ended December 31, 2010, 2009 and 2008, we recognized deferred rent from tenants of $8.7 million, $2.2 million and $0.6 million, respectively. As of December 31, 2010 and 2009, the cumulative deferred rent receivable balance was $15.5 million and $2.8 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $3.9 million of unamortized lease incentives as of December 31, 2010. We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.
We make estimates of the collectibility of our tenant receivables related to base rents, including deferred rent receivable, expense reimbursements and other revenue or income. We specifically analyze accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, we make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectibility of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, we will record a bad debt reserve for the tenants receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments. During the year ended December 31, 2010, we recorded bad debt expense related to our tenant receivables of $22,000. During the year ended December 31, 2009, we reduced our bad debt reserve and recorded a net recovery of bad debt related to our tenant receivables of $5,000. We did not record any bad debt expense related to our deferred rent receivables during the year ended December 31, 2009.
Real Estate Loans Receivable
Interest income on our real estate loans receivable is recognized on an accrual basis over the life of the investment using the interest method. Direct loan origination fees and origination or acquisition costs, as well as acquisition premiums or discounts, are amortized over the term of the loan as an adjustment to interest income. We will place loans on nonaccrual status when any portion of principal or interest is 90 days past due, or earlier when concern exists as to the ultimate collection of principal or interest. When a loan is placed on nonaccrual status, we will reverse the accrual for unpaid interest and generally will not recognize subsequent interest income until the cash is received, or the loan returns to accrual status. We will resume the accrual of interest if we determine the collection of interest according to the contractual terms of the loan is probable.
Real Estate Securities
We recognize interest income on real estate securities that are beneficial interests in securitized financial assets and are rated AA and above on an accrual basis according to the contractual terms of the securities. Discounts or premiums are amortized to interest income over the life of the investment using the interest method. During the year ended December 31, 2009, we acquired and disposed of a AAA-rated CMBS. We recognized $0.1 million of interest income related to this security and recognized a gain on sale of $0.1 million during the year ended December 31, 2009.
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We recognize interest income on real estate securities that are beneficial interests in securitized financial assets that are rated below AA using the effective yield method, which requires us to periodically project estimated cash flows related to these securities and recognize interest income at an interest rate equivalent to the estimated yield on the security, as calculated using the securitys estimated cash flows and amortized cost basis, or reference amount. Changes in the estimated cash flows are recognized through an adjustment to the yield on the security on a prospective basis. Projecting cash flows for these types of securities requires significant judgment, which may have a significant impact on the timing of revenue recognized on these investments.
Cash and Cash Equivalents
We recognize interest income on our cash and cash equivalents as it is earned and record such amounts as other interest income.
Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. We consider the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenants lease term or expected useful life. We anticipate the estimated useful lives of our assets by class to be generally as follows:
Buildings | 25-40 years | |
Building improvements | 10-25 years | |
Tenant improvements | Shorter of lease term or expected useful life | |
Tenant origination and absorption costs | Remaining term of related leases, including below-market renewal periods |
Real Estate Acquisition Valuation
We record the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. Prior to January 1, 2009, real estate acquired in a business combination, consisting of land, buildings and improvements, was recorded at cost. We allocated the cost of tangible assets, identifiable intangibles and assumed liabilities (consisting of above and below-market leases and tenant origination and absorption costs) acquired in a business combination based on their estimated fair values. Beginning January 1, 2009, all assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date are expensed in periods subsequent to the acquisition date. During the year ended December 31, 2010, we acquired 13 real estate assets, recorded each acquisition as a business combination and expensed $18.2 million of acquisition costs. During the year ended December 31, 2009, we acquired one real estate asset in a business combination and expensed $1.5 million of acquisition costs.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.
Impairment of Real Estate and Related Intangible Assets and Liabilities
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. We did not record any impairment loss on our real estate and related intangible assets and liabilities during the years ended December 31, 2010, 2009 and 2008.
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Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangible assets and liabilities as well as market and other trends. Using inappropriate assumptions to estimate cash flows could result in incorrect fair values of the real estate and its related intangible assets and liabilities and could result in the overstatement of the carrying values of our real estate and related intangible assets and liabilities and an overstatement of our net income.
Real Estate Loans Receivable
Our real estate loans receivable are recorded at amortized cost, net of loan loss reserves (if any), and evaluated for impairment at each balance sheet date. The amortized cost of a real estate loan receivable is the outstanding unpaid principal balance, net of unamortized acquisition premiums or discounts and unamortized costs and fees directly associated with the origination or acquisition of the loan.
As of December 31, 2010, there was no loan loss reserve and we did not record any impairment losses related to the real estate loans receivable during the year ended December 31, 2010. However, in the future, we may experience losses from our investments in loans receivable requiring us to record loan loss reserves. Realized losses on individual loans could be material and significantly exceed any recorded reserves.
The reserve for loan losses is a valuation allowance that reflects our estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The reserve is adjusted through Provision for loan losses in our consolidated statements of operations and is decreased by charge-offs to specific loans when losses are confirmed. The reserve for loan losses may include a portfolio-based component and an asset-specific component.
The asset-specific reserve component relates to reserves for losses on loans considered impaired. We consider a loan to be impaired when, based upon current information and events, we believe that it is probable that we will be unable to collect all amounts due under the contractual terms of the loan agreement. We also consider a loan to be impaired if we grant the borrower a concession through a modification of the loan terms or if we expect to receive assets (including equity interests in the borrower) with fair values that are less than the carrying value of our loan in satisfaction of the loan. A reserve is established when the present value of payments expected to be received, observable market prices, the estimated fair value of the collateral (for loans that are dependent on the collateral for repayment) or amounts expected to be received in satisfaction of a loan are lower than the carrying value of that loan.
The portfolio-based reserve component covers the pool of loans that do not have asset-specific reserves. A provision for loan losses is recorded when available information as of each balance sheet date indicates that it is probable that the pool of loans will incur a loss and the amount of the loss can be reasonably estimated. Required reserve balances for this pool of loans are derived from estimated probabilities of default and estimated loss severities assuming a default occurs. On a quarterly basis, we assign estimated probabilities of default and loss severities to each loan in the portfolio based on factors such as the debt service coverage of the underlying collateral, the estimated fair value of the collateral, the significance of the borrowers investment in the collateral, the financial condition of the borrower and/or its sponsors, the likelihood that the borrower and/or its sponsors would allow the loan to default, our willingness and ability to step in as owner in the event of default, and other pertinent factors.
Failure to recognize impairments would result in the overstatement of earnings and the carrying value of our real estate loans held for investment. Actual losses, if any, could differ significantly from estimated amounts.
Fair Value Measurements
Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
| Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; |
| Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
| Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. |
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When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
We consider the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with our estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
We consider the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax on income that we distribute as dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially and adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT.
We have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Neither we nor our subsidiaries have been assessed interest or penalties by any major tax jurisdictions. Our evaluations were performed for the tax years ending December 31, 2010, 2009, and 2008. As of December 31, 2010, returns for the calendar years 2007 through 2009 remain subject to examination by major tax jurisdictions.
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Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Status of Offering
We commenced our initial public offering of 280,000,000 shares of common stock on April 22, 2008. We ceased offering shares of common stock in our primary offering on December 31, 2010 and are completing subscription processing procedures, as set forth in the prospectus. As of March 9, 2011, we had sold 190,824,532 shares of common stock in the offering for gross offering proceeds of $1.9 billion, including 8,140,021 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $77.3 million. We may continue to sell shares under the dividend reinvestment plan until we have sold all of the shares under the plan.
Distributions Paid
On January 14, 2011, we paid distributions of $9.2 million, which related to distributions declared for each day in the period from December 1, 2010 through December 31, 2010. On February 15, 2011, we paid distributions of $10.2 million, which related to distributions declared for each day in the period from January 1, 2011 through January 31, 2011.
Distribution Declaration
On January 21, 2011, our board of directors declared distributions based on daily record dates for the period from February 1, 2011 through February 28, 2011, which we expect to pay in March 2011, and distributions based on daily record dates for the period from March 1, 2011 through March 31, 2011, which we expect to pay in April 2011. On March 4, 2011, our board of directors declared distributions based on daily record dates for the period from April 1, 2011 through April 30, 2011, which we expect to pay in May 2011, and distributions based on daily record dates for the period from May 1, 2011 through May 31, 2011, which we expect to pay in June 2011. Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and if paid each day for a 365-day period, would equal a 6.5% annualized rate based on a purchase price of $10.00 per share.
Investments and Financings Subsequent to December 31, 2010
Acquisition of Gateway Corporate Center
On January 26, 2011, we, through an indirect wholly owned subsidiary, acquired two three-story office buildings totaling 233,836 rentable square feet located on approximately 13.3 total acres of land in Sacramento, California (Gateway Corporate Center). The seller is not affiliated with us or our advisor. The total contractual purchase price of Gateway Corporate Center was approximately $47.4 million plus closing costs. We initially funded the purchase of Gateway Corporate Center with proceeds from our initial public offering and subsequently placed financing of $26.3 million on Gateway Corporate Center. See Portfolio Loan below.
At acquisition, Gateway Corporate Center was 91% leased to 13 tenants.
Portfolio Loan
On January 28, 2011,we, through indirect wholly owned subsidiaries (the Borrowers), entered into a five-year portfolio loan with Wells Fargo Bank, N.A. (the Lender) dated January 27, 2011 for an amount up to $360.0 million (the Portfolio Loan). As of March 11, 2011, $348.3 million had been disbursed to the Borrowers with the remaining loan balance of $11.7 million (the Holdback) available for future disbursements, subject to certain conditions set forth in the loan agreement. In addition, in the event of tenant expansions meeting requirements set forth in the loan agreement, the principal amount of the Portfolio Loan may be increased to $372.0 million. We incurred approximately $1.5 million in net loan costs in conjunction with the initial funding of the Portfolio Loan. The initial maturity date of the Portfolio Loan is January 27, 2016, with two one-year extension options, subject to the satisfaction of certain conditions by the Borrowers. The Portfolio Loan bears interest at a floating rate of 215 basis points over one-month LIBOR during the initial term of the loan, 240 basis points over one-month LIBOR during the first extension period of the loan and 265 basis points over one-month LIBOR during the second extension period of the loan. Monthly payments are interest only with the entire principal amount due at maturity, assuming no prior prepayment. The Borrowers may, upon no less than three business days notice to the Lender, prepay all or a portion of the Portfolio Loan, subject to possible exit fees. Any prepayment made on or after October 27, 2015 will not be subject to a prepayment fee.
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In connection with the closing of the Portfolio Loan, we consolidated into the Portfolio Loan, a portfolio bridge loan with an outstanding balance of $40.6 million and a mortgage loan secured by National City Tower with an outstanding principal balance of $69.0 million. The $348.3 million outstanding under the Portfolio Loan reflects the consolidated loans. On March 10, 2011, we used proceeds from the Portfolio Loan to repay in full a $16.8 million mortgage loan secured by Torrey Reserve West.
The Portfolio Loan is secured by Hartman II Business Center, Plano Business Park, Horizon Tech Center, Dallas Cowboys Distribution Center, Crescent VIII, National City Tower, Granite Tower, Gateway Corporate Center, I-81 Industrial Portfolio, Two Westlake Park, Torrey Reserve West and, in the future, the Portfolio Loan may be secured by certain additional real estate properties currently owned by us or that may be acquired by us, subject to certain terms of the loan agreement.
Acquisition of 601 Tower at Carlson Center
On February 3, 2011, we, through an indirect wholly owned subsidiary, acquired a 15-story office building containing 288,458 rentable square feet located on approximately 2.3 acres of land within the Carlson Center office park in Minnetonka, Minnesota (601 Tower at Carlson Center). The seller is not affiliated with us or our advisor. The total contractual purchase price of 601 Tower at Carlson Center was approximately $54.4 million plus closing costs. We funded the purchase of 601 Tower at Carlson Center with proceeds from our initial public offering but may later place mortgage debt on the property.
At acquisition, 601 Tower at Carlson Center was 90% leased to 42 tenants.
Acquisition of I-81 Industrial Portfolio
On February 16, 2011, we, through an indirect wholly owned subsidiary, acquired a portfolio of four warehouse properties totaling 1,644,480 rentable square feet (the I-81 Industrial Portfolio). The four properties encompass 133.4 acres of land and are located in Pennsylvania. The seller is not affiliated with us or our advisor. The total contractual purchase price of the I-81 Industrial Portfolio was approximately $90.0 million plus closing costs. We funded the purchase of the I-81 Industrial Portfolio with proceeds from the Portfolio Loan and proceeds from our initial public offering.
At acquisition, the I-81 Industrial Portfolio was 100% leased to seven tenants.
Acquisition of Two Westlake Park
On February 25, 2011, we, through an indirect wholly owned subsidiary, acquired a 17-story office building containing 388,142 rentable square feet located on approximately 5.4 acres of land within the Westlake office park in Houston, Texas (Two Westlake Park). The seller is not affiliated with us or our advisor. The total contractual purchase price of Two Westlake Park was approximately $80.5 million plus closing costs. We funded the purchase of Two Westlake Park with proceeds from the Portfolio Loan and proceeds from our initial public offering.
At acquisition, Two Westlake Park was 95% leased to 13 tenants.
Second Amended and Restated Share Redemption Program
On March 4, 2011, our board of directors approved a second amended and restated share redemption program. See Part II, Item 9B, Other Information.
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We are also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.
The table below summarizes the book values and the weighted-average interest rates of our real estate loans receivable and notes payable for each category as of December 31, 2010 based on the maturity dates and the notional amounts and average pay and receive rates of our derivative instruments as of December 31, 2010 based on maturity dates (dollars in thousands):
Maturity Date | ||||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total Book Value or Notional Amounts |
Fair Value |
|||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Loans receivable |
||||||||||||||||||||||||||||||||
Fixed rate |
$ | | $ | | $ | | $ | 31,900 | $ | 79,245 | $ | 137,158 | $ | 248,303 | $ | 325,923 | ||||||||||||||||
Weighted-average annual effective interest rate (1) |
| | | 9.6 | % | 8.5 | % | 14.1 | % | 11.7 | % | |||||||||||||||||||||
Variable rate |
$ | | $ | | 88,456 | $ | | $ | | $ | | $ | 88,456 | $ | 87,500 | |||||||||||||||||
Weighted-average annual effective interest rate (1) |
| | 7.2 | % | | | | 7.2 | % | |||||||||||||||||||||||
Derivative instruments |
||||||||||||||||||||||||||||||||
Interest rate swaps, notional amount |
$ | | $ | | $ | | $ | | $ | 105,000 | $ | | $ | 105,000 | $ | 1,092 | ||||||||||||||||
Average pay rate (2) |
| | | | 1.7 | % | | 1.7 | % | |||||||||||||||||||||||
Average receive rate (3) |
| | | | 0.3 | % | | 0.3 | % | |||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Notes payable |
||||||||||||||||||||||||||||||||
Fixed rate |
$ | 16,885 | $ | | $ | | $ | 93,850 | $ | 350,000 | $ | | $ | 460,735 | $ | 459,936 | ||||||||||||||||
Weighted-average interest rate |
7.5 | % | | | 5.9 | % | 4.3 | % | | 4.7 | % | |||||||||||||||||||||
Variable rate |
$ | 40,622 | $ | | $ | 13,000 | $ | 120,000 | $ | 174,000 | $ | 19,800 | $ | 367,422 | $ | 369,978 | ||||||||||||||||
Weighted-average interest rate (4) |
2.5 | % | | 4.3 | % | 5.0 | % | 3.7 | % | 4.6 | % | 4.1 | % | |||||||||||||||||||
Derivative instruments |
||||||||||||||||||||||||||||||||
Interest rate swaps, notional amount |
$ | | $ | | $ | 13,000 | $ | 110,000 | $ | 69,000 | $ | 19,800 | $ | 211,800 | $ | (3,222 | ) | |||||||||||||||
Average pay rate (2) |
| | 1.3 | % | 2.0 | % | 1.9 | % | 2.4 | % | 2.0 | % | ||||||||||||||||||||
Average receive rate (3) |
| | 0.3 | % | 0.3 | % | 0.3 | % | 0.3 | % | 0.3 | % |
(1) The weighted-average annual effective interest rate represents the effective interest rate at December 31, 2010, using the interest method, that we use to recognize interest income on our real estate loans receivable.
(2) Average pay rate is the interest rate swap fixed rate.
(3) Average receive rate is the 30-day LIBOR rate at December 31, 2010.
(4) The weighted-average interest rate represents the actual interest rate in effect at December 31, 2010 (consisting of the contractual interest rate and the effect of interest rate swaps and floors), using interest rate indices as of December 31, 2010, where applicable.
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We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt or fixed rate real estate loans receivable unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2010, the fair value and carrying value of our fixed rate real estate loans receivable were $325.9 million and $248.3 million, respectively. The fair value estimate of our real estate loans receivable is estimated using an internal valuation model that considers the expected cash flows for the loans, underlying collateral values (for collateral-dependent loans) and the estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements. At December 31, 2010, the fair value of our fixed rate debt was $459.9 million and the carrying value of our fixed rate debt was $460.8 million. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at December 31, 2010. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.
Conversely, movements in interest rates on our variable rate debt and loan receivable would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. At December 31, 2010, we were exposed to market risks related to fluctuations in interest rates on $50.6 million of variable rate debt outstanding, after giving consideration to the impact of interest rate swap agreements on approximately $316.8 million of our variable rate debt. Based on interest rates as of December 31, 2010, if interest rates were 100 basis points higher during the 12 months ending December 31, 2011, interest expense on our variable rate debt would increase by $0.4 million and if interest rates were 100 basis points lower during the 12 months ending December 31, 2011, interest expense on our variable rate debt would decrease by $0.1 million. At December 31, 2010, we were exposed to market risks related to fluctuations in interest rates on $88.5 million of our variable rate loan receivable outstanding. An increase or decrease of 100 basis points in interest rates would have no impact on our future earnings and cash flows due to an interest rate floor on our variable rate loan receivable.
The weighted-average annual effective interest rates of our fixed rate real estate loans receivable and variable rate real estate loan receivable at December 31, 2010 were 11.7% and 7.2%, respectively. The weighted-average annual effective interest rate represents the effective interest rate at December 31, 2010, using the interest method, that we use to recognize interest income on our real estate loans receivable. The weighted-average interest rates of our fixed rate debt and variable rate debt at December 31, 2010 were 4.7% and 4.1%, respectively. The weighted-average interest rate represents the actual interest rate in effect at December 31, 2010 (consisting of the contractual interest rate and the effect of interest rate swaps and floors), using interest rate indices as of December 31, 2010 where applicable.
For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 1, Business Market Outlook and Part I, Item 1A, Risk Factors.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
See the Index to Financial Statements at page F-1 of this report.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
ITEM 9A. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
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Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on its assessment, our management believes that, as of December 31, 2010, our internal control over financial reporting was effective based on those criteria. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. | OTHER INFORMATION |
As of the quarter ended December 31, 2010, all items required to be disclosed under Form 8-K were reported under Form 8-K.
Second Amended and Restated Share Redemption Program
On March 4, 2011, our board of directors approved a second amended and restated share redemption program. The share redemption program has always provided that at the time we established an estimated value per share (not based on the price to acquire a share of common stock in our initial public offering or follow-on public offerings) the redemption price for all stockholders would be equal to the estimated value per share, as determined by our external advisor, KBS Capital Advisors, or another firm chosen for that purpose. When we commenced our initial public offering, we expected to establish an estimated value per share no later than three years after we completed our offering stage. We amended and restated our share redemption program to state our current intention to first establish an estimated value per share upon the completion of our offering stage. We will consider our offering stage complete when we are no longer publicly offering equity securitieswhether through our initial public offering or follow-on public offeringsand have not done so for up to 18 months. We have previously disclosed our intention to establish an estimated value per share at this time.
The second amended and restated share redemption program will be effective 30 days after we file this annual report on Form 10-K. The complete plan document is filed as an exhibit to this annual report on Form 10-K and is available at the SECs website at http://www.sec.gov.
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ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
We have provided below certain information about our executive officers and directors.
Name |
Position(s) |
Age * | ||
Peter M. Bren |
President | 77 | ||
Charles J. Schreiber, Jr. |
Chairman of the Board, Chief Executive Officer and Director | 59 | ||
Peter McMillan III |
Executive Vice President, Treasurer, Secretary and Director | 53 | ||
Keith D. Hall |
Executive Vice President | 52 | ||
David E. Snyder |
Chief Financial Officer | 39 | ||
Stacie K. Yamane |
Chief Accounting Officer | 46 | ||
Hank Adler |
Independent Director | 64 | ||
Barbara R. Cambon |
Independent Director | 57 | ||
Stuart A. Gabriel, Ph.D. |
Independent Director | 57 |
* As of March 1, 2011.
Peter M. Bren is our President, a position he has held since August 2007. He is also the President of our advisor, KBS Capital Advisors, KBS REIT I and KBS REIT III, positions he has held for these entities since October 2004, June 2005 and January 2010, respectively. In addition, Mr. Bren is President and a director of KBS Legacy Partners Apartment REIT, a position he has held for this entity since August 2009. Mr. Bren is also a sponsor of KBS Strategic Opportunity REIT, which was formed in 2008. Other than de minimis amounts owned by family members or family trusts, Mr. Bren indirectly owns and controls a 33 1/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the owner of the entity that acted as the dealer manager of our public offering. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.
Mr. Bren is also a principal of KBS Realty Advisors LLC and Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities were first registered as investment advisors with the SEC in 2002 and 1999, respectively. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. KBS Realty Advisors, together with KBS affiliates, including KBS Capital Advisors, has been involved in the investment in or management of over $12.8 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, and the investors in us, KBS REIT I, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.
Peter Bren oversees all aspects of KBS Capital Advisors and KBS Realty Advisors business activities, including the acquisition, management and disposition of assets. He is a member of the investment committee formed by KBS Capital Advisors to evaluate and recommend new investment opportunities for us. Mr. Bren is also responsible for investor relationships. Through KBS-affiliated entities, Mr. Bren has teamed with Mr. Schreiber since 1992 to acquire, manage, develop and sell high-quality U.S. commercial real estate assets for institutional investors.
Mr. Bren has been involved in real estate development, management, acquisition, disposition and financing for 40 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 17 years as the President of The Bren Company; a former Senior Partner of Lincoln Property Company; President of Lincoln Property Company, Europe; and Chairman of the Board and President of KBS Realty Advisors and KBS Capital Advisors. Mr. Bren is also a founding member of The Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management.
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Charles J. Schreiber, Jr. is the Chairman of our Board, our Chief Executive Officer and one of our directors, positions he has held since March 2008, August 2007 and July 2007, respectively. He is also the Chief Executive Officer of our advisor and the Chairman of the Board, Chief Executive Officer and a director of KBS REIT I and KBS REIT III, positions he has held for these entities since October 2004, June 2005 and January 2010, respectively. He is also a sponsor of KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT, which were formed in 2008 and 2009, respectively. Other than de minimis amounts owned by family members or family trusts, Mr. Schreiber indirectly owns and controls a 33 1/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the owner of the entity that acted as the dealer manager of our public offering. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.
Mr. Schreiber is also a principal of KBS Realty Advisors LLC and Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities were first registered as investment advisors with the SEC in 2002 and 1999, respectively. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. KBS Realty Advisors, together with KBS affiliates, including KBS Capital Advisors, has been involved in the investment in or management of over $12.8 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, and the investors in us, KBS REIT I, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.
As Chief Executive Officer of KBS Capital Advisors and KBS Realty Advisors, Mr. Schreiber oversees all operations of the companies, including the acquisition and management of individual investments for KBS-advised investors and their portfolios of income-producing real estate assets. He directs all facets of the companys business activities. He is also a member of the investment committee formed by KBS Capital Advisors to evaluate and recommend new investment opportunities for us. Mr. Schreiber is also responsible for investor relationships.
Mr. Schreiber has been involved in real estate development, management, acquisition, disposition and financing for more than 36 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 17 years. Prior to teaming with Mr. Bren in 1992, he served as the Executive Vice President of Koll Investment Management Services and Executive Vice President of Acquisitions/Dispositions for The Koll Company. During the mid-1970s through the 1980s, he was Founder and President of Pacific Development Company and was previously Senior Vice President/Southern California Regional Manager of Ashwill-Burke Commercial Brokerage.
Mr. Schreiber graduated from the University of Southern California with a Bachelors Degree in Finance with an emphasis in Real Estate. During his four years at USC, he did graduate work in the then newly-formed Real Estate Department in the USC Graduate School of Business. He is currently an Executive Board Member for the USC Lusk Center for Real Estate at the University of Southern California Marshall School of Business/School of Policy, Planning and Development.
Our board of directors has concluded that Mr. Schreiber is qualified to serve as one of our directors and our Chairman of the Board for reasons including his extensive industry and leadership experience. With 36 years of real estate experience and 17 years of experience with debt-related investments, Mr. Schreiber has the depth and breadth of experience to implement our business strategy. He gained his understanding of the real estate and real estate-finance markets through hands-on experience with acquisitions, asset and portfolio management, asset repositioning, and dispositions. As our Chief Executive Officer and a principal of our external advisor, Mr. Schreiber is best-positioned to provide our board of directors with insights and perspectives on the execution of our business strategy, our operations and other internal matters. Further, as a principal of KBS-affiliated investment advisors and as Chief Executive Officer, Chairman of the Board and a director of KBS REIT I, KBS REIT III and us, Mr. Schreiber brings to our board of directors demonstrated management and leadership ability.
Peter McMillan III is one of our Executive Vice Presidents and our Treasurer and Secretary, positions he has held since August 2007, and he also is one of our directors, a position he has held since March 2008. He is an Executive Vice President, Treasurer, Secretary and a director of KBS REIT I and KBS REIT III, positions he has held for these entities since June 2005 and January 2010, respectively. In addition, Mr. McMillan is President and Chairman of the Board of KBS Strategic Opportunity REIT and an Executive Vice President of KBS Legacy Partners Apartment REIT, positions he has held for these entities since December 2008 and August 2009. Mr. McMillan also owns and controls a 50% interest in GKP Holding LLC. GKP Holding owns a 33 1/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the owner of the entity that acted as the dealer manager of our public offering. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.
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Mr. McMillan is a co-founder and the Managing Partner of Willowbrook Capital Group, LLC. Prior to forming Willowbrook in 2000, Mr. McMillan served as an Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., which was later acquired by AIG. As Chief Investment Officer, he was responsible for over $75.0 billion in assets, including residential and commercial mortgage-backed securities, public and private investment grade and non-investment grade corporate bonds and commercial mortgage loans and real estate investments. Before joining SunAmerica in 1989, he served as Assistant Vice President for Aetna Life Insurance and Annuity Company with responsibility for the companys $6.0 billion fixed income portfolios. Mr. McMillan received his Master of Business Administration in Finance from the Wharton Graduate School of Business at the University of Pennsylvania and his Bachelor of Arts Degree with honors in Economics from Clark University. Mr. McMillan is a director of Steinway Musical Instruments, Inc. and Metropolitan West Funds.
Our board of directors has concluded that Mr. McMillan is qualified to serve as one of our directors for reasons including his expertise in the real estate finance markets and with real estate-related investments. With over 26 years of experience investing in and managing real estate-related debt investments, Mr. McMillan offers insights and perspective with respect to our real estate-related investment portfolio as well as our real estate portfolio. As one of our executive officers and a principal of our advisor, Mr. McMillan is able to direct our board of directors to the critical issues facing our company. Further, his experiences as a director of KBS REIT I, KBS REIT III, Steinway Musical Instruments, Inc., Metropolitan West Funds and us provide him with an understanding of the requirements of serving on a public company board.
Keith D. Hall is one of our Executive Vice Presidents, a position he has held since August 2007. He is also an Executive Vice President of KBS REIT I and KBS REIT III and Chief Executive Officer and a director of KBS Strategic Opportunity REIT, positions he has held for these entities since June 2005, January 2010 and December 2008. Mr. Hall is also a sponsor of KBS Legacy Partners Apartment REIT, which was formed in 2009. Mr. Hall also owns and controls a 50% interest in GKP Holding LLC. GKP Holding owns a 33 1/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the owner of the entity that acted as the dealer manager of our public offering. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.
Mr. Hall is a co-founder of Willowbrook Capital Group, LLC, an asset management company. Prior to forming Willowbrook in 2000, Mr. Hall was a Managing Director at CS First Boston, where he managed CSFBs distribution strategy and business development for the Principal Transaction Groups $18.0 billion real estate securities portfolio. Mr. Halls two primary business unit responsibilities were Mezzanine Lending and Commercial Real Estate Development. Before joining CSFB in 1996, he served as a Director in the Real Estate Products Group at Nomura Securities, with responsibility for the companys $6.0 billion annual pipeline of fixed-income, commercial mortgage-backed securities. Mr. Hall spent the 1980s as a Senior Vice President in the High Yield Department of Drexel Burnham Lamberts Beverly Hills office, where he was responsible for distribution of the groups high-yield real estate securities. Mr. Hall received a Bachelor of Arts Degree with honors in Finance from California State University, Sacramento.
David E. Snyder is our Chief Financial Officer, a position he has held since December 2008. He is also the Chief Financial Officer of our advisor, KBS REIT I and KBS REIT III, positions he has held for these entities since November 2008, December 2008 and January 2010, respectively. He is also the Chief Financial Officer, Treasurer and Secretary of KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT, positions he has held for these entities since December 2008 and August 2009, respectively. He is also a member of the investment committee formed by our advisor to evaluate and recommend new investment opportunities for us.
From January 1998 to May 2008, Mr. Snyder worked for Nationwide Health Properties, Inc., or NHP, a real estate investment trust specializing in healthcare related property. He served as the Vice President and Controller from July 2005 to February 2008 and Controller from January 1998 to July 2005. At NHP, Mr. Snyder was responsible for internal and external financial reporting, Sarbanes-Oxley compliance, budgeting, debt compliance, negotiation and documentation of debt and equity financing and the negotiation of acquisition and leasing documentation. In addition, Mr. Snyder was part of the senior management team that approved investments, determined appropriate financing and developed strategic goals and plans. As part of his investment and financing responsibilities, Mr. Snyder participated in the origination, modification and refinancing of mortgage loans made to customers, mortgages obtained on real estate and unsecured credit facilities.
Mr. Snyder was an adjunct accounting professor at Biola University from 1998 to 2005, teaching courses in auditing and accounting. He was the director of financial reporting at Regency Health Services, Inc., a skilled nursing provider, from November 1996 to December 1997. From October 1993 to October 1996, Mr. Snyder worked for Arthur Andersen LLP. Mr. Snyder received a Bachelor of Arts Degree in Business Administration with an emphasis in Accounting from Biola University in La Mirada, California. Mr. Snyder is a Certified Public Accountant.
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Stacie K. Yamane is our Chief Accounting Officer, a position she has held since December 2008. From August 2007 until December 2008, Ms. Yamane served as our Chief Financial Officer. She also held the position of Controller from August 2007 until October 2008. Ms. Yamane is also the Fund Controller of our advisor and Chief Accounting Officer of KBS REIT I, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT, positions she has held for these entities since October 2004, December 2008, January 2010, August 2009 and August 2009, respectively. Additionally, Ms Yamane served as Chief Financial Officer of KBS REIT I from June 2005 to December 2008 and Controller of KBS REIT I from June 2005 to October 2008.
In addition, Ms. Yamane serves as Senior Vice President/Controller, Portfolio Accounting for KBS Realty Advisors LLC, a position she has held for this entity since 2004. She served as a Vice President/ Portfolio Accounting with KBS-affiliated investment advisors from 1995 to 2004. At KBS Realty Advisors, Ms. Yamane is responsible for client accounting/ reporting for four real estate portfolios. These portfolios consist of industrial, office and retail properties as well as land parcels. Ms. Yamane works closely with portfolio managers, asset managers, property managers and clients to ensure the completion of timely and accurate accounting, budgeting and financial reporting. In addition, she assists in the supervision and management of KBS Realty Advisors accounting department.
Prior to joining an affiliate of KBS Realty Advisors in February of 1995, Ms. Yamane was an audit manager at Kenneth Leventhal & Company, a CPA firm specializing in real estate. During her eight years at Kenneth Leventhal & Company, Ms. Yamane performed or supervised a variety of auditing, accounting and consulting engagements including the audit of financial statements presented under the U.S. generally accepted accounting principles, or GAAP, basis, as well as financial statements presented on a cash and tax basis, the valuation of asset portfolios and the review and analysis of internal control systems. Her experiences at KBS and Kenneth Leventhal & Company give her 21 years of real estate experience.
Ms. Yamane received a Bachelor of Arts Degree in Business Administration with a dual concentration in Accounting and Management Information Systems from California State University, Fullerton. She is a Certified Public Accountant (inactive California).
Hank Adler is one of our independent directors and is the chair of our audit committee, positions he has held since March 2008. Professor Adler is also an independent director and chair of the audit committee of KBS REIT I and KBS REIT III, positions he has held for these entities since June 2005 and September 2010, respectively. He is currently an Assistant Professor of Accounting at Chapman University. Prior to his retirement from Deloitte & Touche, LLP in 2003, Professor Adler was a partner with that firm where he had been employed for over 30 years. He specialized in tax accounting and served as client service and tax partner for a variety of public and private companies. He received a Bachelor of Science in Accounting and a Master of Business Administration from the University of California, Los Angeles. Professor Adler currently serves on the board of directors, compliance committee and as chairman of the audit committee of Corinthian Colleges, Inc. From 1998 to 2007, he also chaired the Toshiba Senior Classic charity event, a PGA Senior Tour championship event. In the 1990s, he served on the board of trustees and as President of the Irvine Unified School District. From 1994 to 2006, he served on the board of directors of Hoag Memorial Hospital Presbyterian.
Our board of directors has concluded that Professor Adler is qualified to serve as one of our independent directors and as the chair of our audit committee for reasons including his extensive experience in public accounting. With over 30 years at one of the big four accounting firms, Professor Adler brings to our board of directors critical insights to and an understanding of the accounting principles and financial reporting rules and regulations affecting our company. His expertise in evaluating the financial and operational results of public companies and overseeing the financial reporting process makes him a valuable member of our board of directors and our audit committee. In addition, as a director and chair of the audit committee of KBS REIT I, KBS REIT III and us and as a director of Corinthian Colleges, Inc., Professor Adler is well aware of the corporate governance and regulatory issues facing public companies.
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Barbara R. Cambon is one of our independent directors and is the chair of our conflicts committee, positions she has held since March 2008. Ms. Cambon is also an independent director and chair of the conflicts committee of KBS REIT I and KBS REIT III, positions she has held for these entities since June 2005 and September 2010, respectively. From April 2009 to December 2010, she served as Chief Operating Officer of Premium One Asset Management LLC, a company whose business focuses on providing investment management services to investors. From October 2003 to October 2009, she also served as a Managing Member of Snowcreek Management LLC, a real estate asset-management company whose business activities focus on residential development projects for institutional investors. As Managing Member, Ms. Cambon provided asset management services to an institutional partnership investment in residential real estate development. She has been in the real estate investment business for 29 years, principally working with institutional capital sources and investment programs. From November 1999 until October 2002, she served as a Principal of Los Angeles-based Colony Capital, LLC, a private real estate investment firm, and from April 2000 until October 2002, she also served as Chief Operating Officer of Colony. Prior to joining Colony in 1999, Ms. Cambon was President and Founder of Institutional Property Consultants, Inc., a real estate consulting company. She is a past Director and Chairman of the Board of the Pension Real Estate Association and past Director of the National Council of Real Estate Investment Fiduciaries. Ms. Cambon serves on the board of directors and on the audit and compensation committees of BioMed Realty Trust, Inc., on the board of Neighborhood National Bancorp and on the University of San Diego Burnham-Moores Real Estate Institute Policy Advisory Board. Ms. Cambon received a Master of Business Administration from Southern Methodist University and a Bachelor of Science Degree in Education from the University of Delaware.
Our board of directors has concluded that Ms. Cambon is qualified to serve as one of our independent directors and as the chair of our conflicts committee for reasons including her expertise in real estate investment and management. Ms. Cambons 29 years of experience investing in, managing and disposing of real estate on behalf of investors give her a wealth of knowledge and experiences from which to draw in advising our company. As a managing member of her own real estate asset-management company, Ms. Cambon is acutely aware of the operational challenges facing companies such as ours. Further, her service as a director and chair of the conflicts committee of KBS REIT I, KBS REIT III and us and as a director of BioMed Realty Trust, Inc., all public REITs, gives her additional perspective and insight into large public real estate companies such as ours.
Stuart A. Gabriel, Ph.D. is one of our independent directors, a position he has held since March 2008. Professor Gabriel is also an independent director of KBS REIT I and KBS REIT III, positions he has held for these entities since June 2005 and September 2010, respectively. Since June 2007, Professor Gabriel has served as Director and Arden Realty Chair at the Richard S. Ziman Center for Real Estate and Professor of Finance in the Anderson School of Management at the University of California, Los Angeles. Prior to joining UCLA he was Director and Lusk Chair in Real Estate at the USC Lusk Center for Real Estate, a position he held from 1999 to 2007. Professor Gabriel also served as Professor of Finance and Business Economics in the Marshall School of Business at the University of Southern California, a position he held from 1990 to 2007. In 2004, he was elected President of the American Real Estate and Urban Economics Association. From September 2004 through July 2008, Professor Gabriel served as a director of IndyMac Bank, F.S.B. Professor Gabriel serves on the editorial boards of seven academic journals. He is also a Fellow of the Homer Hoyt Institute for Advanced Real Estate Studies. Professor Gabriel has published extensively on topics of real estate finance and urban and regional economics. His teaching and academic research experience include analysis of real estate and real estate capital markets performance as well as structured finance products, including credit default swaps, commercial mortgage-backed securities and collateralized debt obligations. Also, he received a number of awards at USC for outstanding graduate teaching. Professor Gabriel serves as a consultant to numerous corporate and governmental entities. Prior to joining the USC faculty in 1990, Professor Gabriel served on the economics staff of the Federal Reserve Board in Washington, D.C. He also has been a Visiting Scholar at the Federal Reserve Bank of San Francisco. Professor Gabriel holds a Ph.D. in Economics from the University of California, Berkeley.
Our board of directors has concluded that Professor Gabriel is qualified to serve as one of our independent directors for reasons including his extensive knowledge and understanding of the real estate and finance markets and real estate finance products. As a professor of real estate finance and economics, Professor Gabriel brings unique perspective to our board of directors. His years of research and analysis of the real estate and finance markets make Professor Gabriel well-positioned to advise us with respect to our investment and financing strategy. This expertise also makes him an invaluable resource for assessing and managing risks facing our company. Through his experience as a director of KBS REIT I, KBS REIT III, IndyMac Bank, F.S.B. and us, he also has an understanding of the requirements of serving on a public company board.
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The Audit Committee
Our board of directors has established an audit committee. The audit committees function is to assist our board of directors in fulfilling its responsibilities by overseeing (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditors qualifications and independence, and (iv) the performance of the independent auditors and our internal audit function. The members of the audit committee are Hank Adler (chairman), Barbara R. Cambon and Stuart A. Gabriel, Ph.D. All of the members of the audit committee are independent as defined by the New York Stock Exchange. All members of the audit committee have significant financial and/or accounting experience, and our board of directors has determined that Professor Adler satisfies the SECs requirements for an audit committee financial expert.
Section 16(a) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, executive officers and any persons beneficially owning more than 10% of our common stock are required to report their initial ownership of the common stock and most changes in that ownership to the SEC. The SEC has designated specific due dates for these reports, and we are required to identify in this Annual Report on Form 10-K those persons who did not file these reports when due. Based solely on our review of copies of the reports filed with the SEC and written representations of our directors and executive officers, we believe all persons subject to these reporting requirements filed the reports on a timely basis in 2010.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer and principal financial officer. Our Code of Conduct and Ethics can be found at http://www.kbsreitii.com.
ITEM 11. | EXECUTIVE COMPENSATION |
Compensation of Executive Officers
Our conflicts committee, which is composed of all of our independent directors, discharges our board of directors responsibilities relating to the compensation of our executives. However, we currently do not have any paid employees and our executive officers do not receive any compensation directly from us for services rendered to us. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, KBS Capital Advisors, our advisor, and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us or our subsidiaries. See Part III, Item 13, Certain Relationships and Related Transactions, and Director Independence Certain Transactions with Related Persons for a discussion of the fees paid to KBS Capital Advisors and its affiliates.
Compensation of Directors
If a director is also one of our executive officers, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, based upon recommendations from our advisor. Four of our executive officers, Messrs. Bren, Hall, McMillan and Schreiber, manage and control our advisor, and through the advisor, they are involved in recommending and setting the compensation to be paid to our independent directors.
We have provided below certain information regarding compensation earned by or paid to our directors during fiscal year 2010.
Name |
Fees Earned or Paid in Cash in 2010 |
All Other Compensation |
Total | |||||||||
Hank Adler |
$ | 118,833 | $ | | $ | 118,833 | ||||||
Barbara R. Cambon |
126,833 | | 126,833 | |||||||||
Stuart A. Gabriel, Ph.D. |
118,333 | | 118,333 | |||||||||
Peter McMillan III (1) |
| | | |||||||||
Charles J. Schreiber, Jr. (1) |
| | |
(1) Directors who are also our executive officers do not receive compensation for services rendered as a director.
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Cash Compensation
We compensate each of our independent directors with an annual retainer of $40,000. In addition, we pay our independent directors for attending board and committee meetings as follows:
| $2,500 for each board meeting attended; |
| $2,500 for each committee meeting attended (committee chairpersons receive an additional $500 per committee meeting for serving in that capacity); |
| $2,000 for each teleconference meeting of the board; and |
| $2,000 for each teleconference meeting of any committee (committee chairpersons receive an additional $1,000 per teleconference committee meeting for serving in that capacity). |
All of our directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Stock Ownership
The following table shows, as of March 9, 2011, the amount of our common stock beneficially owned (unless otherwise indicated) by (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.
Name and Address of Beneficial Owner (1) |
Amount and Nature of Beneficial Ownership (2) |
Percentage | ||||
KBS Capital Advisors, LLC |
20,000 | (3) | * | |||
Hank Adler |
| | ||||
Peter M. Bren |
20,000 | (3) | * | |||
Barbara R. Cambon |
| | ||||
Stuart A. Gabriel |
2,146 | * | ||||
Keith D. Hall |
20,000 | (3) | * | |||
Peter McMillan III |
20,000 | (3) | * | |||
Charles J. Schreiber, Jr. |
20,000 | (3) | * | |||
David E. Snyder |
| | ||||
Stacie K. Yamane |
| | ||||
All officers and directors as a group |
22,146 | (3) | * |
* | Less than 1% of the outstanding common stock. |
(1) | The address of each beneficial owner listed is 620 Newport Center Drive, Suite 1300, Newport Beach, California 92660. |
(2) | None of the shares is pledged as security. |
(3) | Includes 20,000 shares owned by KBS Capital Advisors. KBS Capital Advisors is indirectly owned and controlled by Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. |
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ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
Director Independence
Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors, and all of the members of the audit committee and the conflicts committee are independent as defined by the New York Stock Exchange. The New York Stock Exchange standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, our board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Our board of directors has determined that Hank Adler, Barbara R. Cambon and Stuart A. Gabriel, Ph.D. each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such persons ability to exercise independent judgment as a member of the board. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received or earned any compensation from us or any such other entities except for compensation directly related to service as a director of us. Therefore, we believe that all of these directors are independent directors.
Our Policy Regarding Transactions with Related Persons
Our charter requires our conflicts committee, which consists of all of our independent directors, to review and approve all transactions between us and our advisor, any of our officers or directors or any of their affiliates. Prior to entering into a transaction with a related party, a majority of the conflicts committee must conclude that the transaction is fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. In addition, our Code of Conduct and Ethics lists examples of types of transactions with related parties that would create prohibited conflicts of interest and requires our officers and directors to be conscientious of actual and potential conflicts of interest with respect to our interests and to seek to avoid such conflicts or handle such conflicts in an ethical manner at all times consistent with applicable law. Our executive officers and directors are required to report potential and actual conflicts to a designated compliance officer, currently our chief financial officer, via the Ethics Hotline, to an internal audit representative or directly to the audit committee chair, as appropriate.
Certain Transactions with Related Persons
As described further below, we have entered into agreements with certain affiliates pursuant to which they will provide services to us. Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. control and indirectly own our advisor, KBS Capital Advisors LLC, and KBS Capital Markets Group LLC, the entity that acted as the dealer manager in our public offering. We refer to these individuals as our sponsors. They are also our executive officers. All four of our sponsors actively participate in the management and operations of our advisor. Our advisor has three managers: an entity owned and controlled by Mr. Bren; an entity owned and controlled by Messrs. Hall and McMillan; and an entity owned and controlled by Mr. Schreiber.
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Our Relationship with KBS Capital Advisors. Since our inception, our advisor has provided day-to-day management of our business. Among the services provided by our advisor under the terms of the advisory agreement are the following:
| finding, presenting and recommending to us real estate property and real estate-related investment opportunities consistent with our investment policies and objectives; |
| structuring the terms and conditions of our investments, sales and joint ventures; |
| acquiring properties and other investments on our behalf in compliance with our investment objectives and policies; |
| sourcing and structuring our loan originations; |
| arranging for financing and refinancing of properties and our other investments; |
| entering into leases and service contracts for our properties; |
| supervising and evaluating each property managers performance; |
| reviewing and analyzing the properties operating and capital budgets; |
| assisting us in obtaining insurance; |
| generating an annual budget for us; |
| reviewing and analyzing financial information for each of our assets and the overall portfolio; |
| formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments; |
| performing investor-relations services; |
| maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies; |
| engaging and supervising the performance of our agents, including our registrar and transfer agent; and |
| performing any other services reasonably requested by us. |
Our advisor is subject to the supervision of our board of directors and only has such authority as we may delegate to it as our agent. Our advisory agreement has a one-year term expiring May 21, 2011 subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties. From January 1, 2010 through the most recent date practicable, which was February 28, 2011, we have compensated our advisor as set forth below.
Our advisor or its affiliates may pay some of our organization and offering costs (other than selling commissions and dealer manager fees) incurred in connection with our public offering, including our legal, accounting, printing, mailing and filing fees. We reimburse our advisor for these costs, but only to the extent that the reimbursement would not cause selling commissions, the dealer manager fee and other organization and offering expenses borne by us to exceed 15% of the gross offering proceeds of our public offering as of the date of the reimbursement. In addition, our advisor is obligated to reimburse us to the extent selling commissions, the dealer manager fee and other organization and offering costs incurred by us in the offering exceed 15% of gross offering proceeds raised in the primary offering. KBS Capital Advisors will do the same after termination of the offering pursuant to our dividend reinvestment plan. From January 1, 2010 through February 28, 2011, our advisor incurred approximately $4.4 million of organization and offering expenses on our behalf and as of February 28, 2011, our advisor has been reimbursed by us for approximately $4.1 million of such costs.
We incur acquisition fees payable to our advisor equal to 0.75% of the cost of investments acquired by us, including acquisition expenses and any debt attributable to such investments. With respect to investments in and originations of loans, in lieu of an acquisition fee, we pay our advisor an origination fee equal to 1.0% of the amount funded by us to acquire or originate mortgage, mezzanine, bridge or other loans, including any expenses related to such investment and any debt we use to fund the acquisition or origination of the loan. Acquisition and origination fees relate to services provided in connection with the selection and acquisition or origination of real estate and real estate-related investments. Acquisition fees and origination fees from January 1, 2010 through February 28, 2011 totaled approximately $12.7 million and $2.9 million, respectively. As of February 28, 2011, we have paid $15.0 million of acquisition and origination fees incurred from January 1, 2010 through February 28, 2011.
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In addition to acquisition and origination fees, we reimburse our advisor for amounts that it pays in connection with the selection, acquisition or development of a property or the selection and acquisition or origination of a real estate-related investment, whether or not we ultimately acquire the asset. From January 1, 2010 through February 28, 2011, our advisor and its affiliates did not incur any such costs on our behalf.
For asset management services, we pay our advisor a monthly fee. With respect to investments in real property, we pay our advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment. With respect to investments in loans and any investments other than real property, we pay the advisor a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount actually paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition and origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. From January 1, 2010 through February 28, 2011, our asset management fees totaled $12.9 million, of which $11.5 million has been paid as of February 28, 2011.
Under our advisory agreement, our advisor and its affiliates have the right to seek reimbursement from us for all costs and expenses they incur in connection with their provision of services to us, including our allocable share of our advisors overhead, such as rent, employee costs, utilities and information technology costs. Our advisor may seek reimbursement for employee costs under the advisory agreement. Commencing July 1, 2010, we have reimbursed our advisor for our allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to us. In the future, our advisor may seek reimbursement for additional employee costs. However, we will not reimburse our advisor or its affiliates for employee costs in connection with services for which KBS Capital Advisors earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits our advisor or its affiliates may pay to our executive officers. From January 1, 2010 through February 28, 2011, we have reimbursed our advisor for $35,000 of operating expenses, including $33,000 of employee costs.
Our Relationship with KBS Capital Markets Group. Pursuant to the dealer manager agreement with KBS Capital Markets Group, the dealer manager is entitled to receive selling commissions and a dealer manager fee of up to 9.5% of the gross offering proceeds (except that no selling commissions or dealer manager fees are payable with respect to sales under the dividend reinvestment plan). The selling commissions are subject to reduction for volume discount sales and sales through certain distribution channels. Also, a reduced dealer manager fee is paid with respect to certain volume discount sales. The dealer manager reallows 100% of selling commissions to broker-dealers participating in the public offering. From its dealer manager fee, KBS Capital Markets Group may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee (in special cases, the dealer manager has the option to increase the amount of this reallowance). From January 1, 2010 through February 28, 2011, we incurred selling commissions of $55.0 million, of which 100% was reallowed to participating broker-dealers. From January 1, 2010 through February 28, 2011, we incurred dealer manager fees of $28.1 million, of which $9.9 million was reallowed to participating broker-dealers.
In addition to selling commissions and dealer manager fees, we are also obligated to reimburse the dealer manager and its affiliates for certain offering related expenses that they incur on our behalf. These include attendance and sponsorship fees payable to participating broker-dealers hosting a retail seminar and travel, meals and lodging costs incurred by registered persons associated with the dealer manager and officers and employees of our affiliates to attend retail conferences sponsored by participating broker-dealers, other meetings with participating broker-dealers and industry conferences; expense reimbursements to broker-dealers for actual costs incurred in connection with attending bona fide training and education meetings hosted by us; certain technology costs associated with the offering; certain legal fees allocable to the dealer manager; and reimbursement of bona fide due diligence expenses of broker-dealers (provided that our reimbursement of the bona fide due diligence expenses of broker-dealers shall not exceed in the aggregate 0.5% of the gross offering proceeds from the offering). Under our dealer manager agreement, we are responsible for reimbursing our dealer manager and its affiliates for offering related expenses they incur, provided that our reimbursement payments shall not cause (i) total underwriting compensation (excluding reimbursement of bona fide due diligence expenses) to exceed 10% of the gross proceeds from the offering, or (ii) total organization and offering expenses borne by us to exceed 15% of our gross offering proceeds of the offering as of the date of the reimbursement. From January 1, 2010 through February 28, 2011, we have reimbursed or intend to reimburse our dealer manager for approximately $3.6 million.
We ceased offering shares of common stock in our primary initial public offering on December 31, 2010 and as of February 28, 2011 were in the process of completing subscription processing procedures, as set forth in our prospectus. We continue to offer shares under our dividend reinvestment plan.
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Currently Proposed Transactions. There are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Independent Registered Public Accounting Firm
During the year ended December 31, 2010, Ernst & Young LLP served as our independent registered public accounting firm and provided certain tax and other services. Ernst & Young has served as our independent registered public accounting firm since our formation.
Pre-Approval Policies
In order to ensure that the provision of such services does not impair the auditors independence, the audit committee charter imposes a duty on the audit committee to pre-approve all auditing services performed for us by our independent auditors, as well as all permitted non-audit services. In determining whether or not to pre-approve services, the audit committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. The audit committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.
All services rendered by Ernst & Young for the years ended December 31, 2010 and 2009, were pre-approved in accordance with the policies and procedures described above.
Principal Independent Registered Public Accounting Firm Fees
The audit committee reviewed the audit and non-audit services performed by Ernst & Young, as well as the fees charged by Ernst & Young for such services. In its review of the non-audit service fees, the audit committee considered whether the provision of such services is compatible with maintaining the independence of Ernst & Young. The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Ernst & Young for the years ended December 31, 2010 and 2009, are set forth in the table below.
2010 | 2009 | |||||||
Audit fees |
$ | 650,000 | $ | 589,000 | ||||
Audit-related fees |
2,000 | 3,000 | ||||||
Tax fees |
128,000 | 23,000 | ||||||
All other fees |
| | ||||||
Total |
$ | 780,000 | $ | 615,000 | ||||
For purposes of the preceding table, Ernst & Youngs professional fees are classified as follows:
| Audit fees These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Ernst & Young in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements. |
| Audit-related fees These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards. |
| Tax fees These are fees for all professional services performed by professional staff in our independent auditors tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence. |
| All other fees These are fees for any services not included in the above-described categories. |
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ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) | Financial Statement Schedules |
See the Index to Financial Statements at page F-1 of this report.
The following financial statement schedule is included herein at pages F-37 through F-38 of this report:
Schedule III Real Estate Assets and Accumulated Depreciation and Amortization
(b) | Exhibits |
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EXHIBIT LIST
Ex. |
Description | |
3.1 |
Second Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2008 | |
3.2 |
Second Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 2 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
4.1 |
Form of Subscription Agreement, incorporated by reference to Appendix A to the prospectus dated April 22, 2010, Commission File No. 333-146341 | |
4.2 |
Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 1 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
4.3 |
Amended and Restated Dividend Reinvestment Plan, incorporated by reference to Appendix B to the prospectus dated April 22, 2010, Commission File No. 333-146341 | |
4.4 |
Second Amended and Restated Share Redemption Program | |
4.5 |
Amended and Restated Escrow Agreement, dated June 2, 2008 by and between KBS Real Estate Investment Trust II, Inc., KBS Capital Markets Group LLC and First Republic Trust Company, incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed June 6, 2008 | |
10.1 |
Advisory Agreement between the Company and KBS Capital Advisors LLC, dated May 21, 2010, incorporated by reference to Exhibit 10.1 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.2 |
Amended and Restated Dealer Manager Agreement with Selected Dealer Agreement dated as of April 30, 2010, incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2010 | |
10.3 |
Loan Agreement (related to the Portfolio Revolving Loan Facility) between KBSII 350 PLUMERIA, LLC, KBSII MOUNTAIN VIEW, LLC, KBSII ONE MAIN PLACE, LLC, KBSII PIERRE LACLEDE CENTER, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.4 |
Mortgage Agreement (related to the Portfolio Revolving Loan Facility) between KBSII MOUNTAIN VIEW, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.5 |
Deed of Trust (related to the Portfolio Revolving Loan Facility) between KBSII PIERRE LACLEDE CENTER, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 |
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Ex. |
Description | |
10.6 |
Deed of Trust (related to the Portfolio Revolving Loan Facility) between KBSII ONE MAIN PLACE, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.7 |
Deed of Trust (related to the Portfolio Revolving Loan Facility) between KBSII 350 PLUMERIA, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.8 |
Limited Guaranty (related to the Portfolio Revolving Loan Facility) between KBS REIT PROPERTIES II, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.7 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.9 |
Secured Promissory Note (related to the Portfolio Revolving Loan Facility) by and between KBSII 350 PLUMERIA, LLC, KBSII MOUNTAIN VIEW, LLC, KBSII ONE MAIN PLACE, LLC, KBSII PIERRE LACLEDE CENTER, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated as of April 30, 2010, incorporated by reference to Exhibit 10.8 to the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2010 | |
10.10 |
Agreement of Sale and Purchase (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by and between 300 LASALLE LLC and KBS CAPITAL ADVISORS LLC, effective as of June 10, 2010, incorporated by reference to Exhibit 10.52 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.11 |
First Amendment to Agreement of Sale and Purchase (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by and between 300 LASALLE LLC and KBS CAPITAL ADVISORS LLC, dated July 1, 2010, incorporated by reference to Exhibit 10.53 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.12 |
Second Amendment to Agreement of Sale and Purchase (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by and between 300 LASALLE LLC and KBSII 300 NORTH LASALLE, LLC, dated July 2, 2010, incorporated by reference to Exhibit 10.54 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.13 |
Assignment and Assumption of Purchase Agreement between KBS CAPITAL ADVISORS LLC and KBSII 300 NORTH LASALLE, LLC, dated as of July 1, 2010, incorporated by reference to Exhibit 10.55 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.14 |
Metropolitan Life Insurance Company Mortgage Loan Application (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois), by and between METROPOLITAN LIFE INSURANCE COMPANY and KBSII 300 LASALLE, LLC, effective as of July 6, 2010, incorporated by reference to Exhibit 10.56 to Post-Effective Amendment No. 9 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 |
78
Ex. |
Description | |
10.15 |
Promissory Note (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by and between KBSII 300 NORTH LASALLE, LLC and METROPOLITAN LIFE INSURANCE COMPANY, dated as of July 29, 2010, incorporated by reference to Exhibit 10.15 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2010 | |
10.16 |
Mortgage, Security Agreement and Fixture Filing (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by KBSII 300 NORTH LASALLE, LLC, to METROPOLITAN LIFE INSURANCE COMPANY, dated as of July 29, 2010, incorporated by reference to Exhibit 10.16 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2010 | |
10.17 |
Guaranty Agreement (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) by KBS REIT PROPERTIES II, LLC and METROPOLITAN LIFE INSURANCE COMPANY, dated as of July 29, 2010, incorporated by reference to Exhibit 10.17 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2010 | |
10.18 |
Office Lease Agreement (related to the acquisition of 300 North LaSalle Street in Chicago, Illinois) between 300 LASALLE LLC and KIRKLAND & ELLIS LLP, dated as of August 25, 2005, as amended, incorporated by reference to Exhibit 10.60 to Post-Effective Amendment No. 10 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.19 |
Agreement of Sale and Purchase (related to the acquisition of Union Bank Plaza in Los Angeles, California) by and between HINES VAF UB PLAZA, L.P. and KBS CAPITAL ADVISORS LLC, effective as of August 16, 2010, incorporated by reference to Exhibit 10.61 to Post-Effective Amendment No. 10 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.20 |
First Amendment to Agreement of Sale and Purchase (related to the acquisition of Union Bank Plaza in Los Angeles, California) by and between HINES VAF UB PLAZA, L.P. and KBSII 445 SOUTH FIGUEROA, LLC, dated August 20, 2010, incorporated by reference to Exhibit 10.62 to Post-Effective Amendment No. 10 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.21 |
Second Amendment to Agreement of Sale and Purchase (related to the acquisition of Union Bank Plaza in Los Angeles, California) by and between HINES VAF UB PLAZA, L.P. and KBSII 445 SOUTH FIGUEROA, LLC, dated September 15, 2010, incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 10 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.22 |
Assignment and Assumption of Purchase Agreement between KBS CAPITAL ADVISORS LLC and KBSII 445 SOUTH FIGUEROA, LLC, dated as of August 19, 2010, incorporated by reference to Exhibit 10.64 to Post-Effective Amendment No. 10 to the Companys Registration Statement on Form S-11, Commission File No. 333-146341 | |
10.23 |
Amended and Restated and Consolidated Loan Agreement (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC, KBSII PLANO BUSINESS PARK, LLC, KBSII HORIZON TECH CENTER, LLC, KBSII 2500 REGENT BOULEVARD, LLC, KBSII CRESCENT VIII, LLC, KBSII NATIONAL CITY TOWER, LLC, KBSII GRANITE TOWER, LLC, KBSII GATEWAY CORPORATE CENTER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 |
79
Ex. |
Description | |
10.24 |
Amended and Restated and Consolidated Secured Promissory Note (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC, KBSII PLANO BUSINESS PARK, LLC, KBSII HORIZON TECH CENTER, LLC, KBSII 2500 REGENT BOULEVARD, LLC, KBSII CRESCENT VIII, LLC, KBSII NATIONAL CITY TOWER, LLC, KBSII GRANITE TOWER, LLC, KBSII GATEWAY CORPORATE CENTER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.25 |
Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII NATIONAL CITY TOWER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.26 |
Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBS II GRANITE TOWER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.27 |
First Modification of Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII HORIZON TECH CENTER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.28 |
First Modification of Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII 2500 REGENT BOULEVARD, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.29 |
First Modification of Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII PLANO BUSINESS PARK, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.30 |
First Modification of Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.31 |
First Modification of Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII CRESCENT VIII, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 | |
10.32 |
Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII GATEWAY CORPORATE CENTER, LLC and WELLS FARGO BANK NATIONAL ASSOCIATION, dated January 27, 2011. | |
10.33 |
Amended and Restated and Consolidated Limited Guaranty (relating to the Portfolio Loan) by KBS REIT PROPERTIES II, LLC, in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, dated January 27, 2011 |
80
Ex. |
Description | |
10.34 |
Second Amended and Restated and Consolidated Secured Promissory Note (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC, KBSII PLANO BUSINESS PARK, LLC, KBSII HORIZON TECH CENTER, LLC, KBSII 2500 REGENT BOULEVARD, LLC, KBSII CRESCENT VIII, LLC, KBSII NATIONAL CITY TOWER, LLC, KBSII GRANITE TOWER, LLC, KBSII GATEWAY CORPORATE CENTER, LLC, KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 8, 2011 | |
10.35 |
Open-Ended Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (Alberigi Drive) (relating to the Portfolio Loan) by and between KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 8, 2011 | |
10.36 |
Open-Ended Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (CenterPoint Boulevard) (relating to the Portfolio Loan) by and between KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 8, 2011 | |
10.37 |
Open-Ended Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (Capital Road) (relating to the Portfolio Loan) by and between KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 8, 2011 | |
10.38 |
Open-Ended Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (Oak Ridge Road) (relating to the Portfolio Loan) by and between KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 8, 2011 | |
10.39 |
Third Amended and Restated and Consolidated Secured Promissory Note (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC, KBSII PLANO BUSINESS PARK, LLC, KBSII HORIZON TECH CENTER, LLC, KBSII 2500 REGENT BOULEVARD, LLC, KBSII CRESCENT VIII, LLC, KBSII NATIONAL CITY TOWER, LLC, KBSII GRANITE TOWER, LLC, KBSII GATEWAY CORPORATE CENTER, LLC, KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC, KBSII TWO WESTLAKE PARK, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 25, 2011 | |
10.40 |
Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII TWO WESTLAKE PARK, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated February 25, 2011 | |
10.41 |
Fourth Amended and Restated and Consolidated Secured Promissory Note (relating to the Portfolio Loan) by and between KBSII HARTMAN BUSINESS CENTER, LLC, KBSII PLANO BUSINESS PARK, LLC, KBSII HORIZON TECH CENTER, LLC, KBSII 2500 REGENT BOULEVARD, LLC, KBSII CRESCENT VIII, LLC, KBSII NATIONAL CITY TOWER, LLC, KBSII GRANITE TOWER, LLC, KBSII GATEWAY CORPORATE CENTER, LLC, KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, LLC, KBSII TWO WESTLAKE PARK, LLC, KBSII TORREY RESERVE WEST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated March 10, 2011 | |
10.42 |
Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (relating to the Portfolio Loan) by and between KBSII TORREY RESERVE WEST, LLC and WELLS FARGO BANK, NATIONAL ASSOCIATION, dated March 10, 2011 |
81
Ex. |
Description | |
21.1 |
Subsidiaries of the Company | |
31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 |
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 |
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 |
82
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
KBS Real Estate Investment Trust II, Inc.
We have audited the accompanying consolidated balance sheets of KBS Real Estate Investment Trust II, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule in Item 15(a), Schedule III-Real Estate Assets and Accumulated Depreciation and Amortization. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of KBS Real Estate Investment Trust II, Inc. at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Irvine, California
March 11, 2011
F-2
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31, | ||||||||
2010 | 2009 | |||||||
Assets |
||||||||
Real estate: |
||||||||
Land |
$ | 190,507 | $ | 60,607 | ||||
Buildings and improvements |
1,511,105 | 447,953 | ||||||
Tenant origination and absorption costs |
252,264 | 66,867 | ||||||
Total real estate, cost |
1,953,876 | 575,427 | ||||||
Less accumulated depreciation and amortization |
(80,473 | ) | (34,059 | ) | ||||
Total real estate, net |
1,873,403 | 541,368 | ||||||
Real estate loans receivable, net |
336,759 | 130,801 | ||||||
Total real estate and real estate-related investments, net |
2,210,162 | 672,169 | ||||||
Cash and cash equivalents |
82,413 | 273,821 | ||||||
Restricted cash |
937 | | ||||||
Rents and other receivables, net |
20,582 | 3,893 | ||||||
Above-market leases, net |
48,456 | 2,303 | ||||||
Deferred financing costs, prepaid expenses and other assets |
17,104 | 1,682 | ||||||
Total assets |
$ | 2,379,654 | $ | 953,868 | ||||
Liabilities and stockholders equity |
||||||||
Notes payable |
$ | 828,157 | $ | 126,660 | ||||
Accounts payable and accrued liabilities |
20,287 | 2,664 | ||||||
Due to affiliates |
373 | 206 | ||||||
Distributions payable |
9,179 | 5,013 | ||||||
Below-market leases, net |
35,487 | 19,664 | ||||||
Other liabilities |
18,536 | 3,839 | ||||||
Total liabilities |
912,019 | 158,046 | ||||||
Commitments and contingencies (Note 14) |
||||||||
Redeemable common stock |
43,306 | 21,260 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding |
| | ||||||
Common stock, $.01 par value; 1,000,000,000 shares authorized, 176,739,865 and 93,167,161 shares issued and outstanding as of December 31, 2010 and December 31, 2009, respectively |
1,767 | 932 | ||||||
Additional paid-in capital |
1,537,403 | 810,006 | ||||||
Cumulative distributions in excess of net income |
(112,711 | ) | (36,376 | ) | ||||
Accumulated other comprehensive loss |
(2,130 | ) | | |||||
Total stockholders equity |
1,424,329 | 774,562 | ||||||
Total liabilities and stockholders equity |
$ | 2,379,654 | $ | 953,868 | ||||
See accompanying notes to consolidated financial statements.
F-3
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues: |
||||||||||||
Rental income |
$ | 110,294 | $ | 49,548 | $ | 11,898 | ||||||
Tenant reimbursements |
18,066 | 8,762 | 2,166 | |||||||||
Interest income from real estate loans receivable |
28,255 | 16,885 | 21 | |||||||||
Other operating income |
3,518 | 192 | 2 | |||||||||
Total revenues |
160,133 | 75,387 | 14,087 | |||||||||
Expenses: |
||||||||||||
Operating, maintenance, and management |
28,715 | 12,265 | 3,335 | |||||||||
Real estate taxes and insurance |
12,977 | 4,515 | 937 | |||||||||
Asset management fees to affiliate |
10,005 | 4,482 | 857 | |||||||||
Real estate acquisition fees to affiliates |
10,692 | 846 | | |||||||||
Real estate acquisition fees and expenses |
7,487 | 678 | | |||||||||
General and administrative expenses |
3,947 | 2,678 | 810 | |||||||||
Depreciation and amortization |
61,686 | 28,105 | 6,974 | |||||||||
Interest expense |
19,389 | 10,164 | 4,345 | |||||||||
Total expenses |
154,898 | 63,733 | 17,258 | |||||||||
Other income: |
||||||||||||
Other interest income |
273 | 646 | 589 | |||||||||
Gain on sale of real estate securities |
| 119 | | |||||||||
Total other income |
273 | 765 | 589 | |||||||||
Net income (loss) |
$ | 5,508 | $ | 12,419 | $ | (2,582 | ) | |||||
Net income (loss) per common share, basic and diluted |
$ | 0.04 | $ | 0.20 | $ | (0.33 | ) | |||||
Weighted-average number of common shares outstanding, basic and diluted |
125,894,756 | 63,494,969 | 7,926,366 | |||||||||
Distributions declared per common share |
$ | 0.650 | $ | 0.650 | $ | 0.263 | ||||||
See accompanying notes to consolidated financial statements.
F-4
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(dollars in thousands)
Accumulated | ||||||||||||||||||||||||
Cumulative | Other | Total | ||||||||||||||||||||||
Common Stock | Additional | Distributions and | Comprehensive | Stockholders | ||||||||||||||||||||
Shares | Amounts | Paid-in Capital | Net Income (Loss) | Loss | Equity | |||||||||||||||||||
Balance, December 31, 2007 |
20,000 | $ | 1 | $ | 199 | $ | | $ | | $ | 200 | |||||||||||||
Issuance of common stock |
31,495,364 | 314 | 313,903 | | | 314,217 | ||||||||||||||||||
Transfers to redeemable common stock |
| | (1,921 | ) | | | (1,921 | ) | ||||||||||||||||
Distributions declared |
| | | (4,941 | ) | | (4,941 | ) | ||||||||||||||||
Commissions on stock sales and related dealer manager fees to affiliate |
| | (29,084 | ) | | | (29,084 | ) | ||||||||||||||||
Other offering costs |
| | (5,505 | ) | | | (5,505 | ) | ||||||||||||||||
Net loss |
| | | (2,582 | ) | | (2,582 | ) | ||||||||||||||||
Balance, December 31, 2008 |
31,515,364 | $ | 315 | $ | 277,592 | $ | (7,523 | ) | $ | | $ | 270,384 | ||||||||||||
Issuance of common stock |
61,851,680 | 619 | 615,081 | | | 615,700 | ||||||||||||||||||
Redemptions of common stock |
(199,883 | ) | (2 | ) | (1,919 | ) | | | (1,921 | ) | ||||||||||||||
Transfers to redeemable common stock |
| | (19,339 | ) | | | (19,339 | ) | ||||||||||||||||
Distributions declared |
| | | (41,272 | ) | | (41,272 | ) | ||||||||||||||||
Commissions on stock sales and related dealer manager fees to affiliate |
| | (54,913 | ) | | | (54,913 | ) | ||||||||||||||||
Other offering costs |
| | (6,496 | ) | | | (6,496 | ) | ||||||||||||||||
Net income |
| | | 12,419 | | 12,419 | ||||||||||||||||||
Balance, December 31, 2009 |
93,167,161 | $ | 932 | $ | 810,006 | $ | (36,376 | ) | $ | | $ | 774,562 | ||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income |
| | | 5,508 | | 5,508 | ||||||||||||||||||
Unrealized losses on derivative instruments |
| | | | (2,130 | ) | (2,130 | ) | ||||||||||||||||
Total comprehensive income |
3,378 | |||||||||||||||||||||||
Issuance of common stock |
85,838,625 | 858 | 852,417 | | | 853,275 | ||||||||||||||||||
Redemptions of common stock |
(2,265,921 | ) | (23 | ) | (21,237 | ) | | | (21,260 | ) | ||||||||||||||
Transfers to redeemable common stock |
| | (22,046 | ) | | | (22,046 | ) | ||||||||||||||||
Distributions declared |
| | | (81,843 | ) | | (81,843 | ) | ||||||||||||||||
Commissions on stock sales and related dealer manager fees to affiliate |
| | (74,346 | ) | | | (74,346 | ) | ||||||||||||||||
Other offering costs |
| | (7,391 | ) | | | (7,391 | ) | ||||||||||||||||
Balance, December 31, 2010 |
176,739,865 | $ | 1,767 | $ | 1,537,403 | $ | (112,711 | ) | $ | (2,130 | ) | $ | 1,424,329 | |||||||||||
See accompanying notes to consolidated financial statements.
F-5
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net income (loss) |
$ | 5,508 | $ | 12,419 | $ | (2,582 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
61,686 | 28,105 | 6,974 | |||||||||
Noncash interest income on real estate-related investments |
(6,354 | ) | (5,304 | ) | (6 | ) | ||||||
Deferred rent |
(8,686 | ) | (2,187 | ) | (596 | ) | ||||||
Bad debt expense (recovery) |
22 | (5 | ) | 19 | ||||||||
Amortization of above- and below-market leases, net |
(4,290 | ) | (5,683 | ) | (1,666 | ) | ||||||
Amortization of deferred financing costs |
1,165 | 996 | 541 | |||||||||
Gain on sale of real estate securities |
| (119 | ) | | ||||||||
Increase in fair value of contingent consideration |
(273 | ) | | | ||||||||
Changes in operating assets and liabilities: |
||||||||||||
Restricted cash for operational expenditures |
(723 | ) | | | ||||||||
Rents and other receivables |
(12,111 | ) | 549 | (1,673 | ) | |||||||
Prepaid expenses and other assets |
(6,636 | ) | (973 | ) | (724 | ) | ||||||
Accounts payable and accrued liabilities |
17,648 | (240 | ) | 3,124 | ||||||||
Other liabilities |
12,567 | 2,379 | 1,459 | |||||||||
Net cash provided by operating activities |
59,523 | 29,937 | 4,870 | |||||||||
Cash Flows from Investing Activities: |
||||||||||||
Acquisitions of real estate |
(1,389,288 | ) | (112,174 | ) | (437,434 | ) | ||||||
Additions to real estate |
(9,153 | ) | (2,172 | ) | (100 | ) | ||||||
Investment in real estate loans receivable |
(287,104 | ) | (67,611 | ) | (58,001 | ) | ||||||
Proceeds from sale of real estate-related investments |
87,500 | | | |||||||||
Investments in real estate securities |
| (3,958 | ) | | ||||||||
Sales of real estate securities |
| 4,198 | | |||||||||
Increase in restricted cash for capital expenditures |
(214 | ) | | | ||||||||
Net cash used in investing activities |
(1,598,259 | ) | (181,717 | ) | (495,535 | ) | ||||||
Cash Flows from Financing Activities: |
||||||||||||
Proceeds from notes payable |
717,422 | 15,540 | 271,446 | |||||||||
Principal payments on notes payable |
(32,910 | ) | (160,326 | ) | | |||||||
Payments of deferred financing costs |
(7,153 | ) | (650 | ) | (1,077 | ) | ||||||
Contingent consideration related to acquisition of real estate |
(3,663 | ) | | | ||||||||
Return of contingent consideration related to acquisition of real estate |
873 | | | |||||||||
Proceeds from issuance of common stock |
809,969 | 594,440 | 312,295 | |||||||||
Payments to redeem common stock |
(21,260 | ) | (1,921 | ) | | |||||||
Payments of commissions on stock sales and related dealer manager fees |
(74,348 | ) | (54,911 | ) | (29,084 | ) | ||||||
Payments of other offering costs |
(7,231 | ) | (6,560 | ) | (5,108 | ) | ||||||
Distributions paid to common stockholders |
(34,371 | ) | (16,620 | ) | (1,398 | ) | ||||||
Net cash provided by financing activities |
1,347,328 | 368,992 | 547,074 | |||||||||
Net (decrease) increase in cash and cash equivalents |
(191,408 | ) | 217,212 | 56,409 | ||||||||
Cash and cash equivalents, beginning of period |
273,821 | 56,609 | 200 | |||||||||
Cash and cash equivalents, end of period |
$ | 82,413 | $ | 273,821 | $ | 56,609 | ||||||
Supplemental Disclosure of Cash Flow Information: |
||||||||||||
Interest paid |
$ | 15,773 | $ | 9,654 | $ | 2,881 | ||||||
Supplemental Disclosure of Noncash Transactions: |
||||||||||||
Mortgage debt assumed on real estate acquisition |
$ | 16,985 | $ | | $ | | ||||||
Increase in distributions payable |
$ | 4,166 | $ | 3,392 | $ | 1,621 | ||||||
Increase in capital expenses payable |
$ | 3,960 | $ | | $ | 470 | ||||||
Increase in lease incentives payable |
$ | 4,086 | $ | | $ | | ||||||
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan |
$ | 43,306 | $ | 21,260 | $ | 1,921 | ||||||
See accompanying notes to consolidated financial statements.
F-6
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
1. | ORGANIZATION |
KBS Real Estate Investment Trust II, Inc. (the Company) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT) beginning with the taxable year ended December 31, 2008. The Company conducts its business primarily through KBS Limited Partnership II, a Delaware limited partnership formed on August 23, 2007 (the Operating Partnership), and its subsidiaries. The Company is the sole general partner of and directly owns a 0.1% partnership interest in the Operating Partnership. The Companys wholly-owned subsidiary, KBS REIT Holdings II LLC, a Delaware limited liability company formed on August 23, 2007 (KBS REIT Holdings II), owns the remaining 99.9% partnership interest in the Operating Partnership and is its sole limited partner.
The Company owns a diverse portfolio of real estate and real estate-related investments. As of December 31, 2010, the Company owned 17 real estate properties (consisting of 14 office properties, one office/flex property and two industrial properties), a leasehold interest in one industrial property and six real estate loans.
Subject to certain restrictions and limitations, the business of the Company is managed by KBS Capital Advisors LLC (the Advisor), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on May 21, 2010 (the Advisory Agreement). The Advisory Agreement may be renewed for an unlimited number of one-year periods upon the mutual consent of the Advisor and the Company. Either party may terminate the Advisory Agreement upon 60 days written notice. The Advisor owns 20,000 shares of the Companys common stock.
Upon commencing its initial public offering (the Offering), the Company retained KBS Capital Markets Group LLC (the Dealer Manager), an affiliate of the Advisor, to serve as the dealer manager of the Offering pursuant to a dealer manager agreement, as amended and restated on April 30, 2010 (the Dealer Manager Agreement). The Company ceased offering shares of common stock in its primary offering on December 31, 2010 and continues to offer shares of common stock under its dividend reinvestment plan.
As of December 31, 2010, the Company had sold 179,185,669 shares of common stock in the Offering for gross offering proceeds of $1.8 billion, including 6,999,082 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $66.5 million. Also as of December 31, 2010, the Company had redeemed 2,465,804 of the shares sold in the Offering for $23.2 million.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, KBS REIT Holdings II, the Operating Partnership, and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.
The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as contained within the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) and the rules and regulations of the Securities and Exchange Commission (SEC).
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications
Certain amounts in the Companys prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
F-7
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Revenue Recognition
Real Estate
The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is reasonably assured and records amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
| whether the lease stipulates how a tenant improvement allowance may be spent; |
| whether the amount of a tenant improvement allowance is in excess of market rates; |
| whether the tenant or landlord retains legal title to the improvements at the end of the lease term; |
| whether the tenant improvements are unique to the tenant or general-purpose in nature; and |
| whether the tenant improvements are expected to have any residual value at the end of the lease. |
During the years ended December 31, 2010, 2009 and 2008, the Company recognized deferred rent from tenants of $8.7 million, $2.2 million and $0.6 million, respectively. As of December 31, 2010 and 2009, the cumulative deferred rent receivable balance was $15.5 million and $2.8 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $3.9 million of unamortized lease incentives as of December 31, 2010. The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.
The Company makes estimates of the collectibility of its tenant receivables related to base rents, including deferred rent, expense reimbursements and other revenue or income. Management specifically analyzes accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectibility of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, the Company will record a bad debt reserve for the tenants receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments. During the year ended December 31, 2010, the Company recorded bad debt expense related to its tenant receivables of $22,000. During the year ended December 31, 2009, the Company reduced its bad debt reserve and recorded a net recovery of bad debt related to its tenant receivables of $5,000. The Company did not record any bad debt expense related to its deferred rent receivables during the year ended December 31, 2009.
Real Estate Loans Receivable
Interest income on the Companys real estate loans receivable is recognized on an accrual basis over the life of the investment using the interest method. Direct loan origination fees and origination or acquisition costs, as well as acquisition premiums or discounts, are amortized over the term of the loan as an adjustment to interest income. The Company will place loans on nonaccrual status when any portion of principal or interest is 90 days past due, or earlier when concern exists as to the ultimate collection of principal or interest. When a loan is placed on nonaccrual status, the Company will reverse the accrual for unpaid interest and generally will not recognize subsequent interest income until the cash is received, or the loan returns to accrual status. The Company will resume the accrual of interest if it determines the collection of interest according to the contractual terms of the loan is probable.
F-8
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Real Estate Securities
The Company recognizes interest income on real estate securities that are beneficial interests in securitized financial assets and are rated AA and above on an accrual basis according to the contractual terms of the securities. Discounts or premiums are amortized to interest income over the life of the investment using the interest method. During the year ended December 31, 2009, the Company acquired and disposed of AAA-rated commercial mortgage-backed securities (CMBS). The Company recognized $0.1 million of interest income related to this security and recognized a gain on sale of $0.1 million during the year ended December 31, 2009.
Cash and Cash Equivalents
The Company recognizes interest income on its cash and cash equivalents as it is earned and classifies such amounts as other interest income.
Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenants lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
Buildings | 25-40 years | |
Building improvements | 10-25 years | |
Tenant improvements | Shorter of lease term or expected useful life | |
Tenant origination and absorption costs | Remaining term of related leases, including below-market renewal periods |
Real Estate Acquisition Valuation
The Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. Prior to January 1, 2009, real estate acquired in a business combination, consisting of land, buildings and improvements, was recorded at cost. The Company allocated the cost of tangible assets, identifiable intangibles and assumed liabilities (consisting of above and below-market leases and tenant origination and absorption costs) acquired in a business combination based on their estimated fair values. Beginning January 1, 2009, all assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date are expensed in periods subsequent to the acquisition date. During the year ended December 31, 2010, the Company acquired 13 real estate assets, recorded each acquisition as a business combination and expensed $18.2 million of acquisition costs. During the year ended December 31, 2009, the Company acquired one real estate asset in a business combination and expensed $1.5 million of acquisition costs.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Companys acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Companys net income.
F-9
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Impairment of Real Estate and Related Intangible Assets and Liabilities
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. The Company did not record any impairment loss on its real estate and related intangible assets and liabilities during the years ended December 31, 2010, 2009 and 2008.
Real Estate Loans Receivable
The Companys real estate loans receivable are recorded at amortized cost, net of loan loss reserves (if any), and evaluated for impairment at each balance sheet date. The amortized cost of a real estate loan receivable is the outstanding unpaid principal balance, net of unamortized acquisition premiums or discounts and unamortized costs and fees directly associated with the origination or acquisition of the loan.
As of December 31, 2010, there was no loan loss reserve and the Company did not record any impairment losses related to the real estate loans receivable during the years ended December 31, 2010, 2009 and 2008. However, in the future, the Company may experience losses from its investments in loans receivable requiring the Company to record loan loss reserves. Realized losses on individual loans could be material and significantly exceed any recorded reserves.
The reserve for loan losses is a valuation allowance that reflects managements estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The reserve is adjusted through Provision for loan losses on the Companys consolidated statements of operations and is decreased by charge-offs to specific loans when losses are confirmed. The reserve for loan losses may include a portfolio-based component and an asset-specific component.
The asset-specific reserve component relates to reserves for losses on loans considered impaired. The Company considers a loan to be impaired when, based upon current information and events, it believes that it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. The Company also considers a loan to be impaired if it grants the borrower a concession through a modification of the loan terms or if it expects to receive assets (including equity interests in the borrower) with fair values that are less than the carrying value of the loan in satisfaction of the loan. A reserve is established when the present value of payments expected to be received, observable market prices, the estimated fair value of the collateral (for loans that are dependent on the collateral for repayment) or amounts expected to be received in satisfaction of a loan are lower than the carrying value of that loan.
The portfolio-based reserve component covers the pool of loans that do not have asset-specific reserves. A provision for loan losses is recorded when available information as of each balance sheet date indicates that it is probable that the pool of loans will incur a loss and the amount of the loss can be reasonably estimated. Required reserve balances for this pool of loans are derived from estimated probabilities of default and estimated loss severities assuming a default occurs. On a quarterly basis, the Companys management assigns estimated probabilities of default and loss severities to each loan in the portfolio based on factors such as the debt service coverage of the underlying collateral, the estimated fair value of the collateral, the significance of the borrowers investment in the collateral, the financial condition of the borrower and/or its sponsors, the likelihood that the borrower and/or its sponsors would allow the loan to default, the Companys willingness and ability to step in as owner in the event of default, and other pertinent factors.
Failure to recognize impairments would result in the overstatement of earnings and the carrying value of the Companys real estate loans held for investment. Actual losses, if any, could differ significantly from estimated amounts.
Cash and Cash Equivalents
The Company considers all short-term (with an original maturity of three months or less), highly-liquid investments utilized as part of the Companys cash-management activities to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value.
F-10
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The Companys cash and cash equivalents balance exceeds federally insurable limits as of December 31, 2010. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts. The Company has a corporate banking relationship with Wells Fargo Bank, N.A. in which it deposits the majority of its funds.
Restricted Cash
Restricted cash is comprised of lender impound reserve accounts on the Companys borrowings for security deposits, property taxes, insurance, and capital improvements and replacements.
Derivative Instruments
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates on its variable rate notes payable. The Company records these derivative instruments at fair value on the accompanying consolidated balance sheets. Derivative instruments designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges. The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) in the accompanying consolidated statements of equity. The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as gain or loss on derivative instruments in the accompanying consolidated statements of operations.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivative instruments that are part of a hedging relationship to specific forecasted transactions or recognized obligations on the consolidated balance sheets. The Company also assesses and documents, both at the hedging instruments inception and on a quarterly basis thereafter, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the respective hedged items. When it is determined that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues hedge accounting prospectively and reclassifies amounts recorded to accumulated other comprehensive income (loss) to earnings.
For further information regarding the Companys derivative instruments, see Note 8, Derivative Instruments.
Deferred Financing Costs
Deferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing. These costs are amortized over the terms of the respective financing agreements using the interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close. As of December 31, 2010 and 2009, the Companys deferred financing costs were $6.2 million and $0.2 million, respectively, net of amortization.
F-11
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Fair Value Measurements
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
| Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; |
| Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
| Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. |
When available, the Company utilizes quoted market prices from independent third-party sources to determine fair value and classifies such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
The Company considers the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Companys estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
The Company considers the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
F-12
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Redeemable Common Stock
The Company has adopted a share redemption program that may enable stockholders to sell their shares to the Company in limited circumstances.
There are several limitations on the Companys ability to redeem shares under the share redemption program:
| Unless the shares are being redeemed in connection with a stockholders death, qualifying disability or determination of incompetence (each as defined under the share redemption program), the Company may not redeem the shares until the stockholder has held the shares for one year. |
| During each calendar year, the share redemption program limits the number of shares the Company may redeem to those that the Company could purchase with the amount of the net proceeds from the issuance of shares under the dividend reinvestment plan during the prior calendar year. |
| During any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year. |
| The Company has no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. |
Pursuant to the program, the Company will initially redeem shares at prices determined as follows:
| The lower of $9.25 or 92.5% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least one year; |
| The lower of $9.50 or 95.0% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least two years; |
| The lower of $9.75 or 97.5% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least three years; and |
| The lower of $10.00 or 100% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least four years. |
Notwithstanding the above, the redemption price for redemptions sought upon a stockholders death, qualifying disability or determination of incompetence will initially be the amount paid to acquire the shares from the Company. Furthermore, once the Company establishes an estimated value per share of common stock, the redemption price per share for all stockholders will be equal to the estimated value per share, as determined by the Advisor or another firm chosen for that purpose. The Company currently expects to establish an estimated value per share no later than the completion of its offering stage. The Company will consider its offering stage complete when it is no longer publicly offering equity securities whether through the primary offering or follow-on public offerings and has not done so for up to 18 months. Public equity offering for this purpose does not include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership.
The Companys board of directors may amend, suspend or terminate the share redemption program with 30 days notice to its stockholders. The Company may provide this notice by including such information in a Current Report on Form 8-K or in the Companys annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to its stockholders.
The Company records amounts that are redeemable under the share redemption program as redeemable common stock in the accompanying consolidated balance sheets because the shares are mandatorily redeemable at the option of the holder and therefore their redemption is outside the control of the Company. The maximum amount redeemable under the Companys share redemption program is limited to the number of shares the Company could redeem with the amount of the net proceeds from the sale of shares under the dividend reinvestment plan during the prior calendar year. However, because the amounts that can be redeemed in future periods are determinable and only contingent on an event that is likely to occur (e.g., the passage of time), the Company presents the net proceeds from the current year dividend reinvestment plan as redeemable common stock in the accompanying consolidated balance sheets.
F-13
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The Company classifies financial instruments that represent a mandatory obligation of the Company to redeem shares as liabilities. The Companys redeemable common shares are contingently redeemable at the option of the holder. When the Company determines it has a mandatory obligation to redeem shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.
The Company limits the dollar value of shares that may be redeemed under the program as described above. For the year ended December 31, 2010, the Company had received investor redemption requests of $21.8 million. As of the December 31, 2010 redemption date, the Company had redeemed $21.3 million of common stock, which represents the dollar value of the number of shares that the Company could purchase with the amount of the net proceeds from the issuance of shares under the dividend reinvestment plan in 2009. Effective January 2011, this limitation was re-set, and based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2010, the Company has $43.3 million available for redemption in 2011. The Company redeemed the remaining outstanding and unfulfilled redemptions as of December 31, 2010 of $0.5 million on the January 31, 2011 redemption date.
Related Party Transactions
Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Offering, the investment of funds in real estate and real estate-related investments, management of the Companys investments and for other services (including, but not limited to, the disposition of investments). The Company is also obligated to reimburse the Advisor and Dealer Manager for organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, and the Company is obligated to reimburse the Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement.
The Company records all related party fees as incurred, subject to any limitations described in the Advisory Agreement. The Company had not incurred any disposition fees, subordinated participation in net cash flows, or subordinated incentive listing fees during the year ended December 31, 2010 or during any previous periods.
Selling Commissions and Dealer Manager Fees
Through April 29, 2010, the Company paid the Dealer Manager up to 6.0% and 3.5% of the gross offering proceeds from the primary offering as selling commissions and dealer manager fees, respectively. Effective April 30, 2010, the Company pays the Dealer Manager up to 6.5% and 3.0% of the gross offering proceeds from the primary offering as selling commissions and dealer manager fees, respectively. A reduced sales commission and dealer manager fee is paid with respect to certain volume discount sales. No sales commission or dealer manager fee is paid with respect to shares issued through the dividend reinvestment plan. The Dealer Manager reallows 100% of sales commissions earned to participating broker-dealers. The Dealer Manager may reallow to any participating broker-dealer up to 1% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee and, in special cases, the Dealer Manager may increase the reallowance.
Organization and Offering Costs
Organization and offering costs (other than selling commissions and dealer manager fees) of the Company may be paid by the Advisor, the Dealer Manager or their affiliates on behalf of the Company. Other offering costs include all expenses incurred by the Company in connection with the Offering. Organization costs include all expenses incurred by the Company in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company.
F-14
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company is obligated to reimburse the Advisor, the Dealer Manager or their affiliates, as applicable, for organization and other offering costs paid by them on behalf of the Company, provided that the Advisor would be obligated to reimburse the Company to the extent selling commissions, dealer manager fees and organization and other offering costs incurred by the Company in the Offering exceed 15% of gross offering proceeds. As a result, the Company is only liable for these costs up to an amount that, when combined with selling commissions and dealer manager fees, does not exceed 15% of the gross proceeds of the Offering. As of December 31, 2010, the Companys selling commissions, dealer manager fees, and organization and other offering costs did not exceed 15% of the gross offering proceeds. Through December 31, 2010, including shares issued through the Companys dividend reinvestment plan, the Company had issued 179,185,669 shares in the Offering for gross offering proceeds of $1.8 billion and recorded other offering costs of $19.4 million and selling commissions and dealer manager fees of $158.3 million. Organization costs are expensed as incurred and offering costs, which include selling commissions and dealer manager fees, are charged as incurred as a reduction to stockholders equity.
Acquisition and Origination Fees
The Company pays the Advisor an acquisition fee equal to 0.75% of the cost of investments acquired, including acquisition expenses and any debt attributable to such investments. With respect to investments in and originations of loans, the Company pays an origination fee equal to 1% of the amount funded by the Company to acquire or originate mortgage, mezzanine, bridge or other loans, including any expenses related to such investments and any debt the Company uses to fund the acquisition or origination of these loans. The Company does not pay an acquisition fee with respect to investments in loans.
Asset Management Fee
With respect to investments in real estate, the Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. In the case of investments made through joint ventures, the asset management fee will be determined based on the Companys proportionate share of the underlying investment.
With respect to investments in loans and any investments other than real estate, the Company pays the Advisor a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition or origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation.
With respect to an investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances, such investment may either be excluded from the calculation of the asset management fee described above or included in such calculation at a reduced value that is recommended by the Advisor and the Companys management and then approved by a majority of the Companys independent directors, and this change in the fee will be applicable to an investment upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a person other than the Company, its direct or indirect wholly owned subsidiary or a joint venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment. As of December 31, 2010, the Company has not determined to calculate the asset management fee at an adjusted value for any investments or to exclude any investments from the calculation of the asset management fee.
Operating Expenses
The Advisor has the right to seek reimbursement from the Company for all costs and expenses it incurs in connection with the provision of services to the Company, including the Companys allocable share of the Advisors overhead, such as rent, employee costs, utilities and information technology costs. Commencing July 1, 2010, the Company has reimbursed the Advisor for the Companys allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. In the future, the Advisor may seek reimbursement for additional employee costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits the Advisor or its affiliates may pay to the Companys executive officers.
F-15
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Companys annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Companys net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed interest or penalties by any major tax jurisdictions. The Companys evaluations were performed for the tax years ending December 31, 2010, 2009 and 2008. As of December 31, 2010, returns for the calendar years 2007 through 2009 remain subject to examination by major tax jurisdictions.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the years ended December 31, 2010, 2009 and 2008.
Distributions declared per common share assumes each share was issued and outstanding each day during the year ended December 31, 2010 and 2009, respectively, and each day during the period from July 16, 2008 through December 31, 2008. For the years ended December 31, 2010 and 2009, distributions were based on daily record dates and calculated at a rate of $0.00178082 per share per day. Each day during the period from January 1, 2009 through December 31, 2010 was a record date for distributions.
Distributions for the period from July 16, 2008 through August 15, 2008 were based on daily record dates and calculated at a rate of $0.00054795 per share per day. Distributions for the period from August 16, 2008 through December 31, 2008 were based on daily record dates and calculated at a rate of $0.00178082 per share per day. No day during the period from January 1, 2008 through July 15, 2008 was a record date for distributions.
Segments
The Companys segments are based on the Companys method of internal reporting which classifies its operations by investment type: real estate and real estate-related. For financial data by segment, see Note 11, Segment Information.
Square Footage, Occupancy and Other Measures
Square footage, occupancy and other measures used to describe real estate and real estate-related investments included in the Notes to Consolidated Financial Statements are presented on an unaudited basis.
F-16
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Recently Issued Accounting Standards Updates
In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires additional disclosures regarding significant transfers in and out of Level 1 and Level 2 fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures about purchases, sales, issuances and settlements relating to the activity in Level 3 fair value measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements relating to the activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of ASU No. 2010-06 did not have a material impact on the Companys consolidated financial statements.
In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU No. 2010-20). ASU No. 2010-20 requires the Company to provide a greater level of disaggregated information about the credit quality of its financing receivables and its allowance for credit losses. This ASU also requires the Company to disclose additional information related to credit quality indicators, past due information, information related to loans modified in a troubled debt restructuring and significant purchases and sales of financing receivables disaggregated by portfolio segment. ASU No. 2010-20 was initially effective for interim and annual periods ending on or after December 15, 2010. As this ASU amends only the disclosure requirements for loans and the allowance for credit losses, the adoption of ASU No. 2010-20 is not expected to have a significant impact on the Companys financial statements. In January 2011, the FASB issued ASU No. 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (ASU No. 2011-01). ASU No. 2011-01 announced that it was deferring the effective date of new disclosure requirements for troubled debt restructurings prescribed by ASU No. 2010-20. The effective date for those disclosures will be concurrent with the effective date for proposed ASU No. 2010-20. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The adoption of ASU No. 2010-20 may require additional disclosures, but the Company does not expect the adoption to have a material impact to its consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging Issues Task Force) (ASU No. 2010-29). ASU No. 2010-29 updated accounting guidance to clarify that pro forma disclosures should be presented as if a business combination occurred at the beginning of the prior annual period for purposes of preparing both the current reporting period and the prior reporting period pro forma financial information. These disclosures should be accompanied by a narrative description about the nature and amount of material, nonrecurring pro forma adjustments. The new accounting guidance is effective for business combinations consummated in periods beginning after December 15, 2010, and should be applied prospectively as of the date of adoption. Early adoption is permitted. The Company adopted ASU No. 2010-29 for the year ended December 31, 2010 and the adoption of this ASU did not have a material impact to the Companys consolidated financial statements.
F-17
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
3. | RECENT ACQUISITIONS OF REAL ESTATE |
During the year ended December 31, 2010, the Company acquired the following properties (in thousands):
Intangibles | ||||||||||||||||||||||||||||||||||||
Property Name |
City | State | Acquisition Date |
Land | Building and Improvements |
Tenant Origination and Absorption Costs |
Above-Market Lease Assets |
Below-Market Lease Liabilities |
Total Purchase Price |
|||||||||||||||||||||||||||
Pierre Laclede Center |
Clayton | MO | 02/04/2010 | $ | 15,200 | $ | 46,246 | $ | 15,261 | $ | 112 | $ | (2,645 | ) | $ | 74,174 | ||||||||||||||||||||
One Main Place |
Portland | OR | 02/05/2010 | 7,200 | 38,009 | 9,634 | 531 | (932 | ) | 54,442 | ||||||||||||||||||||||||||
Plano Business Park |
Plano | TX | 03/15/2010 | 3,050 | 10,299 | 3,349 | 548 | (637 | ) | 16,609 | ||||||||||||||||||||||||||
Hartman II |
Austell | GA | 04/07/2010 | 2,900 | 6,243 | 1,224 | 433 | | 10,800 | |||||||||||||||||||||||||||
Crescent VIII |
Greenwood Village | CO | 05/26/2010 | 2,300 | 7,600 | 1,952 | 648 | | 12,500 | |||||||||||||||||||||||||||
Horizon Tech Center |
San Diego | CA | 06/17/2010 | 7,900 | 25,096 | 4,141 | 3,363 | | 40,500 | |||||||||||||||||||||||||||
Dallas Cowboys Distribution Center (1) |
Irving | TX | 07/08/2010 | | 15,775 | 2,738 | 487 | | 19,000 | |||||||||||||||||||||||||||
300 N. LaSalle Building |
Chicago | IL | 07/29/2010 | 41,200 | 502,476 | 71,864 | 31,197 | (2,097 | ) | 644,640 | ||||||||||||||||||||||||||
Torrey Reserve West (2) |
San Diego | CA | 09/09/2010 | 5,300 | 15,762 | 3,675 | 2,397 | (25 | ) | 27,109 | ||||||||||||||||||||||||||
Union Bank Plaza |
Los Angeles | CA | 09/15/2010 | 24,000 | 160,901 | 29,331 | 896 | (7,133 | ) | 207,995 | ||||||||||||||||||||||||||
Emerald View at Vista Center |
West Palm Beach | FL | 12/09/2010 | 5,300 | 22,972 | 5,483 | 2,219 | | 35,974 | |||||||||||||||||||||||||||
Granite Tower |
Denver | CO | 12/16/2010 | 8,850 | 125,167 | 16,271 | 1,942 | (3,265 | ) | 148,965 | ||||||||||||||||||||||||||
National City Tower |
Louisville | KY | 12/17/2010 | 6,700 | 76,681 | 32,183 | 3,845 | (5,844 | ) | 113,565 | ||||||||||||||||||||||||||
$ | 129,900 | $ | 1,053,227 | $ | 197,106 | $ | 48,618 | $ | (22,578 | ) | $ | 1,406,273 | ||||||||||||||||||||||||
(1) The Company acquired the rights to a ground lease with respect to this property. The ground lease expires in February 2050.
(2) In connection with the acquisition of Torrey Reserve West, the Company assumed an existing mortgage loan from an unaffiliated lender with an outstanding principal balance of $17.0 million.
The intangible assets and liabilities acquired in connection with these acquisitions have weighted-average amortization periods as of the date of acquisition as follows (in years):
Tenant | ||||||||||||
Origination and | Above-Market | Below-Market | ||||||||||
Absorption Costs | Lease Assets | Lease Liabilities | ||||||||||
Pierre Laclede Center |
5.0 | 3.3 | 5.7 | |||||||||
One Main Place |
3.4 | 5.5 | 3.4 | |||||||||
Plano Business Park |
5.2 | 5.5 | 6.0 | |||||||||
Hartman II |
5.2 | 5.2 | | |||||||||
Crescent VIII |
3.7 | 3.9 | | |||||||||
Horizon Tech Center |
3.9 | 4.0 | | |||||||||
Dallas Cowboys Distribution Center |
9.7 | 9.7 | | |||||||||
300 N. LaSalle Building |
16.0 | 16.7 | 16.4 | |||||||||
Torrey Reserve West |
4.0 | 4.0 | 3.7 | |||||||||
Union Bank Plaza |
9.6 | 10.8 | 6.6 | |||||||||
Emerald View at Vista Center |
5.2 | 6.3 | | |||||||||
Granite Tower |
6.3 | 5.8 | 7.2 | |||||||||
National City Tower |
7.1 | 6.4 | 9.3 |
For the year ended December 31, 2010, the Company recognized $65.2 million of total revenues and $28.9 million of operating income from these properties.
F-18
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
4. | REAL ESTATE |
As of December 31, 2010, the Companys real estate portfolio was composed of 14 office properties, one office/flex property, two industrial properties and a leasehold interest in one industrial property, encompassing in the aggregate approximately 7.5 million rentable square feet, and the portfolio was 96% occupied. The following table provides summary information regarding the properties owned by the Company as of December 31, 2010 (in thousands):
Property |
Land | Buildings
and Improvements |
Tenant Origination and Absorption Costs |
Total Real Estate | ||||||||||||
As of December 31, 2010: |
||||||||||||||||
Office |
$ | 184,557 | $ | 1,478,777 | $ | 244,967 | $ | 1,908,301 | ||||||||
Industrial (1) |
5,950 | 32,328 | 7,297 | 45,575 | ||||||||||||
Cost |
$ | 190,507 | $ | 1,511,105 | $ | 252,264 | $ | 1,953,876 | ||||||||
Accumulated depreciation/amortization |
| (47,307 | ) | (33,166 | ) | (80,473 | ) | |||||||||
Net Amount |
$ | 190,507 | $ | 1,463,798 | $ | 219,098 | $ | 1,873,403 | ||||||||
As of December 31, 2009: |
||||||||||||||||
Office |
$ | 60,607 | $ | 447,953 | $ | 66,867 | $ | 575,427 | ||||||||
Industrial |
| | | | ||||||||||||
Cost |
$ | 60,607 | $ | 447,953 | $ | 66,867 | $ | 575,427 | ||||||||
Accumulated depreciation/amortization |
| (18,190 | ) | (15,869 | ) | (34,059 | ) | |||||||||
Net Amount |
$ | 60,607 | $ | 429,763 | $ | 50,998 | $ | 541,368 | ||||||||
(1) Includes an investment in the rights to a ground lease. The ground lease expires in February 2050.
As of December 31, 2010, the following property represented more than 10% of the Companys total assets:
Average | ||||||||||||||||||||||||||||||||||||||||
Rentable | Total | Percentage | Annualized | Annualized | ||||||||||||||||||||||||||||||||||||
Square | Real Estate, Net | of Total | Base Rent | Base Rent | ||||||||||||||||||||||||||||||||||||
Property |
Location | Feet | (in thousands) | Assets | (in thousands) (1) | per sq. ft. | Occupancy | |||||||||||||||||||||||||||||||||
300 N. LaSalle Building |
Chicago, IL | 1,302,901 | $ | 607,044 | 25.5 | % | $ | 43,838 | $ | 34.16 | 98.5 | % |
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2010, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
F-19
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Operating Leases
The Companys real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2010, the leases have remaining terms of up to 18.2 years with a weighted-average remaining term of 6.9 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $2.7 million and $0.8 million as of December 31, 2010 and 2009, respectively.
As of December 31, 2010, the future minimum rental income from the Companys properties under non-cancelable operating leases is as follows (in thousands):
2011 |
$ | 167,290 | ||
2012 |
165,631 | |||
2013 |
154,018 | |||
2014 |
142,663 | |||
2015 |
123,296 | |||
Thereafter |
739,056 | |||
$ | 1,491,954 | |||
As of December 31, 2010, the Companys highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
Annualized | Percentage of | |||||||||
Number of | Base Rent (1) | Annualized | ||||||||
Industry |
Tenants | (in thousands) | Base Rent | |||||||
Legal Services |
52 | $ | 47,511 | 26 | % | |||||
Finance |
52 | 38,060 | 20 | % | ||||||
Other Professional Services |
50 | 19,373 | 10 | % | ||||||
$ | 104,944 | 56 | % | |||||||
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2010, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
F-20
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
No other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time. As of December 31, 2010, the Company has a bad debt reserve of approximately $34,000, which represents less than 1% of annualized base rent. As of December 31, 2010, the Company has one tenant with a rent balance outstanding over 90 days.
As of December 31, 2010, the Company had a concentration of credit risk related to the following tenant lease that represents more than 10% of the Companys annualized base rent:
Net Rentable Sq. Ft. | Annualized Base Rent Statistics | |||||||||||||||||||||||||||
Tenant |
Property | Tenant Industry | Square Feet |
% of Portfolio |
Annualized Base Rent (1) (in thousands) |
% of Portfolio Annualized Base Rent |
Annualized Base Rent per Square Feet |
Lease Expiration (2) |
||||||||||||||||||||
Kirkland & Ellis |
300 N. LaSalle Building | Legal Services | 687,857 | 9.5 | % | $ | 25,351 | 13.6 | % | $ | 36.86 | 02/28/2029 |
(1) Annualized base rent represents annualized contractual base rental income, adjusted to straight-line any contractual rent increases or decreases from the leases inception through the balance of the lease term.
(2) Represents the expiration date of the lease at December 31, 2010 and does not take into account any tenant renewal options.
5. | TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES |
As of December 31, 2010 and 2009, the Companys tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) are as follows (in thousands):
Tenant Origination and | Above-Market | Below-Market | ||||||||||||||||||||||
Absorption Costs | Lease Assets | Lease Liabilities | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Cost |
$ | 252,264 | $ | 66,867 | $ | 51,024 | $ | 2,499 | $ | 44,100 | $ | 26,888 | ||||||||||||
Accumulated Amortization |
(33,166 | ) | (15,869 | ) | (2,568 | ) | (196 | ) | (8,613 | ) | (7,224 | ) | ||||||||||||
Net Amount |
$ | 219,098 | $ | 50,998 | $ | 48,456 | $ | 2,303 | $ | 35,487 | $ | 19,664 | ||||||||||||
Increases (decreases) in net income as a result of amortization of the Companys tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the years ended December 31, 2010, 2009 and 2008 are as follows (in thousands):
Tenant Origination and | Above-Market | Below-Market | ||||||||||||||||||||||||||||||||||
Absorption Costs | Lease Assets | Lease Liabilities | ||||||||||||||||||||||||||||||||||
For the Year Ended | For the Year Ended | For the Year Ended | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Amortization |
$ | (29,005 | ) | $ | (13,141 | ) | $ | (3,484 | ) | $ | (2,466 | ) | $ | (170 | ) | $ | (26 | ) | $ | 6,756 | $ | 5,853 | $ | 1,692 | ||||||||||||
F-21
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The remaining unamortized balance for these outstanding intangible assets and liabilities as of December 31, 2010 will be amortized for the years ending December 31 as follows:
Tenant Origination and Absorption Costs |
Above-Market Lease Assets |
Below-Market Lease Liabilities |
||||||||||
2011 |
$ | (42,008 | ) | $ | (5,927 | ) | $ | 7,309 | ||||
2012 |
(34,710 | ) | (5,773 | ) | 6,206 | |||||||
2013 |
(26,352 | ) | (5,403 | ) | 5,560 | |||||||
2014 |
(22,074 | ) | (4,463 | ) | 5,025 | |||||||
2015 |
(17,094 | ) | (3,489 | ) | 3,688 | |||||||
Thereafter |
(76,860 | ) | (23,401 | ) | 7,699 | |||||||
$ | (219,098 | ) | $ | (48,456 | ) | $ | 35,487 | |||||
Weighted-Average Remaining Amortization Period |
9.2 years | 12.3 years | 6.7 years |
6. | REAL ESTATE LOANS RECEIVABLE |
As of December 31, 2010 and 2009, the Company, through wholly owned subsidiaries, had invested in real estate loans receivable as follows (dollars in thousands):
Loan Name Location of Related Property or Collateral |
Date Acquired/ Originated |
Property Type |
Loan Type |
Outstanding Principal Balance as of December 31, 2010 (1) |
Book Value as of December 31, 2010 (2) |
Book Value as of December 31, 2009 (2) |
Contractual Interest Rate (3) |
Annualized Effective Interest Rate (3) |
Maturity Date (4) |
|||||||||||||||||||||||||||
Northern Trust Building A-Note |
12/31/2008 | Office | A-Note | $ | 94,500 | $ | 63,244 | $ | 60,535 | 5.6 | % | 13.0 | % | 10/01/2017 | ||||||||||||||||||||||
One Liberty Plaza Notes (5) |
02/11/2009 | Office | Mortgage | 115,000 | 73,914 | 70,266 | 6.1 | % | 15.0 | % | 08/06/2017 | |||||||||||||||||||||||||
Tuscan Inn First Mortgage Origination |
01/21/2010 | Hotel | Mortgage | 20,200 | 20,027 | | 8.3 | % | 8.6 | % | 01/21/2015 | |||||||||||||||||||||||||
Chase Tower First Mortgage Origination (6) |
01/25/2010 | Office | Mortgage | 59,200 | 59,218 | | 8.4 | % | 8.5 | % | 02/01/2015 | |||||||||||||||||||||||||
Pappas Commerce First Mortgage Origination
(7) |
04/05/2010 | Industrial | Mortgage | 31,900 | 31,900 | | 9.5 | % | 9.6 | % | 07/01/2014 | |||||||||||||||||||||||||
One Kendall Square First Mortgage Origination
(8)(9) |
11/22/2010 |
|
Mixed-use Facility |
|
Mortgage | 87,500 | 88,456 | | (8 | ) | 7.2 | % | 12/01/2013 | |||||||||||||||||||||||
$ | 408,300 | $ | 336,759 | $ | 130,801 | |||||||||||||||||||||||||||||||
(1) Outstanding principal balance as of December 31, 2010 represents original principal balance outstanding under the loan, increased for any subsequent fundings and reduced for any principal paydowns.
(2) Book value of real estate loans receivable represents outstanding principal balance adjusted for unamortized acquisition discounts, origination fees, and direct origination and acquisition costs.
(3) Contractual interest rates are the stated interest rates on the face of the loans. Annualized effective interest rates are calculated as the actual interest income recognized in 2010, using the interest method, divided by the average amortized cost basis of the investment. The annualized effective interest rates and contractual interest rates presented are for the year ended December 31, 2010.
(4) Maturity dates are as of December 31, 2010.
(5) Monthly installments on the One Liberty Plaza Notes are interest-only until August 2011. For the final six years on the notes, principal on the loan amortizes on a 30-year amortization schedule, with the remaining principal balance due at maturity.
(6) Monthly installments on the Chase Tower First Mortgage are interest-only for the first three years, followed by principal and interest payments with principal calculated using an amortization of 30 years for the balance of the term, with the remaining principal balance due at maturity.
(7) As of December 31, 2010, $31.9 million had been disbursed under the Pappas Commerce First Mortgage and an additional $18.0 million remains available for future funding, subject to certain conditions set forth in the loan agreement.
(8) Monthly installments on One Kendall Square First Mortgage are interest-only during the initial term of the loan. The One Kendall Square First Mortgage bears interest at a floating rate of 550 basis points over one-month LIBOR, but at no point shall the interest rate be less than 7.5%.
(9) On November 22, 2010, the Company originated the One Kendall Square First Mortgage in the amount of $175.0 million. On November 30, 2010, the Company sold a pari-passu participation interest with respect to 50% of the outstanding principal balance at par to an unaffiliated buyer. The outstanding principal and book value reflect the Companys pari-passu participation interest in the One Kendall Square First Mortgage.
F-22
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The following summarizes the activity related to the real estate loans receivable for the year ended December 31, 2010:
Real estate loans receivable - December 31, 2009 |
$ | 130,801 | ||
Face value of real estate loans receivable originated |
286,300 | |||
Accretion of discounts on purchased real estate loans receivable |
6,470 | |||
Closing costs, net of origination fees, on origination of real estate loans receivable |
804 | |||
Amortization of closing costs and origination fees on purchased |
(116 | ) | ||
Sale of 50% participation interest in One Kendall |
(87,500 | ) | ||
Real estate loans receivable - December 31, 2010 |
$ | 336,759 | ||
For the years ended December 31, 2010, 2009 and 2008, interest income from real estate loans receivable consists of the following (in thousands):
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Contractual interest income |
$ | 21,901 | $ | 11,702 | $ | 15 | ||||||
Accretion of purchase discounts |
6,470 | 5,275 | 6 | |||||||||
Amortization of closing costs on purchases and origination fees |
(116 | ) | (92 | ) | | |||||||
Interest income from real estate loans receivable |
$ | 28,255 | $ | 16,885 | $ | 21 | ||||||
As of December 31, 2010 and 2009, interest receivable from real estate loans receivable was $2.4 million and $1.0 million, respectively, and was included in rents and other receivables.
The following is a schedule of maturities for all real estate loans receivable outstanding as of December 31, 2010 (in thousands):
Current Maturity | Fully Extended Maturity(1) | |||||||||||||||
Face Value | Face Value | |||||||||||||||
(Funded) | Book Value | (Funded) | Book Value | |||||||||||||
2011 |
$ | | $ | | $ | | $ | | ||||||||
2012 |
| | | | ||||||||||||
2013 |
87,500 | 88,456 | | | ||||||||||||
2014 |
31,900 | 31,900 | 31,900 | 31,900 | ||||||||||||
2015 |
79,400 | 79,245 | 166,900 | 167,701 | ||||||||||||
Thereafter |
209,500 | 137,158 | 209,500 | 137,158 | ||||||||||||
$ | 408,300 | $ | 336,759 | $ | 408,300 | $ | 336,759 | |||||||||
(1) The schedule of current maturities above represents the contractual maturity dates and outstanding balances as of December 31, 2010. Certain of the real estate loans receivable have extension options available to the borrowers, subject to certain conditions, that have been reflected in the schedule of fully extended maturities.
F-23
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
7. | NOTES PAYABLE |
As of December 31, 2010 and 2009, the Companys notes payable consisted of the following (dollars in thousands):
Principal as of December 31, 2010 |
Principal as of December 31, 2009 |
Contractual Interest Rate as of December 31, 2010 (1) |
Interest Rate at December 31, 2010 (1) |
Payment Type |
Maturity Date (2) | |||||||||||||||
Portfolio Mortgage Loan (3) |
$ | | $ | 27,810 | (3) | (3) | Interest Only | (3) | ||||||||||||
100 & 200 Campus Drive Mortgage Loan (4) |
55,000 | 5,000 | One-month LIBOR + 3.25%(5) | 5.1% | Interest Only | 02/26/2014 | ||||||||||||||
300-600 Campus Drive Mortgage Loan |
93,850 | 93,850 | 5.90% | 5.9% | Interest Only | 04/10/2014 | ||||||||||||||
Portfolio Revolving Loan Facility (6) (7) |
65,000 | | One-month LIBOR + 3.00%(7) | 5.0% | Interest Only | 04/30/2014 | ||||||||||||||
Willow Oaks Revolving Loan (8) |
13,000 | | (8) | 4.3% | Interest Only | 08/01/2013 | ||||||||||||||
300 N. LaSalle Building Mortgage Loan |
350,000 | | 4.25% | 4.3% | Interest Only | 08/01/2015 | ||||||||||||||
Torrey Reserve West Mortgage Loan |
16,885 | | 7.54% | 7.5% | Principal + Interest | 03/10/2011 | ||||||||||||||
Union Bank Plaza Mortgage Loan (9) |
105,000 | | One-month LIBOR + 1.75% | 3.4% | Interest Only | 09/15/2015 | ||||||||||||||
Portfolio Bridge Loan (10) |
40,622 | | One-month LIBOR + 2.25% | 2.5% | Interest Only | 09/30/2011 | ||||||||||||||
Emerald View at Vista Center Mortgage Loan (11) |
19,800 | | One-month LIBOR + 2.25% | 4.6% | Interest Only | 01/01/2016 | ||||||||||||||
National City Tower Mortgage Loan (12) |
69,000 | | One-month LIBOR + 2.15% | 4.1% | Interest Only | 12/16/2015 | ||||||||||||||
$ | 828,157 | $ | 126,660 | |||||||||||||||||
(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2010. Interest rate is calculated as the actual interest rate in effect at December 31, 2010 (consisting of the contractual interest rate and the effect of interest rate swaps and contractual floor rates), using interest rate indices at December 31, 2010, where applicable.
(2) Represents the initial maturity date or the maturity date as extended as of December 31, 2010; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(3) Represented a portfolio consisting of two separate loans. The individual deeds of trust and mortgages on the respective properties securing the loans were cross-defaulted and cross-collateralized. During the year ended December 31, 2010, the Company paid off this loan with proceeds from a revolving loan facility. See footnote (6) below.
(4) On February 26, 2010, the Company paid in full the outstanding principal and accrued interest on a mortgage loan secured by the 100 & 200 Campus Drive Buildings that was to mature on March 9, 2010, and obtained a new $64.6 million four-year mortgage loan. As of December 31, 2010, $55.0 million had been disbursed to the Company and $9.6 million remains available for future disbursements, subject to certain conditions set forth in the loan agreement.
(5) The Company entered into two interest rate swap agreements on the initial $20.0 million funded, which effectively fix the interest rate on that amount at approximately 5.55% through the initial term of the loan. The Company also entered into two interest rate swap agreements on the additional $35.0 million funded, which effectively fix the interest rate on that amount at approximately 4.78% through the initial term of the loan.
(6) On April 30, 2010, the Company entered into a four-year revolving loan facility for an amount up to $100.0 million. As of December 31, 2010, $65.0 million had been disbursed to the Company and $35.0 million remains available for future disbursements, subject to certain conditions set forth in the loan agreement.
(7) The interest rate under this loan is calculated at a variable rate of 300 basis points over one-month LIBOR, but at no point shall the interest rate be less than 4.25%; however, there shall be no minimum floor rate for any portion of the loan that is subject to a swap contract with a minimum initial term of two years or any shorter term expiring on the maturity date. The Company entered into an interest rate swap agreement that effectively fixes the interest rate on the initial $55.0 million drawn under the loan at approximately 5.17% for the first three years of the loan and fixes the interest rate on $45.0 million of this amount at approximately 5.17% for the last year of the initial loan term.
(8) On July 26, 2010, the Company entered into a $65.0 million revolving loan. As of December 31, 2010, $13.0 million had been disbursed to the Company and $52.0 million remains available for future disbursements, subject to certain conditions set forth in the loan agreement. The interest rate under this loan is calculated at a variable rate of 300 basis points over one-month, three-month or six-month LIBOR, but at no point may the interest rate be less than 4.5% for portions of the loan that are not subject to a swap contract. The Company entered into two interest rate swap agreements with the lenders that effectively fix the interest rate on $13.0 million drawn under the loan at approximately 4.33% during the initial loan term.
(9) On September 15, 2010, in connection with the acquisition of the Union Bank Plaza, the Company entered into a five-year mortgage loan for borrowings of up to $119.3 million secured by the Union Bank Plaza. As of December 31, 2010, $105.0 million had been disbursed to the Company with the remaining loan balance of $14.3 million available for future disbursements, subject to certain conditions set forth in the loan agreement. The Company has entered into an interest rate swap agreement with the lender on the initial $105.0 million funded, which effectively fixed the interest rate at 3.445% through the initial term of the loan.
(10) On September 30, 2010, the Company, entered into a 12-month bridge loan agreement for an amount of $50.0 million. As of December 31, 2010, $40.6 million had been disbursed to the Company with the remaining loan balance of $9.4 million available for future disbursements, subject to certain conditions set forth in the loan agreement. Subsequent to December 31, 2010, this loan was repaid in full. See Note 15, Subsequent Events Investments and Financings Subsequent to December 31, 2010 Portfolio Loan.
(11) The Company entered into an interest rate swap agreement with the lender on the $19.8 million funded, which effectively fixed the interest rate at 4.635% through the initial term of the loan.
(12) The Company entered into an interest rate swap agreement with the lender on the $69.0 million funded, which effectively fixed the interest rate at 4.085% through June 16, 2015. Subsequent to December 31, 2010, this loan was consolidated into a new portfolio loan. See Note 15, Subsequent Events Investments and Financings Subsequent to December 31, 2010 Portfolio Loan.
F-24
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
During the years ended December 31, 2010, 2009 and 2008, the Company incurred $19.4 million, $10.2 million and $4.3 million of interest expense, respectively. Of these amounts, $2.9 million and $0.4 million were payable at December 31, 2010 and 2009, respectively. Included in interest expense for the years ended December 31, 2010, 2009 and 2008 were $1.2 million, $1.0 million and $0.5 million, respectively, of amortization of deferred financing costs. Interest expense for the year ended December 31, 2010 also included $1.6 million incurred as a result of the Companys interest rate swap agreements.
The following is a schedule of maturities for all notes payable outstanding as of December 31, 2010 (in thousands):
Current Maturity | Fully Extended Maturity(1) | |||||||
2011 |
$ | 57,507 | $ | 57,507 | ||||
2012 |
| | ||||||
2013 |
13,000 | | ||||||
2014 |
213,850 | 93,850 | ||||||
2015 |
524,000 | 483,000 | ||||||
Thereafter |
19,800 | 193,800 | ||||||
$ | 828,157 | $ | 828,157 | |||||
(1) Represents the maturities of all notes payable outstanding as of December 31, 2010 assuming the Company exercises all extension options available per the terms of the loan agreements. The Company can give no assurance that it will be able to satisfy the conditions to extend the terms of the loan agreements.
Certain of our notes payable contain financial and non-financial debt covenants. As of December 31, 2010, the Company was in compliance with all debt covenants.
8. | DERIVATIVE INSTRUMENTS |
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Companys risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Companys ability to achieve its investment return objectives. The Company does not enter into the derivatives for speculative purposes.
The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero. All of the Companys interest rate swaps are designated as cash flow hedges.
F-25
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The following table summarizes the notional and fair value of the Companys interest rate swaps designated as cash flow hedges as of December 31, 2010. The notional value is an indication of the extent of the Companys involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
Fair Value of Asset (Liability) | ||||||||||||||||||||||||
Derivative Instruments |
Effective Date |
Maturity Date |
Notional Value |
Reference Rate | December 31, 2010 |
Balance Sheet Location | ||||||||||||||||||
Interest Rate Swap |
02/26/2010 | 02/26/2014 | $ | 10,000 |
|
One-month LIBOR/ Fixed at 2.30% |
|
$ | (322 | ) | Other liabilities | |||||||||||||
Interest Rate Swap |
02/26/2010 | 02/26/2014 | 10,000 |
|
One-month LIBOR/ Fixed at 2.30% |
|
(322 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
04/30/2010 | 04/30/2014 | |
55,000 |
(1) |
|
One-month LIBOR/ Fixed at 2.17% |
|
(1,520 | ) | Other liabilities | |||||||||||||
Interest Rate Swap |
07/26/2010 | 08/01/2013 | 6,500 |
|
One-month LIBOR/ Fixed at 1.33% |
|
(57 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
07/26/2010 | 08/01/2013 | 6,500 |
|
One-month LIBOR/ Fixed at 1.33% |
|
(56 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
09/15/2010 | 09/15/2015 | 105,000 |
|
One-month LIBOR/ Fixed at 1.70% |
|
1,092 |
|
Deferred financing costs, prepaid expenses and other assets |
| ||||||||||||||
Interest Rate Swap |
12/15/2010 | 02/26/2014 | 17,500 |
|
One-month LIBOR/ Fixed at 1.53% |
|
(149 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
12/15/2010 | 02/26/2014 | 17,500 |
|
One-month LIBOR/ Fixed at 1.53% |
|
(149 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
12/16/2010 | 01/01/2016 | 19,800 |
|
One-month LIBOR/ Fixed at 2.39% |
|
(329 | ) | Other liabilities | |||||||||||||||
Interest Rate Swap |
12/20/2010 | 06/16/2015 | 69,000 |
|
One-month LIBOR/ Fixed at 1.94% |
|
(318 | ) | Other liabilities | |||||||||||||||
Total derivatives designated |
$ | 316,800 | $ | (2,130 | ) | |||||||||||||||||||
(1) In connection with entering into the Portfolio Revolving Loan Facility, the Company entered into an interest rate swap agreement with Wells Fargo Bank, N.A. which effectively fixes the interest rate on the initial $55.0 million drawn under the loan at approximately 5.17% for the first three years of the loan and fixes the interest rate on $45.0 million of this amount at approximately 5.17% for the last year of the initial loan term.
The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) in the accompanying consolidated statements of equity. The Company recorded unrealized losses of $2.1 million on derivative instruments designated as cash flow hedges in accumulated other comprehensive loss for the year ended December 31, 2010. Amounts in other comprehensive income will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flow. As a result of utilizing derivative instruments designated as cash flow hedges to hedge our variable rate notes payable, the Company recognized an additional $1.6 million of interest expense related to the effective portion of cash flow hedges during the year ended December 31, 2010. The change in fair value of the ineffective portion is recognized directly in earnings. During year ended December 31, 2010, there was no ineffective portion related to the change in fair value of the cash flow hedges. During the next 12 months, the Company expects to recognize additional interest expense related to derivative instruments designated as cash flow hedges. The present value of this additional interest expense totaled $4.9 million as of December 31, 2010 and was included in accumulated other comprehensive loss.
F-26
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
9. | FAIR VALUE OF FINANCIAL DISCLOSURES |
The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Companys financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. See Note 2, Summary of Significant Accounting Policies. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
Real estate loans receivable: These instruments are presented in the accompanying consolidated balance sheets at their amortized cost net of recorded loan loss reserves and not at fair value. The fair values of real estate loans receivable were estimated using an internal valuation model that considered the expected cash flows for the loans, underlying collateral values (for collateral-dependent loans) and estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements.
Derivative instruments: These instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined by a third-party expert using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk.
Notes payable: The fair value of the Companys notes payable is estimated using a discounted cash flow analysis based on managements estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Contingent consideration: The fair value of the Companys contingent consideration is estimated using a probability-weighted discounted cash flow analysis. The discounted cash flow analysis is based on managements estimates of current market interest rates for instruments with similar characteristics and expected cash flows under this arrangement.
The following are the carrying amounts and fair values of the Companys financial instruments as of December 31, 2010 and 2009, for which carrying amounts do not approximate fair value (in thousands):
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Face Value |
Carrying Amount |
Fair Value |
Face Value |
Carrying Amount |
Fair Value |
|||||||||||||||||||
Financial assets: |
||||||||||||||||||||||||
Real estate loans receivable |
$ | 408,300 | $ | 336,759 | $ | 413,423 | $ | 209,500 | $ | 130,801 | $ | 174,387 | ||||||||||||
Financial liabilities: |
||||||||||||||||||||||||
Notes payable |
828,157 | 828,157 | 829,914 | 126,660 | 126,660 | 125,285 |
F-27
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Disclosure of the fair value of financial instruments is based on pertinent information available to the Company at December 31, 2010 and requires a significant amount of judgment. Despite increased capital market and credit market activity, transaction volume for certain financial instruments remains relatively low. This has made the estimation of fair values difficult and, therefore, both the actual results and the Companys estimate of value at a future date could be materially different.
At December 31, 2010, the Company held the following assets and liabilities measured at fair value (in thousands):
Fair Value Measurements Using | ||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Nonrecurring Basis: |
||||||||||||||||
Investments in real estate (1) |
$ | 1,406,273 | $ | | $ | | $ | 1,406,273 | ||||||||
Total Assets |
$ | 1,406,273 | $ | | $ | | $ | 1,406,273 | ||||||||
Mortgage debt assumed on real estate acquisition |
$ | 16,985 | $ | | $ | | $ | 16,985 | ||||||||
Total Liabilities |
$ | 16,985 | $ | | $ | | $ | 16,985 | ||||||||
Recurring Basis: |
||||||||||||||||
Contingent consideration |
$ | 3,063 | $ | | $ | | $ | 3,063 | ||||||||
Asset derivatives |
1,092 | | 1,092 | | ||||||||||||
Total Assets |
$ | 4,155 | $ | | $ | 1,092 | $ | 3,063 | ||||||||
Liability derivatives |
$ | (3,222 | ) | $ | | $ | (3,222 | ) | $ | | ||||||
Total Liabilities |
$ | (3,222 | ) | $ | | $ | (3,222 | ) | $ | | ||||||
(1) Amount reflects acquisition date fair value of real estate acquired in 2010.
F-28
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
10. | RELATED PARTY TRANSACTIONS |
The Company has entered into an Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. These agreements entitle the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering, the investment of funds in real estate and real estate-related investments and the management of those investments, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company (as discussed in Note 2, Summary of Significant Accounting Policies) and certain costs incurred by the Advisor in providing services to the Company. The Advisor and Dealer Manager also serve as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust I, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc. and KBS Legacy Partners Apartment REIT, Inc. During the years ended December 31, 2010 and 2009, no transactions occurred between the Company and these entities.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the years ended December 31, 2010, 2009 and 2008, respectively, and any related amounts payable as of December 31, 2010 and 2009 (in thousands):
Incurred | Payable as of | |||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
Expensed |
||||||||||||||||||||
Asset management fees (1) |
$ | 10,005 | $ | 4,482 | $ | 857 | $ | | $ | | ||||||||||
Reimbursement of operating expenses (2) |
35 | 44 | 182 | 9 | | |||||||||||||||
Acquisition fees |
10,692 | 846 | | | | |||||||||||||||
Additional Paid-in Capital |
||||||||||||||||||||
Selling commissions |
49,277 | 34,108 | 18,152 | | | |||||||||||||||
Dealer manager fees |
25,069 | 20,805 | 10,932 | | | |||||||||||||||
Reimbursable other offering costs |
4,302 | 2,845 | 5,362 | 364 | 206 | |||||||||||||||
Capitalized |
||||||||||||||||||||
Acquisition and origination fees |
2,865 | 697 | 3,832 | | | |||||||||||||||
$ | 102,245 | $ | 63,827 | $ | 39,317 | $ | 373 | $ | 206 | |||||||||||
(1) See Note 2, Summary of Significant Accounting Policies Related Party Transactions Asset Management Fee.
(2) The Advisor may seek reimbursement for employee costs under the Advisory Agreement. Commencing July 1, 2010, the Company has reimbursed the Advisor for the Companys allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These were the only employee costs reimbursed under the Advisory Agreement as of December 31, 2010. The Company will not reimburse for employee costs in connection with services for which KBS Capital Advisors earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Companys executive officers.
F-29
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
11. | SEGMENT INFORMATION |
The Company presently operates in two business segments based on its investment types: real estate and real estate-related. Under the real estate segment, the Company has invested in office, office/flex and industrial properties. Under the real estate-related segment, the Company has invested in mortgage loans, an A-Note and CMBS. All revenues earned from the Companys two operating segments were from external customers and there were no intersegment sales or transfers. The Company does not allocate corporate-level accounts to its operating segments. Corporate-level accounts include corporate general and administrative expenses, non-operating interest income, non-operating interest expense and other corporate-level expenses. The accounting policies of the segments are consistent with those described in Note 2, Summary of Significant Accounting Policies.
The Company evaluates the performance of its segments based upon net operating income (NOI), which is a non-GAAP supplemental financial measure. The Company defines NOI for its real estate segment as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees and provision for bad debt) less interest expense. The Company defines NOI for its real estate-related segment as interest income less loan servicing costs and asset management fees. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Companys real estate and real estate-related investments and to make decisions about resource allocations. The Company believes that net income is the GAAP measure that is most directly comparable to NOI; however, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as defined above may not be comparable to other REITs or companies as their definitions of NOI may differ from the Companys definition.
F-30
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The following tables summarize total revenues and NOI for each reportable segment for the years ended December 31, 2010, 2009 and 2008 and total assets and total liabilities for each reportable segment as of December 31, 2010 and 2009 (in thousands):
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues: |
||||||||||||
Real estate segment |
$ | 131,878 | $ | 58,374 | $ | 14,066 | ||||||
Real estate-related segment |
28,255 | 17,013 | 21 | |||||||||
Total segment revenues |
$ | 160,133 | $ | 75,387 | $ | 14,087 | ||||||
Interest Expense: |
||||||||||||
Real estate segment |
$ | 18,241 | $ | 9,596 | $ | 4,329 | ||||||
Real estate-related segment |
| | | |||||||||
Total segment interest expense |
18,241 | 9,596 | 4,329 | |||||||||
Corporate-level |
1,148 | 568 | 16 | |||||||||
Total interest expense |
$ | 19,389 | $ | 10,164 | $ | 4,345 | ||||||
NOI: |
||||||||||||
Real estate segment |
$ | 63,751 | $ | 28,434 | $ | 4,611 | ||||||
Real estate-related segment |
26,444 | 16,095 | 18 | |||||||||
Total NOI |
$ | 90,195 | $ | 44,529 | $ | 4,629 | ||||||
December 31, | ||||||||||||
2010 | 2009 | |||||||||||
Assets: (1) |
||||||||||||
Real estate segment |
$ | 1,981,974 | $ | 552,076 | ||||||||
Real estate-related segment |
339,146 | 131,776 | ||||||||||
Total segment assets |
2,321,120 | 683,852 | ||||||||||
Corporate-level (2) |
58,534 | 270,016 | ||||||||||
Total assets |
$ | 2,379,654 | $ | 953,868 | ||||||||
Liabilities: |
||||||||||||
Real estate segment |
$ | 901,270 | $ | 151,923 | ||||||||
Real estate-related segment |
61 | | ||||||||||
Total segment liabilities |
901,331 | 151,923 | ||||||||||
Corporate-level (3) |
10,688 | 6,123 | ||||||||||
Total liabilities |
$ | 912,019 | $ | 158,046 | ||||||||
(1) The Company had $13.1 million and $1.9 million in additions to long-lived assets in the real estate segment during the years ended December 31, 2010 and 2009, respectively. There are no long-lived assets in the real estate-related segment.
(2) Total corporate-level assets consisted primarily of proceeds from the Offering being held in the form of cash and cash equivalents of approximately $58.5 million and $270.0 million as of December 31, 2010 and 2009, respectively.
(3) As of December 31, 2010 and 2009, corporate-level liabilities consisted primarily of distributions payable.
F-31
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
The following table reconciles the Companys net income (loss) to its NOI for the years ended December 31, 2010, 2009 and 2008 (in thousands):
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net income (loss) |
$ | 5,508 | $ | 12,419 | $ | (2,582 | ) | |||||
Other interest income |
(273 | ) | (646 | ) | (589 | ) | ||||||
Gain on sale of real estate securities |
| (119 | ) | | ||||||||
Real estate acquisition fees to affiliates |
10,692 | 846 | | |||||||||
Real estate acquisition fees and expenses |
7,487 | 678 | | |||||||||
General and administrative expenses |
3,947 | 2,678 | 810 | |||||||||
Depreciation and amortization |
61,686 | 28,105 | 6,974 | |||||||||
Corporate-level interest expense |
1,148 | 568 | 16 | |||||||||
NOI |
$ | 90,195 | $ | 44,529 | $ | 4,629 | ||||||
12. | PRO FORMA FINANCIAL INFORMATION (UNAUDITED) |
The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company for the years ended December 31, 2010 and 2009. The Company acquired 12 properties and a leasehold interest in one industrial property during the year ended December 31, 2010, all of which were accounted for as business combinations. The following unaudited pro forma information for the years ended December 31, 2010 and 2009 has been prepared to give effect to the acquisitions of (i) 300 N. LaSalle Building, (ii) Union Bank Plaza, (iii) Granite Tower and (iv) National City Tower, as if the acquisitions occurred on January 1, 2009. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had these acquisitions occurred on these dates, nor do they purport to predict the results of operations for future periods (in thousands, except share and per share amounts).
For the Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
Revenues |
$ | 241,548 | $ | 164,855 | ||||
Depreciation and amortization |
$ | 89,495 | $ | 64,285 | ||||
Net income (loss) |
$ | 23,364 | $ | (11,338 | ) | |||
Net income (loss) per common share, basic and diluted |
$ | 0.13 | $ | (0.09 | ) | |||
Weighted-average number of common |
173,609,478 | 129,686,958 | ||||||
The pro forma information for the year ended December 31, 2010 was adjusted to exclude $14.6 million of acquisition costs related to the above properties incurred in 2010. These costs were recognized in the pro forma information for the year ended December 31, 2009.
F-32
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
13. | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) |
Presented below is a summary of the unaudited quarterly financial information for the year ended December 31, 2010 and 2009 (in thousands, except per share amounts):
2010 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Revenues |
$ | 27,336 | $ | 31,470 | $ | 43,266 | $ | 58,061 | ||||||||
Net income (loss) |
$ | 3,828 | $ | 5,410 | $ | (7,642 | ) | $ | 3,912 | |||||||
Net income (loss) per common share, basic and diluted |
$ | 0.04 | $ | 0.05 | $ | (0.06 | ) | $ | 0.03 | |||||||
Distributions declared per common share (1) |
$ | 0.160 | $ | 0.162 | $ | 0.164 | $ | 0.164 | ||||||||
2009 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Revenues |
$ | 16,408 | $ | 17,436 | $ | 19,518 | $ | 22,025 | ||||||||
Net income |
$ | 1,205 | $ | 3,863 | $ | 2,408 | $ | 4,943 | ||||||||
Net income per common share, basic and diluted |
$ | 0.03 | $ | 0.07 | $ | 0.03 | $ | 0.06 | ||||||||
Distributions declared per common share (1) |
$ | 0.160 | $ | 0.162 | $ | 0.164 | $ | 0.164 |
(1) Distributions declared per common share assumes each share was issued and outstanding each day during the respective quarterly period from January 1, 2009 through December 31, 2010. Each day during the period from January 1, 2009 through December 31, 2010 was a record date for distributions. Distributions were calculated at a rate of $0.00178082 per share per day from January 1, 2009 through December 31, 2010.
14. | COMMITMENTS AND CONTINGENCIES |
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Companys real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event the Advisor is unable to provide the respective services, the Company will be required to obtain such services from other sources.
Geographic Concentration
The 300 N. LaSalle Building represents approximately 26% of the Companys total assets. As a result of this investment, the geographic concentration of the Companys portfolio makes it particularly susceptible to adverse economic developments in the Chicago real estate market. Any adverse economic or real estate developments in this market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Companys operating results.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Companys financial condition and results of operations as of December 31, 2010.
F-33
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Legal Matters
From time to time, the Company is party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
15. | SUBSEQUENT EVENTS |
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Status of Offering
The Company commenced the Offering on April 22, 2008. The Company ceased offering shares of common stock in its primary offering on December 31, 2010 and is completing subscription processing procedures, as set forth in the Companys prospectus. As of March 9, 2011, the Company had sold 190,824,532 shares of common stock in the Offering for gross offering proceeds of $1.9 billion, including 8,140,021 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $77.3 million. The Company may continue to sell shares under the dividend reinvestment plan until it has sold all the shares under the plan.
Distributions Paid
On January 14, 2011, the Company paid distributions of $9.2 million, which related to distributions declared for each day in the period from December 1, 2010 through December 31, 2010. On February 15, 2011, the Company paid distributions of $10.2 million, which related to distributions declared for each day in the period from January 1, 2011 through January 31, 2011.
Distributions Declared
On January 21, 2011, the Companys board of directors declared distributions based on daily record dates for the period from February 1, 2011 through February 28, 2011, which the Company expects to pay in March 2011, and distributions based on daily record dates for the period from March 1, 2011 through March 31, 2011, which the Company expects to pay in April 2011. On March 4, 2011, the Companys board of directors declared distributions based on daily record dates for the period from April 1, 2011 through April 30, 2011, which the Company expects to pay in May 2011, and distributions based on daily record dates for the period from May 1, 2011 through May 31, 2011, which the Company expects to pay in June 2011. Investors may choose to receive cash distributions or purchase additional shares through the Companys dividend reinvestment plan.
Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and if paid each day for a 365-day period, would equal a 6.5% annualized rate based on a purchase price of $10.00 per share.
Investments and Financings Subsequent to December 31, 2010
Acquisition of Gateway Corporate Center
On January 26, 2011, the Company, through an indirect wholly owned subsidiary, acquired two three-story office buildings totaling 233,836 rentable square feet located on approximately 13.3 total acres of land in Sacramento, California (Gateway Corporate Center). The seller is not affiliated with the Company or the Advisor. The total contractual purchase price of Gateway Corporate Center was approximately $47.4 million plus closing costs. The Company initially funded the purchase of Gateway Corporate Center with proceeds from the Offering and subsequently placed financing of $26.3 million on Gateway Corporate Center. See Portfolio Loan below.
At acquisition, Gateway Corporate Center was 91% leased to 13 tenants.
F-34
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Portfolio Loan
On January 28, 2011, the Company, through indirect wholly owned subsidiaries (the Borrowers), entered into a five-year portfolio loan with Wells Fargo Bank, N.A. (the Lender) dated January 27, 2011 for an amount up to $360.0 million (the Portfolio Loan). As of March 11, 2011, $348.3 million had been disbursed to the Borrowers with the remaining loan balance of $11.7 million (the Holdback) available for future disbursements, subject to certain conditions set forth in the loan agreement. In addition, in the event of tenant expansions meeting requirements set forth in the loan agreement, the principal amount of the Portfolio Loan may be increased to $372.0 million. The Company incurred approximately $1.5 million in net loan costs in conjunction with the initial funding of the Portfolio Loan. The initial maturity date of the Portfolio Loan is January 27, 2016, with two one-year extension options, subject to the satisfaction of certain conditions by the Borrowers. The Portfolio Loan bears interest at a floating rate of 215 basis points over one-month LIBOR during the initial term of the loan, 240 basis points over one-month LIBOR during the first extension period of the loan and 265 basis points over one-month LIBOR during the second extension period of the loan. Monthly payments are interest only with the entire principal amount due at maturity, assuming no prior prepayment. The Borrowers may, upon no less than three business days notice to the Lender, prepay all or a portion of the Portfolio Loan, subject to possible exit fees. Any prepayment made on or after October 27, 2015 will not be subject to a prepayment fee.
In connection with the closing of the Portfolio Loan, the Company consolidated into the Portfolio Loan, a portfolio bridge loan with an outstanding balance of $40.6 million and a mortgage loan secured by National City Tower with an outstanding principal balance of $69.0 million. The $348.3 million outstanding under the Portfolio Loan reflects the consolidated loans. On March 10, 2011, the Company used proceeds from the Portfolio Loan to repay in full a $16.8 million mortgage loan secured by Torrey Reserve West.
The Portfolio Loan is secured by Hartman II Business Center, Plano Business Park, Horizon Tech Center, Dallas Cowboys Distribution Center, Crescent VIII, National City Tower, Granite Tower, Gateway Corporate Center, I-81 Industrial Portfolio, Two Westlake Park, Torrey Reserve West and in the future, the Portfolio Loan may be secured by certain additional real estate properties currently owned by the Company or that may be acquired by the Company, subject to certain terms of the loan agreement.
Acquisition of 601 Tower at Carlson Center
On February 3, 2011, the Company, through an indirect wholly owned subsidiary, acquired a 15-story office building containing 288,458 rentable square feet located on approximately 2.3 acres of land within the Carlson Center office park in Minnetonka, Minnesota (601 Tower at Carlson Center). The seller is not affiliated with the Company or the Advisor. The total contractual purchase price of 601 Tower at Carlson Center was approximately $54.4 million plus closing costs. The Company funded the purchase of 601 Tower at Carlson Center with proceeds from the Offering but may later place mortgage debt on the property.
At acquisition, 601 Tower at Carlson Center was 90% leased to 42 tenants.
Acquisition of I-81 Industrial Portfolio
On February 16, 2011, the Company, through an indirect wholly owned subsidiary, acquired a portfolio of four warehouse properties totaling 1,644,480 rentable square feet (the I-81 Industrial Portfolio). The four properties encompass 133.4 acres of land and are located in Pennsylvania. The seller is not affiliated with the Company or the Advisor. The total contractual purchase price of the I-81 Industrial Portfolio was approximately $90.0 million plus closing costs. The Company funded the purchase of the I-81 Industrial Portfolio with proceeds from the Portfolio Loan and proceeds from the Offering.
At acquisition, the I-81 Industrial Portfolio was 100% leased to seven tenants.
Acquisition of Two Westlake Park
On February 25, 2011, the Company, through an indirect wholly owned subsidiary, acquired a 17-story office building containing 388,142 rentable square feet located on approximately 5.4 acres of land within the Westlake office park in Houston, Texas (Two Westlake Park). The seller is not affiliated with the Company or the Advisor. The total contractual purchase price of Two Westlake Park was approximately $80.5 million plus closing costs. The Company funded the purchase of Two Westlake Park with proceeds from the Portfolio Loan and proceeds from the Offering.
At acquisition, Two Westlake Park was 95% leased to 13 tenants.
F-35
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2010
Second Amended and Restated Share Redemption Program
On March 4, 2011, the Companys board of directors approved a second amended and restated share redemption program. The share redemption program has always provided that at the time the Company established an estimated value per share (not based on the price to acquire a share of common stock in the Companys initial public offering or follow-on public offerings) the redemption price for all stockholders would be equal to the estimated value per share, as determined by the Advisor or another firm chosen for that purpose. When the Company commenced its Offering, it expected to establish an estimated value per share no later than three years after the Company completed its offering stage. The Company amended and restated its share redemption program to state its current intention to first establish an estimated value per share upon the completion of its offering stage. The Company will consider its offering stage complete when it is no longer publicly offering equity securitieswhether through its initial public offering or follow-on public offeringsand has not done so for up to 18 months. The Company has previously disclosed its intention to establish an estimated value per share at this time.
The second amended and restated share redemption program will be effective 30 days after the Company files its annual report on Form 10-K for the year ended December 31, 2010.
F-36
KBS REAL ESTATE INVESTMENT TRUST II, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 2010
(in thousands)
Initial Cost to Company | Cost
Capitalized Subsequent to Acquisition |
Gross Amount at
which Carried at Close of Period |
Accumulated Depreciation and Amortization |
Original Date of Construction |
Date Acquired | |||||||||||||||||||||||||||||||||||||||||
Description |
Location | Ownership Percent |
Encumbrances | Land | Building
and Improvements (1) |
Total | Land | Building
and Improvements (1) |
Total (2) | |||||||||||||||||||||||||||||||||||||
Mountain View Corporate Center |
Basking Ridge, NJ |
100 | % | $ | 10,223 | $ | 3,600 | $ | 27,138 | $ | 30,738 | $ | 265 | $ | 3,600 | $ | 27,403 | $ | 31,003 | $ | 3,891 | 2001 | 07/30/2008 | |||||||||||||||||||||||
100 & 200 Campus Drive Buildings |
Florham Park, NJ |
100 | % | 55,000 | 10,700 | 188,509 | 199,209 | 5,269 | 10,700 | 183,824 | 194,524 | 17,073 | 1988/1989 | 09/09/2008 | ||||||||||||||||||||||||||||||||
300-600 Campus Drive Buildings |
Florham Park, NJ |
100 | % | 93,850 | 9,717 | 185,445 | 195,162 | 1,799 | 9,717 | 185,325 | 195,042 | 18,773 | 1997/1999 | 10/10/2008 | ||||||||||||||||||||||||||||||||
350 E. Plumeria Building |
San Jose, CA |
100 | % | 12,010 | 11,290 | 24,819 | 36,109 | 13 | 11,290 | 24,832 | 36,122 | 2,293 | 1984/2008 | 12/18/2008 | ||||||||||||||||||||||||||||||||
Willow Oaks Corporate Center |
Fairfax, VA |
100 | % | 13,000 | 25,300 | 87,802 | 113,102 | 1,240 | 25,300 | 87,614 | 112,914 | 10,168 | 1986/1989/2003 | 08/26/2009 | ||||||||||||||||||||||||||||||||
Pierre Laclede Center |
Clayton, MO |
100 | % | 24,664 | 15,200 | 61,507 | 76,707 | 2,711 | 15,200 | 62,568 | 77,768 | 5,529 | 1964/1970 | 02/04/2010 | ||||||||||||||||||||||||||||||||
One Main Place |
Portland, OR |
100 | % | 18,103 | 7,200 | 47,643 | 54,843 | 2,439 | 7,200 | 49,307 | 56,507 | 5,321 | 1980 | 02/05/2010 | ||||||||||||||||||||||||||||||||
Plano Business Park |
Plano, TX | 100 | % | 9,131 | 3,050 | 13,648 | 16,698 | 10 | 3,050 | 13,645 | 16,695 | 995 | 2001 | 03/15/2010 | ||||||||||||||||||||||||||||||||
Hartman II |
Austell, GA |
100 | % | 5,331 | 2,900 | 7,467 | 10,367 | | 2,900 | 7,467 | 10,367 | 301 | 2006 | 04/07/2010 | ||||||||||||||||||||||||||||||||
Crescent VIII |
Greenwood Village, CO |
100 | % | 6,170 | 2,300 | 9,552 | 11,852 | 410 | 2,300 | 9,962 | 12,262 | 706 | 1996 | 05/26/2010 | ||||||||||||||||||||||||||||||||
Horizon Tech Center |
San Diego, CA |
100 | % | 19,990 | 7,900 | 29,237 | 37,137 | | 7,900 | 29,237 | 37,137 | 1,205 | 2009 | 06/17/2010 | ||||||||||||||||||||||||||||||||
Dallas Cowboys Distribution Center (3) |
Irving, TX | 100 | %(3) | | | 18,513 | 18,513 | | | 18,513 | 18,513 | 329 | 2010 | 07/08/2010 | ||||||||||||||||||||||||||||||||
300 N. LaSalle Building |
Chicago, IL |
100 | % | 350,000 | 41,200 | 574,340 | 615,540 | 360 | 41,200 | 574,700 | 615,900 | 8,856 | 2009 | 07/29/2010 | ||||||||||||||||||||||||||||||||
Torrey Reserve West |
San Diego, CA |
100 | % | 16,885 | 5,300 | 19,437 | 24,737 | 380 | 5,300 | 19,817 | 25,117 | 552 | 2000 | 09/09/2010 | ||||||||||||||||||||||||||||||||
Union Bank Plaza |
Los Angeles, CA |
100 | % | 105,000 | 24,000 | 190,232 | 214,232 | 205 | 24,000 | 190,359 | 214,359 | 3,522 | 1967 | 09/15/2010 | ||||||||||||||||||||||||||||||||
Emerald View at Vista Center |
West Palm Beach, FL |
100 | % | 19,800 | 5,300 | 28,455 | 33,755 | | 5,300 | 28,455 | 33,755 | 98 | 2007 | 12/09/2010 | ||||||||||||||||||||||||||||||||
Granite Tower |
Denver, CO |
100 | % | | 8,850 | 141,438 | 150,288 | 40 | 8,850 | 141,478 | 150,328 | 386 | 1983 | 12/16/2010 | ||||||||||||||||||||||||||||||||
National City Tower |
Louisville, KY |
100 | % | 69,000 | 6,700 | 108,864 | 115,564 | | 6,700 | 108,863 | 115,563 | 475 | 1972 | 12/17/2010 | ||||||||||||||||||||||||||||||||
TOTAL | $ | 828,157 | $ | 190,507 | $ | 1,764,046 | $ | 1,954,553 | $ | 15,141 | $ | 190,507 | $ | 1,763,369 | $ | 1,953,876 | $ | 80,473 | ||||||||||||||||||||||||||||
(1) Building and improvements include tenant origination and absorption costs.
(2) The aggregate cost of real estate for federal income tax purposes was $2.0 billion as of December 31, 2010.
(3) The Company acquired the rights to a ground lease with respect to this property. The ground lease expires in February 2050.
F-37
KBS REAL ESTATE INVESTMENT TRUST II, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)
December 31, 2010
(in thousands)
2010 | 2009 | 2008 | ||||||||||
Real estate: |
||||||||||||
Balance at the beginning of the year |
$ | 575,427 | $ | 460,779 | $ | | ||||||
Acquisitions |
1,380,233 | 113,102 | 461,218 | |||||||||
Improvements |
13,112 | 1,929 | 100 | |||||||||
Write-off of fully depreciated and fully amortized assets |
(14,896 | ) | (383 | ) | (539 | ) | ||||||
Balance at the end of the year |
$ | 1,953,876 | $ | 575,427 | $ | 460,779 | ||||||
Accumulated depreciation: |
||||||||||||
Balance at the beginning of the year |
$ | 34,059 | $ | 6,436 | $ | | ||||||
Depreciation expense |
61,310 | 28,006 | 6,974 | |||||||||
Write-off of fully depreciated and fully amortized assets |
(14,896 | ) | (383 | ) | (538 | ) | ||||||
Balance at the end of the year |
$ | 80,473 | $ | 34,059 | $ | 6,436 | ||||||
F-38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on March 11, 2011.
KBS REAL ESTATE INVESTMENT TRUST II, INC. | ||
By: | /S/ CHARLES J. SCHREIBER, JR. | |
Charles J. Schreiber, Jr. | ||
Chairman of the Board, Chief Executive Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name |
Title |
Date | ||
/S/ CHARLES J. SCHREIBER, JR. |
Chairman of Board, Chief Executive Officer and | March 11, 2011 | ||
Charles J. Schreiber, Jr. | Director | |||
/S/ DAVID E. SNYDER |
Chief Financial Officer | March 11, 2011 | ||
David E. Snyder | ||||
/S/ PETER MCMILLAN III |
Executive Vice President, Treasurer, Secretary and | March 11, 2011 | ||
Peter McMillan III | Director | |||
/S/ STACIE K. YAMANE |
Chief Accounting Officer | March 11, 2011 | ||
Stacie K. Yamane | ||||
/S/ HANK ADLER |
Director | March 11, 2011 | ||
Hank Adler | ||||
/S/ BARBARA R. CAMBON |
Director | March 11, 2011 | ||
Barbara R. Cambon | ||||
/S/ STUART A. GABRIEL, PH.D. |
Director | March 11, 2011 | ||
Stuart A. Gabriel, Ph.D. |
Exhibit 4.4
SECOND AMENDED AND RESTATED SHARE REDEMPTION PROGRAM
The board of directors of KBS Real Estate Investment Trust II, Inc., a Maryland corporation (the Company), has adopted a Second Amended and Restated Share Redemption Program (the SRP), the terms and conditions of which are set forth below. Capitalized terms shall have the same meaning as set forth in the Companys charter unless otherwise defined herein.
1. Qualifying Stockholders. Qualifying Stockholders are (a) holders of the Companys shares of Common Stock (the Shares) who have held their Shares for at least one year, provided that, if the Company is redeeming all of a stockholders Shares, then there is no holding period requirement for Shares purchased pursuant to the Companys dividend reinvestment plan and (b) stockholders or authorized representatives of stockholders qualifying for the special redemption provisions set forth in paragraphs 6, 7 and 8 below.
2. Share Redemption. Subject to the terms and conditions of this SRP, including the limitations on redemptions set forth in paragraph 4 and the procedures for redemption set forth in paragraph 5, the Company will redeem such number of Shares as requested by a Qualifying Stockholder.
3. Redemption Price. Unless the Shares are being redeemed in connection with a stockholders death, Qualifying Disability (as defined in paragraph 7 below) or Determination of Incompetence (as defined in paragraph 8 below), and until the Company establishes an estimated value per Share as described below, the price at which the Company will redeem the Shares of a Qualifying Stockholder is as follows:
a. The lower of $9.25 or 92.5% of the price paid to acquire the Shares from the Company for stockholders who have held their Shares for at least one year;
b. The lower of $9.50 or 95.0% of the price paid to acquire the Shares from the Company for stockholders who have held their Shares for at least two years;
c. The lower of $9.75 or 97.5% of the price paid to acquire the Shares from the Company for stockholders who have held their Shares for at least three years; and
d. The lower of $10.00 or 100% of the price paid to acquire the Shares from the Company for stockholders who have held their Shares for at least four years.
Notwithstanding the foregoing, once the Company establishes an estimated value per Share that is not based on the price to acquire a Share in the Companys primary initial public offering or follow-on public offerings, the redemption price per Share for all stockholders will be equal to the estimated value per Share, as determined by the Companys advisor or another firm chosen for that purpose. The Company expects to
establish an estimated value per Share that is not based on the price to acquire a Share in the Companys primary initial public offering or follow-on public offerings after the completion of its offering stage. The Company will consider its offering stage complete when the Company is no longer publicly offering equity securities whether through its primary initial public offering or follow-on public offerings and has not done so for up to 18 months. For the purpose of determining when the Companys offering stage is complete, public equity offerings do not include offerings on behalf of selling stockholders or offerings related to any dividend reinvestment plan, employee benefit plan, or the redemption of interests in KBS Limited Partnership II, the Companys operating partnership.
The Company will provide information about its estimated value per Share in public filings with the Securities and Exchange Commission. The Company will also report the redemption price in its annual report and three quarterly reports publicly filed with the Securities and Exchange Commission.
4. Limitations on Redemption. Notwithstanding anything contained in this SRP to the contrary, the Companys obligation to redeem Shares pursuant to paragraphs 2 and 6 hereof is limited as follows:
a. Unless the Shares are being redeemed in connection with a stockholders death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8), the Company may not redeem Shares unless the stockholder has held the Shares for one year.
b. During any calendar year, the Company may redeem only the number of Shares that the Company could purchase with the amount of net proceeds from the sale of Shares under the Companys dividend reinvestment plan during the prior calendar year.
c. During any calendar year, the Company may redeem no more than 5% of the weighted-average number of Shares outstanding during the prior calendar year.
d. The Company has no obligation to redeem Shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
5. Procedures for Redemption. The Company has engaged a third party to administer the SRP. Upon any change to the identity or the mailing address of the program administrator, the Company will notify stockholders of such change. The Company will redeem Shares on the last business day of each month (the Redemption Date). For a stockholders Shares to be eligible for redemption in a given month, the program administrator must receive a written redemption request from the stockholder or from an authorized representative of the stockholder setting forth the number of Shares requested to be redeemed at least five business days before the Redemption Date. If the
Company cannot repurchase all Shares presented for redemption in any month because of the limitations on redemptions set forth in paragraph 4, then the Company will honor redemption requests on a pro rata basis, except that (i) if a pro rata redemption would result in a stockholder owning less than half of the minimum purchase requirement described in a currently effective, or the most recently effective, registration statement of the Company as such registration statement has been amended or supplemented (the Minimum Purchase Requirement), then the Company would redeem all of such stockholders Shares; and (ii) if a pro rata redemption would result in a stockholder owning more than half but less than all of the Minimum Purchase Requirement, then the Company would not redeem any Shares that would reduce a stockholders ownership of Shares below the Minimum Purchase Requirement. If the Company is redeeming all of a stockholders Shares, there would be no holding period requirement for Shares purchased pursuant to the Companys dividend reinvestment plan.
If the Company does not completely satisfy a redemption request on a Redemption Date because the program administrator did not receive the request in time or because of the limitations on redemptions set forth in paragraph 4, then the Company will treat the unsatisfied portion of the redemption request as a request for redemption at the next Redemption Date funds are available for redemption, unless the redemption request is withdrawn. Any stockholder can withdraw a redemption request by sending written notice to the program administrator, provided such notice is received at least five business days before the Redemption Date.
6. Special Provisions upon a Stockholders Death, Qualifying Disability or Determination of Incompetence. The Company will treat redemption requests made upon a stockholders death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8) differently, as follows:
a. There is no one-year holding requirement.
b. Until the Company establishes an estimated value per Share that is not based on the price to acquire a Share in the Companys primary initial public offering or follow-on public offerings, which the Company expects to be after the completion of its offering stage (as defined in paragraph 3 above), the redemption price is the amount paid to acquire the Shares from the Company.
c. Once the Company has established an estimated value per Share that is not based on the price to acquire a Share in the Companys primary initial public offering or follow-on public offerings, the redemption price will be the estimated value of the Shares, as determined by the Companys advisor or another firm chosen for that purpose.
Except as specifically set forth in this paragraph 6, redemptions upon a stockholders death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8) are subject to the same limitations and terms
and conditions as other redemptions, including the limitations on redemptions set forth in paragraph 4 and the redemption request procedures set forth in paragraph 5.
7. Qualifying Disability Determinations. In order for a disability to entitle a stockholder to the special redemption terms described in paragraph 6 (a Qualifying Disability), (1) the stockholder must receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the Shares to be redeemed, and (2) such determination of disability must be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could be eligible to receive (the Applicable Government Agency). The Applicable Government Agencies are limited to the following: (i) if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the Applicable Governmental Agency is the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (ii) if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (CSRS), then the Applicable Governmental Agency is the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (iii) if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholders discharge from military service under conditions that were other than dishonorable and, therefore, could be eligible to receive military disability benefits, then the Applicable Governmental Agency is the Department of Veterans Affairs or the agency charged with the responsibility for administering military disability benefits at that time if other than the Department of Veterans Affairs.
Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to workers compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums will not entitle a stockholder to the special redemption terms described in paragraph 6. Redemption requests following an award by the applicable governmental agency of disability benefits must be accompanied by: (1) the investors initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Department of Veterans Affairs record of disability-related discharge or such other documentation issued by the Applicable Governmental Agency that the Company deems acceptable and that demonstrates an award of the disability benefits.
As the following disabilities do not entitle a worker to Social Security disability benefits, they do not qualify for special redemption terms, except in the limited circumstances when the investor is awarded disability benefits by the other Applicable Governmental Agencies described above:
a. disabilities occurring after the legal retirement age; and
b. disabilities that do not render a worker incapable of performing substantial gainful activity.
8. Determination of Incompetence. In order for a determination of incompetence or incapacitation to entitle a stockholder to the special redemption terms described in paragraph 6 (a Determination of Incompetence), a state or federal court located in the United States (a U.S. Court) must declare, determine or find the stockholder to be (i) mentally incompetent to enter into a contract, to prepare a will or to make medical decisions or (ii) mentally incapacitated, in both cases such determination must be made by a U.S. court after the date the stockholder acquired the Shares to be redeemed.
A determination of incompetence or incapacitation by any person or entity other than a U.S. Court, or for any purpose other than those listed above, will not entitle a stockholder to the special redemption terms described in paragraph 6. Redemption requests following a Determination of Incompetence by a U.S. Court must be accompanied by the court order, determination or the certificate of the court declaring the stockholder incompetent or incapacitated.
9. Termination, Suspension or Amendment of the SRP by the Company. The Company may amend, suspend or terminate the SRP for any reason upon thirty days notice to the Companys stockholders. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the stockholders.
The SRP provides stockholders a limited ability to redeem Shares for cash until a secondary market develops for the Shares. If and when such a secondary market develops, the SRP will terminate.
10. Notice of Redemption Requests. Qualifying Stockholders who desire to redeem their Shares must provide written notice to the Company on the form provided by the Company.
11. Liability of the Company. The Company shall not be liable for any act done in good faith or for any good faith omission to act.
12. Governing Law. The SRP shall be governed by the laws of the State of Maryland.
Exhibit 10.23
Loan No. 1002835
AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT
between
KBSII HARTMAN BUSINESS CENTER, LLC,
KBSII PLANO BUSINESS PARK, LLC,
KBSII HORIZON TECH CENTER, LLC,
KBSII 2500 REGENT BOULEVARD, LLC,
KBSII CRESCENT VIII, LLC,
KBSII NATIONAL CITY TOWER, LLC,
KBSII GRANITE TOWER, LLC, and
KBSII GATEWAY CORPORATE CENTER, LLC,
as Borrowers
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
THE FINANCIAL INSTITUTIONS
NOW OR HEREAFTER SIGNATORIES HERETO
AND THEIR ASSIGNEES PURSUANT TO SECTION 13.13,
as Lenders
Entered into as of January 27, 2011
TABLE OF CONTENTS
Page | ||||||
ARTICLE 1. |
DEFINITIONS | 1 | ||||
1.1 |
DEFINED TERMS | 1 | ||||
1.2 |
SCHEDULES AND EXHIBITS INCORPORATED | 15 | ||||
ARTICLE 2. |
LOAN | 15 | ||||
2.1 |
LOAN | 15 | ||||
2.2 |
LOAN FEES | 15 | ||||
2.3 |
LOAN DOCUMENTS | 16 | ||||
2.4 |
EFFECTIVE DATE | 16 | ||||
2.5 |
MATURITY DATE | 16 | ||||
2.6 |
AMENDED AND RESTATED AND CONSOLIDATED LOAN | 16 | ||||
2.7 |
INTEREST ON THE LOAN | 16 | ||||
2.8 |
PAYMENTS | 19 | ||||
2.9 |
FULL REPAYMENT AND RECONVEYANCE | 20 | ||||
2.10 |
PARTIAL RELEASE OF PROPERTY | 20 | ||||
2.11 |
LENDERS ACCOUNTING | 23 | ||||
2.12 |
SECURED SWAP OBLIGATIONS | 23 | ||||
2.13 |
PAR LOAN VALUE. | 23 | ||||
2.14 |
EXTENSION OPTIONS | 23 | ||||
2.15 |
INCREASE IN AGGREGATE LOAN COMMITMENT | 24 | ||||
ARTICLE 3. |
DISBURSEMENT | 26 | ||||
3.1 |
CONDITIONS PRECEDENT | 26 | ||||
3.2 |
APPRAISALS | 27 | ||||
3.3 |
INITIAL DISBURSEMENT | 27 | ||||
3.4 |
SUBSEQUENT DISBURSEMENT | 28 | ||||
3.5 |
FUNDS TRANSFER DISBURSEMENTS | 31 | ||||
3.6 |
BORROWERS REPRESENTATIVES | 32 | ||||
ARTICLE 4. |
INTENTIONALLY OMITTED | 32 | ||||
ARTICLE 5. |
INSURANCE | 32 | ||||
ARTICLE 6. |
REPRESENTATIONS AND WARRANTIES | 32 | ||||
6.1 |
ORGANIZATION; CORPORATE POWERS | 32 | ||||
6.2 |
AUTHORITY | 33 | ||||
6.3 |
OWNERSHIP OF BORROWERS | 33 | ||||
6.4 |
NO CONFLICT | 33 | ||||
6.5 |
CONSENTS AND AUTHORIZATIONS | 33 | ||||
6.6 |
GOVERNMENTAL REGULATION | 33 | ||||
6.7 |
PRIOR FINANCIALS | 33 | ||||
6.8 |
FINANCIAL STATEMENTS; PROJECTIONS AND FORECASTS | 33 |
- i -
TABLE OF CONTENTS
(CONTINUED)
Page | ||||||
6.9 |
PRIOR OPERATING STATEMENTS | 34 | ||||
6.10 |
OPERATING STATEMENTS AND PROJECTIONS | 34 | ||||
6.11 |
LITIGATION; ADVERSE EFFECTS | 34 | ||||
6.12 |
NO MATERIAL ADVERSE CHANGE | 34 | ||||
6.13 |
PAYMENT OF TAXES | 34 | ||||
6.14 |
MATERIAL ADVERSE AGREEMENTS | 34 | ||||
6.15 |
PERFORMANCE | 34 | ||||
6.16 |
FEDERAL RESERVE REGULATIONS | 35 | ||||
6.17 |
DISCLOSURE | 35 | ||||
6.18 |
REQUIREMENTS OF LAW; ERISA | 35 | ||||
6.19 |
ENVIRONMENTAL MATTERS | 35 | ||||
6.20 |
MAJOR AGREEMENTS; LEASES | 35 | ||||
6.21 |
SOLVENCY | 36 | ||||
6.22 |
TITLE TO PROPERTY; NO LIENS. | 36 | ||||
6.23 |
USE OF PROCEEDS | 36 | ||||
6.24 |
PROPERTY MANAGEMENT AGREEMENTS | 36 | ||||
6.25 |
SINGLE PURPOSE ENTITY | 36 | ||||
6.26 |
INTENTIONALLY OMITTED | 36 | ||||
6.27 |
ORGANIZATIONAL DOCUMENTS | 36 | ||||
ARTICLE 7. |
INTENTIONALLY OMITTED | 36 | ||||
ARTICLE 8. |
LOAN CONSTANT COMPLIANCE | 36 | ||||
8.1 |
LOAN CONSTANT COVERAGE | 36 | ||||
8.2 |
DISBURSEMENTS OF FUNDS IN SWEPT FUNDS DISBURSEMENT ACCOUNT | 38 | ||||
8.3 |
DISBURSEMENTS OF FUNDS IN CASH FLOW COLLATERAL ACCOUNTS | 39 | ||||
ARTICLE 9. |
OTHER COVENANTS OF BORROWER | 39 | ||||
9.1 |
EXPENSES | 39 | ||||
9.2 |
ERISA COMPLIANCE | 39 | ||||
9.3 |
LEASES; LEASE APPROVAL; LEASE TERMINATION. | 39 | ||||
9.4 |
SNDAs. | 40 | ||||
9.5 |
SUBDIVISION MAPS | 40 | ||||
9.6 |
OPINIONS OF LEGAL COUNSEL | 40 | ||||
9.7 |
FURTHER ASSURANCES | 41 | ||||
9.8 |
ASSIGNMENT | 41 | ||||
9.9 |
MANAGEMENT OF PROPERTY. | 41 | ||||
9.10 |
REQUIREMENTS OF LAW | 41 | ||||
9.11 |
SPECIAL COVENANTS; SINGLE PURPOSE ENTITY | 41 |
- ii -
TABLE OF CONTENTS
(CONTINUED)
Page | ||||||
9.12 |
LIMITATIONS ON DISTRIBUTIONS, ETC | 41 | ||||
9.13 |
INCURRENCE OF ADDITIONAL INDEBTEDNESS | 41 | ||||
9.14 |
SPECIAL REPRESENTATIONS, COVENANTS AND WAIVERS | 41 | ||||
9.15 |
ENVIRONMENTAL INSURANCE PROCEEDS | 43 | ||||
9.16 |
AMENDMENT OF CONSTITUENT DOCUMENTS | 43 | ||||
9.17 |
OWNERSHIP OF BORROWER | 43 | ||||
9.18 |
LIENS | 44 | ||||
9.19 |
TRANSFERS OF COLLATERAL | 44 | ||||
9.20 |
ADDITIONAL REIT COVENANTS | 44 | ||||
9.21 |
TERMINATION PAYMENTS | 44 | ||||
9.22 |
SWAP AGREEMENT | 45 | ||||
9.23 |
GRANITE TOWER PROPERTY | 45 | ||||
ARTICLE 10. |
REPORTING COVENANTS | 45 | ||||
10.1 |
FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION (BORROWERS) | 46 | ||||
10.2 |
FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION (KBS REIT) | 48 | ||||
10.3 |
ENVIRONMENTAL NOTICES | 48 | ||||
10.4 |
CONFIDENTIALITY | 48 | ||||
ARTICLE 11. |
DEFAULTS AND REMEDIES | 48 | ||||
11.1 |
DEFAULT | 48 | ||||
11.2 |
ACCELERATION UPON DEFAULT; REMEDIES | 51 | ||||
11.3 |
DISBURSEMENTS TO THIRD PARTIES | 51 | ||||
11.4 |
REPAYMENT OF FUNDS ADVANCED | 51 | ||||
11.5 |
RIGHTS CUMULATIVE, NO WAIVER | 51 | ||||
ARTICLE 12. |
THE ADMINISTRATIVE AGENT; INTERCREDITOR PROVISIONS | 51 | ||||
12.1 |
APPOINTMENT AND AUTHORIZATION | 51 | ||||
12.2 |
WELLS FARGO AS LENDER | 52 | ||||
12.3 |
LOAN DISBURSEMENTS | 52 | ||||
12.4 |
DISTRIBUTION AND APPORTIONMENT OF PAYMENTS; DEFAULTING LENDERS | 53 | ||||
12.5 |
PRO RATA TREATMENT | 54 | ||||
12.6 |
SHARING OF PAYMENTS, ETC | 54 | ||||
12.7 |
COLLATERAL MATTERS; PROTECTIVE ADVANCES | 54 | ||||
12.8 |
POST-FORECLOSURE PLANS | 55 | ||||
12.9 |
APPROVALS OF LENDERS | 56 | ||||
12.10 |
NOTICE OF DEFAULTS | 56 |
- iii -
TABLE OF CONTENTS
(CONTINUED)
Page | ||||||
12.11 |
ADMINISTRATIVE AGENTS RELIANCE, ETC | 56 | ||||
12.12 |
INDEMNIFICATION OF ADMINISTRATIVE AGENT | 57 | ||||
12.13 |
LENDER CREDIT DECISION, ETC | 58 | ||||
12.14 |
SUCCESSOR ADMINISTRATIVE AGENT | 58 | ||||
ARTICLE 13. |
MISCELLANEOUS PROVISIONS | 59 | ||||
13.1 |
INDEMNITY | 59 | ||||
13.2 |
FORM OF DOCUMENTS | 59 | ||||
13.3 |
NO THIRD PARTIES BENEFITED | 59 | ||||
13.4 |
NOTICES | 59 | ||||
13.5 |
ATTORNEY-IN-FACT | 59 | ||||
13.6 |
ACTIONS | 60 | ||||
13.7 |
RIGHT OF CONTEST | 60 | ||||
13.8 |
RELATIONSHIP OF PARTIES | 60 | ||||
13.9 |
DELAY OUTSIDE LENDERS CONTROL | 60 | ||||
13.10 |
ATTORNEYS FEES AND EXPENSES; ENFORCEMENT | 60 | ||||
13.11 |
IMMEDIATELY AVAILABLE FUNDS | 60 | ||||
13.12 |
AMENDMENTS AND WAIVERS | 60 | ||||
13.13 |
SUCCESSORS AND ASSIGNS | 61 | ||||
13.14 |
CAPITAL ADEQUACY | 63 | ||||
13.15 |
LENDERS AGENTS | 63 | ||||
13.16 |
TAX SERVICE | 64 | ||||
13.17 |
WAIVER OF RIGHT TO TRIAL BY JURY | 64 | ||||
13.18 |
SEVERABILITY | 64 | ||||
13.19 |
TIME | 64 | ||||
13.20 |
HEADINGS | 64 | ||||
13.21 |
GOVERNING LAW | 64 | ||||
13.22 |
USA PATRIOT ACT NOTICE | 64 | ||||
13.23 |
ELECTRONIC DOCUMENT DELIVERIES | 65 | ||||
13.24 |
INTEGRATION; INTERPRETATION | 65 | ||||
13.25 |
JOINT AND SEVERAL LIABILITY | 65 | ||||
13.26 |
COUNTERPARTS | 65 | ||||
13.27 |
LIMITATION ON PERSONAL LIABILITY OF SHAREHOLDERS, PARTNERS AND MEMBERS | 65 |
- iv -
EXHIBITS AND SCHEDULES
SCHEDULE 1.1(A) PRO RATA SHARES
SCHEDULE 1.1(B) PAR LOAN VALUES
SCHEDULE 1.1(C) INITIAL PROPERTIES
SCHEDULE 6.3 OWNERSHIP OF BORROWERS
SCHEDULE 6.11 LITIGATION DISCLOSURE
SCHEDULE 6.24 PROPERTY MANAGEMENT AGREEMENTS
SCHEDULE 7.1 ENVIRONMENTAL REPORTS
EXHIBIT A DESCRIPTION OF INITIAL PROPERTIES
EXHIBIT B DOCUMENTS
EXHIBIT C FORM OF SUBORDINATION NON-DISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT D FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT E FORM OF PROMISSORY NOTE
EXHIBIT F FIXED RATE NOTICE
EXHIBIT G TRANSFER AUTHORIZER DESIGNATION
EXHIBIT H BORROWERS CERTIFICATE
EXHIBIT I ADDITIONAL DEFINITIONS
EXHIBIT J FORM OF JOINDER
EXHIBIT K ADJUSTED LOAN CONSTANT CALCULATION
- v -
AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT
(Secured Loan)
THIS AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT (Agreement), dated as of January 27, 2011, by and among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations, as evidenced by the execution by such party of a joinder hereto, as contemplated by Section 3.4 below (each individually Borrower and together, Borrowers), each of the financial institutions initially a signatory hereto together with their assignees under Section 13.13 (Lenders), and WELLS FARGO BANK, NATIONAL ASSOCIATION (Wells Fargo) as contractual representative of the Lenders to the extent and in the manner provided in Article 12 (in such capacity, the Administrative Agent).
R E C I T A L S
A. | KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII Horizon Tech Center, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, KBSII Crescent VIII, LLC, a Delaware limited liability company (together, Original Horizon Borrowers), Administrative Agent and Lenders previously executed a Loan Agreement, dated September 30, 2010 (the Horizon Loan Agreement), whereby Lenders made a loan to Original Horizon Borrowers in the original principal amount of $50,000,000 (the Original Horizon Loan). The Original Horizon Loan is secured by liens on certain real properties located in the states of California, Texas, Georgia and Colorado (the Horizon Properties). |
B. | KBSII National City Tower, LLC, a Delaware limited liability company (the Original National City Borrower, together with the Original Horizon Borrowers, collectively, the Original Borrowers), Administrative Agent and Lenders previously executed a Loan Agreement dated December 16, 2010 (the National City Loan Agreement), whereby Lenders made a loan to Original National City Borrower in the original principal amount of $69,000,000 (the Original National City Loan, together with the Original Horizon Loan, the Original Loan). The Original National City Loan is secured by a lien on certain real property located in Kentucky (the National City Property, together with the Horizon Properties, collectively, the Original Properties). |
C. | Borrowers have now requested that Administrative Agent and Lenders consolidate the Original National City Loan and the Original Horizon Loan and increase the amount of the Original Loan, on a consolidated basis, to $360,000,000. |
D. | Administrative Agent and Lenders are willing to make the Loan to Borrowers, subject to the terms and conditions contained herein. The Loan is to be secured by the Original Properties, the Granite Tower Property (as defined below), the Gateway Center Property (as defined below) and, subject to the terms hereof, certain additional properties (each a Property and together, the Properties); provided, that a property shall not be deemed a Property hereunder unless and until Administrative Agent (for the benefit of Lenders) has obtained a first priority lien on such property pursuant to a Security Document. |
NOW, THEREFORE, Borrowers, Administrative Agent and Lenders agree as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINED TERMS. The following capitalized terms generally used in this Agreement shall have the meanings defined or referenced below. Certain other capitalized terms used only in specific sections of this Agreement are defined in such sections.
550 Oak Ridge Property means the property located at 550 Oak Ridge, Hazelton, Pennsylvania.
1
Accommodation Obligations as applied to any Person, means (a) any Indebtedness of another Person in respect of which that Person is liable, including, without limitation, any such Indebtedness directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable including in respect of any partnership in which that Person is a general partner; and (b) any Contractual Obligations (contingent or otherwise) of such Person arising through any agreement to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received.
Accountants means any big four accounting firm or another firm of certified public accountants of national standing, if any, selected by Borrowers and acceptable to Administrative Agent.
ADA means the Americans with Disabilities Act, of July 26, 1990, Pub. L. No. 101-336, 104 Stat. 327, 42 U.S.C. § 12101, et seq., as amended from time to time.
Administrative Agent means Wells Fargo Bank, National Association, or any successor Administrative Agent appointed pursuant to Section 12.14.
Affiliates as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as applied to any Person, means (a) the possession, directly or indirectly, of the power to vote ten percent (10%) or more of all interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting interests or by contract or otherwise, or (b) the ownership of a general partnership interest or a limited partnership interest (or other ownership interest) representing ten percent (10%) or more of the outstanding limited partnership interests or other ownership interests of such Person. In no event shall Administrative Agent or any Lender be an Affiliate of any Borrower.
Aggregate Loan Commitment means the sum of the Commitment amounts of all of the Lenders, initially totaling $360,000,000, and subject to increase or reduction in accordance with the terms of this Agreement.
Aggregate Holdback shall mean an undisbursed portion of the Loan in an amount equal to $126,383,507.
Agreement shall have the meaning given to such term in the preamble hereto.
Alternate Rate is a rate of interest per annum five percent (5%) in excess of the Variable Rate in effect from time to time.
Allocated Share means at any time, and from time to time, an amount expressed as a percentage that is calculated by dividing the cost basis of the Properties, on an aggregate basis, by the cost basis of all real property owned directly or indirectly by KBS REIT or the KBS Limited Partnership II.
Amazon Expansion Option means the right of Amazon.com, pursuant to Addendum 5 to the Amazon Lease, to expand the premises under the Amazon Lease onto the Expansion Area (as such term is defined in the Amazon Lease).
Amazon Lease means that certain Lease Agreement dated April 4, 2008, between Amazon.com (defined below), as tenant, and Borrower (as successor-in-interest to Mericle Humboldt 40, LLC), as landlord.
Amazon.com means Amazon.com.dedc, LLC, a Delaware limited liability company.
Page 2
Applicable LIBO Rate is the rate of interest equal to the sum of: (a) the Applicable Spread plus (b) the LIBO Rate, which rate is divided by one (1.00) minus the Reserve Percentage:
Applicable LIBO Rate = Applicable Spread | + | LIBO Rate | ||||||
(1 -Reserve Percentage) |
Applicable Spread means (i) for the period prior to the Initial Maturity Date, 2.15%, (ii) for the period beginning on the Initial Maturity Date and continuing until the First Extended Maturity Date, 2.40%, and (iii) for the period beginning on the First Extended Maturity Date and continuing until the Second Extended Maturity Date, 2.65%.
Appraisal means a written appraisal prepared by an independent MAI appraiser acceptable to Administrative Agent and subject to Administrative Agents customary independent appraisal requirements and prepared in compliance with all applicable regulatory requirements, including the Financial Institutions Recovery, Reform and Enforcement Act of 1989, as amended from time to time.
Appraised Value means, with respect to the property being appraised, the fair market value, on an as-is basis, as reflected in the then most recent Appraisal of the Property, as adjusted, if applicable, by Administrative Agent based upon its internal review of such Appraisal.
Approved Fund means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender, or (c) an entity or an Affiliate of any entity that administers or manages a Lender.
Assignment and Assumption Agreement means an Assignment and Assumption Agreement among a Lender, an Assignee and the Administrative Agent, substantially in the form of Exhibit D.
Bankruptcy Code means the Bankruptcy Reform Act of 1978 (11 USC § 101-1330) as now or hereafter amended or recodified.
Borrower and Borrowers shall have the meaning given to such term in the preamble hereto.
Borrowers Certificate shall have the meaning given to such term in Section 10.1(c).
Business Day means (a) any day of the week other than Saturday, Sunday or other day on which the offices of Administrative Agent in San Francisco, California are authorized or required to close and (b) with reference to the LIBO Rate, any such day that is also a day on which dealings in Dollar deposits are carried out in the London interbank market. Unless specifically referenced in this Agreement as a Business Day, all references to days shall be to calendar days.
Capital Leases, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is or should be accounted for as a lease on the balance sheet of that Person.
Cash Flow Collateral Accounts shall have the meaning given to such term in Section 8.1.
Cash Flow Sweep shall have the meaning given such term in Section 8.1.
Cash Flow Sweep Commencement Date shall have the meaning given such term in Section 8.1.
Collateral means the Properties and any personal property or other collateral with respect to which a Lien or security interest was granted to Administrative Agent, for the benefit of Lenders, pursuant to the Loan Documents.
Commitment means, as to each Lender, such Lenders obligation to make disbursements pursuant to Section 3.3 and Section 12.3, in an amount up to, but not exceeding the amount set forth for such Lender on Schedule 1.1(A) attached hereto as such Lenders Commitment Amount or as set forth in the applicable Assignment and Assumption Agreement, as the same may be (i) reduced from time to time pursuant to the terms of this Agreement or as appropriate to reflect any assignments to or by such Lender effected in accordance with Section 13.13 or (ii) increased in accordance with Section 2.15.
Page 3
Concessions shall mean all free-rent periods or abatements and all above-market amounts paid or foregone by Borrowers directly to or on behalf of any tenant for the purpose of inducing such tenant to enter into a lease, including, without limitation, tenant improvement allowances, moving expenses, and/or assumptions or buyouts of the tenants obligations under other leases. (The term above-market shall be understood to mean amounts in excess of those assumed in the then most recent Appraisal for the Property in question, or, with respect to tenant improvement costs, such other amount as may be approved by Administrative Agent in its discretion.) Administrative Agent shall have the right to adjust any Concessions based, in part and as applicable, upon assumptions set forth in the then most current Appraisal for the Property in question. All Concessions shall be amortized over the full lease term with annual amortization only to be deducted for the purpose of determining Net Operating Income. (Example: Concessions in the form of above-market tenant improvements for a five year lease total $100,000; the annualized deduction in determining Net Operating Income shall be $20,000.)
Contaminant means any pollutant (as that term is defined in 42 U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C. 1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)), hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)), toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)), radioactive material, special waste, petroleum (including crude oil or any petroleum-derived substance, waste, or breakdown or decomposition product thereof), any constituent of any such substance or waste, including, but not limited to, polychlorinated biphenyls and asbestos, or any other substance or waste deleterious to the environment the release, disposal or remediation of which is now or at any time becomes subject to regulation under any Hazardous Materials Laws, along with all Hazardous Materials.
Contractual Obligation, as applied to any Person, means any provision of any securities issued by that Person or any indenture, mortgage, lease, contract, undertaking, document or instrument to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject (including, without limitation, any restrictive covenant affecting such Person or any of its properties).
Crescent Property means 8350 East Crescent Parkway, Greenwood Village, Colorado.
Debit Account means Wells Fargo Bank account number 4121828040 in the name of KBS REIT Properties II, LLC.
Debt Service Coverage Ratio means the ratio of (a) Net Operating Income for all Properties (as of the date of determination), to (b) an annual interest payment calculated by multiplying (i) an interest rate equal to the DSC LIBO Rate plus the Applicable Spread effective with respect to the next-occurring extension period (for example, if calculated at any time after the Initial Maturity Date but before the First Extended Maturity Date, then the Applicable Spread would be 2.65%) times (ii) the amount of the Loan outstanding as of the date of determination.
Default shall have the meaning given to such term in Section 11.1.
Defaulting Lender means any Lender which (i) fails or refuses to perform any of its obligations under this Agreement or any other Loan Document to which it is a party within the time period specified for performance of such obligation or, if no time period is specified, if such failure or refusal continues for a period of five (5) Business Days after notice from Administrative Agent, (ii) notifies any Borrower, the Administrative Agent or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or makes a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit, (iii) fails, within three (3) Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund disbursements of the Loan, or (iv) (A) becomes or is insolvent or has a parent company that has become or is insolvent or (B) becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.
Distributions, with respect to Borrowers, means any distribution of money to any equity owner or Affiliate of Borrowers, whether in the form of earnings, income or other proceeds, repayment of any principal or interest on
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any loan or other advance made to Borrowers by any such equity owner or Affiliate, or any loan or advance by Borrowers of any funds to any such equity owner or Affiliate.
Dollars and $ means the lawful money of the United States of America.
DSC LIBO Rate is the rate of interest quoted by Administrative Agent as the London Inter-Bank Offered Rate for deposits in U.S. Dollars at approximately 9:00 a.m. California time two (2) Business Days prior to the date of determination for purposes of calculating effective rates of interest for loans or obligations making reference thereto for an amount approximately equal to the outstanding amount of the Loan, for a period of one (1) year, which rate is divided by one (1.00) minus the Reserve Percentage.
Effective Date means the date on which Lenders make the initial disbursement of Loan proceeds hereunder (without regard to the dates on which proceeds were previously disbursed with respect to the Original Horizon Loan or the Original National City Loan).
Effective Rate shall have the meaning given to such term in Section 2.7(e).
Eligible Assignee means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and (ii) unless a Default or Potential Default exists, Borrowers (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, Eligible Assignee shall not include any of the Borrowers or any of Borrowers Affiliates.
Environmental Laws shall have the meaning given to such term in Section 6.19.
ERISA means the Employee Retirement Income Security Act of 1974, as in effect from time to time.
Existing Swap means ISDA Master Agreement dated December 20, 2010, as amended by the Joinder and First Amendment to ISDA Master Agreement dated January 27, 2011, executed by Borrowers and Wells Fargo Bank, together with the ISDA schedule and any confirmation of transactions thereunder, as amended, modified or replaced from time to time.
Exit Fee shall have the meaning given to such term in Section 2.8(e).
Federal Funds Rate means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal Funds brokers of recognized standing selected by Administrative Agent.
Fee Letter shall have the meaning given in Section 2.2.
First Extended Maturity Date means January 27, 2017.
First Extension Option shall have the meaning given to such term in Section 2.14.
Fiscal Quarter means each of the calendar quarters ending March 31, June 30, September 30 and December 31.
Fixed Rate is the Applicable LIBO Rate as accepted by Borrowers as an Effective Rate for a particular Fixed Rate Period and Fixed Rate Portion.
Fixed Rate Commencement Date means the date upon which the Fixed Rate Period commences.
Fixed Rate Notice is a written notice in the form shown on Exhibit F hereto which requests a Fixed Rate for a particular Fixed Rate Period and Fixed Rate Portion.
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Fixed Rate Period is the period or periods of (a) one month; or (b) any other shorter period which ends at the Maturity Date, which periods are selected by Borrowers and confirmed in a Fixed Rate Notice; provided that no Fixed Rate Period shall extend beyond the Maturity Date.
Fixed Rate Portion is the portion or portions of the principal balance of the Loan which Borrowers select to have subject to a Fixed Rate, each of which is an amount: (a) equal to the unpaid principal balance of the Loan not subject to a Fixed Rate; and (b) is not less than One Hundred Thousand Dollars ($100,000) and is an even multiple of One Hundred Thousand Dollars ($100,000). In the event Borrowers are subject to a principal amortization schedule under the terms and conditions of the Loan Documents, the Fixed Rate Portion(s) from time to time in effect shall in no event exceed, in the aggregate, the maximum outstanding principal balance which will be permissible on the last day of the Fixed Rate Period selected.
Fixed Rate Price Adjustment shall have the meaning given to such term in Section 2.7(h).
Fixed Rate Taxes are, collectively, all withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign Governmental Authority and related in any manner to a Fixed Rate.
Free Cash Flow means, for a particular period, Gross Operating Income for such period for all Properties minus (a) debt service on the Loan for such period, (b) any Permitted Operating Expenses actually incurred for such period, (c) the REIT Operating Expense for such period, (d) accrued liability for taxes and insurance for such period and (e) any other expenses relating to the Property actually incurred for such period, provided such expenses are approved, in advance, by Administrative Agent, which approval shall not be unreasonably withheld, conditioned or delayed.
Fund means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
Future Borrower means a Single Purpose Entity that owns a Future Property and is an Affiliate of Borrowers.
Future Property shall mean one or more parcels of real property acquired after the Effective Date by a Future Borrower which becomes a Property hereunder; provided that this term shall not apply to the I-81 Properties or the Torrey Reserve Property.
Gateway Center Property means 160 and 180 Promenade Circle, Sacramento, California.
Governmental Authority means any nation or government, any federal, state, local, municipal or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
Granite Tower Property means 1099 18th Street, Denver, Colorado.
Gross Operating Income shall mean the sum of any and all amounts, payments, fees, rentals, additional rentals, expense reimbursements (including, without limitation, all reimbursements by tenants, lessees, licensees and other users of a Property), discounts or credits to any Borrower, income, interest and other monies directly or indirectly received by or on behalf of or credited to any Borrower from any person with respect to such Borrowers ownership, use, development, operation, leasing, franchising, marketing or licensing of such Property, including, without limitation, from parking operations. Gross Operating Income shall be computed on a cash basis and shall include all amounts actually received in the relevant period whether or not such amounts are attributable to a charge arising in such period.
Gross Rental Income means the actual sum of the Net Effective Rental Rates of all tenants in possession at each of the Properties, as of the date of determination.
Gross Rents means, with respect to a Property, the sum of (a) the Gross Rental Income of the Property plus (b) any expense reimbursements required to be paid by the tenants at such Property.
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Ground Lease means the Ground Lease Agreement, dated May 29, 2009, by and between Dallas/Fort Worth International Airport Board, as lessor (Ground Lessor), and BVDC, LP (BVDC), as lessee, as evidenced by a Memorandum of Lease recorded June 1, 2009 under Clerks File No. D209143392, Real Property Records, Tarrant County, Texas; and filed for record on May 29, 2009 under Clerks File No. 200900153683, Real Property Records, Dallas County, Texas, as amended by that certain Lease Amendment (Roof-Top Sign) dated July 6, 2010, by and between Ground Lessor and BVDC, as assigned to KBSII 2500 Regent Boulevard, LLC, as evidenced by that certain Assignment and Assumption of Ground Lease dated July 8, 2010, filed for record on July 8, 2010 and recorded under Document No. 201000173571, Official Public Records, Dallas County, Texas; and filed for record on July 8, 2010 under Document No. D210164479, Official Public Records, Tarrant County, Texas.
Ground Leased Property means the leasehold interest in the real property located at 2500 Regent Boulevard, Irving, Texas, which is subject to the Ground Lease.
Guarantor means KBS REIT Properties II, LLC, a Delaware limited liability company, and any other person or entity who, or which, in any manner, is or becomes obligated to Lenders under any guaranty now or hereafter executed in connection with respect to the Loan (collectively or severally as the context thereof may suggest or require).
Hazardous Materials means any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are hazardous substances, hazardous wastes, hazardous materials, toxic substances, wastes, regulated substances, industrial solid wastes, or pollutants under the Hazardous Materials Laws, as described below, and/or other applicable environmental laws, ordinances and regulations.
Hazardous Materials Indemnity Agreement means the Amended and Restated and Consolidated Hazardous Materials Indemnity Agreement executed by the Borrowers for the benefit of Administrative Agent and Lenders dated on or about the date hereof, as the same may be amended, modified or replaced from time to time.
Hazardous Materials Laws means all laws, ordinances and regulations relating to Hazardous Materials, including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986, CERCLA), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.
Holdback Extension Fee shall mean the Holdback Fee payable pursuant to the Fee Letter with respect to any portion of the Aggregate Holdback that has not been disbursed as of the date which occurs one hundred eighty (180) days following the Effective Date.
Holdback Fee shall have the meaning given to such term in the Fee Letter.
Horizon Loan Agreement shall have the meaning given to such term in the Recitals hereto.
I-81 Borrower means a Single Purpose Entity that owns the I-81 Properties and is an Affiliate of Borrowers.
I-81 Holdback Amount means an amount equal to $51,085,375, or such lesser amount as would cause the conditions in Section 3.4(a)(ix) to be satisfied.
I-81 Properties shall mean 325 Centerpoint, Jenkins Township, Pennsylvania; 550 Oak Ridge, Hazleton Pennsylvania; 125 Capital, Jenkins Township, Pennsylvania; and 14-46 Alberigi, Jessup Borough, Pennsylvania each, an I-81 Property.
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Indebtedness, as applied to any Person (and without duplication), means (a) the principal amount of all indebtedness of such Person for borrowed money, whether or not subordinated and whether with or without recourse beyond any collateral security, (b) the principal amount of all indebtedness of such Person evidenced by securities or other similar instruments, (c) all reimbursement obligations and other liabilities of such Person with respect to letters of credit or bankers acceptances issued for such Persons account, (d) all obligations of such Person to pay the deferred purchase price of property or services, (e) all obligations in respect of both operating and capital leases of such Person, (f) all Accommodation Obligations of such Person, (g) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any asset of such Person, whether or not such indebtedness, obligations or liabilities are assumed by, or are a personal liability of, such Person (including, without limitation, the principal amount of any assessment or similar indebtedness encumbering any property (except for non-delinquent, accrued but unpaid real estate taxes as provided under Section 9.13)), (h) all indebtedness, obligations or other liabilities (other than interest expense liability) in respect of interest rate swap, collar, cap or similar agreements providing interest rate protection and foreign currency exchange agreements, (i) ERISA obligations currently due and payable, and (j) without duplication or limitation, all liabilities and other obligations included in the financial statements (or notes thereto) of such Person as prepared in accordance with GAAP.
Initial Disbursement means $123,994,578.
Initial Maturity Date means January 27, 2016.
Joinder means a joinder agreement in the form of Exhibit J hereto.
KBS REIT means KBS Real Estate Investment Trust II, Inc., a Maryland corporation.
KBS Limited Partnership II means KBS Limited Partnership II, a Delaware limited partnership.
Lease means a tenant lease of all or any portion of a Property.
Lender means each financial institution from time to time party hereto as a Lender, together with its respective successors and permitted assigns. With respect to matters requiring the consent or approval of all Lenders at any given time, all then existing Defaulting Lenders will be disregarded and excluded, and, for voting purposes only, all Lenders shall be deemed to mean all Lenders other than Defaulting Lenders.
Liabilities and Costs means all claims, judgments, liabilities, obligations, responsibilities, losses, damages (including lost profits), punitive or treble damages, costs, disbursements and expenses (including, without limitation, reasonable attorneys, experts and consulting fees and costs of investigation and feasibility studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future.
LIBO Rate is, for any Fixed Rate Portion, the rate of interest quoted by Administrative Agent from time to time as the London Inter-Bank Offered Rate for deposits in U.S. Dollars at approximately 9:00 a.m. California time two (2) Business Days prior to a Fixed Rate Commencement Date or a Price Adjustment Date, as appropriate, for purposes of calculating effective rates of interest for loans or obligations making reference thereto for an amount approximately equal to a Fixed Rate Portion and for a period of time approximately equal to a Fixed Rate Period or the time remaining in a Fixed Rate Period after a Price Adjustment Date, as appropriate.
LIBOR Market Index Rate means at any time the rate of interest obtained by dividing (i) the rate of interest quoted by the Administrative Agent from time to time as the London Inter-Bank Rate for one-month deposits in U.S. Dollars at approximately 9:00 a.m. Pacific time for such day; provided, if such day is not a Business Day, the immediately preceding Business Day by (ii) a percentage equal to 1 minus the stated maximum rate (stated as a decimal) of all reserves, if any, required to be maintained with respect to Eurocurrency funding (currently referred to as Eurocurrency liabilities) as specified in Regulation D of the Board of Governors, of the Federal Reserve System (or against any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR loans is determined or any applicable category of extensions of credit or other assets which includes loans by an office of any Lender outside of the United States of America). Any change in such maximum rate shall result in a change in the LIBOR Market Index Rate on the date on which such change in such maximum rate becomes effective.
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Lien means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance (including, but not limited to, easements, rights-of-way, zoning restrictions and the like), lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including without limitation any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement or document having similar effect (other than a financing statement filed by a true lessor pursuant to Section 9408 (or a successor section) of the Uniform Commercial Code) naming the owner of the asset to which such Lien relates as debtor, under the Uniform Commercial Code or other comparable law of any jurisdiction.
Loan means the cumulative principal amount of up to Three Hundred and Sixty Million Dollars ($360,000,000), as such amount may be increased or decreased in accordance with the terms of this Agreement.
Loan Constant means a fraction, expressed as a percentage, determined by dividing (i) the Net Operating Income of the Properties by (ii) the sum of the then outstanding principal amount of the Loan less the amount of any Termination Payments then being held in a blocked and pledged cash collateral account pursuant to Section 9.21.
Loan Constant Requirement shall have the meaning given such term in Section 8.1.
Loan Documents means those documents, as hereafter amended, supplemented, replaced or modified, properly executed and in recordable form, if necessary, listed in Exhibit B as Loan Documents.
Loan Party means Borrowers and any other person or entity obligated under the Loan Documents or Other Related Documents.
Loan-to-Value Percentage means the outstanding principal amount of the Loan as a percentage of the aggregate Appraised Value of the Properties.
Major Agreements means, at any time, (a) each cross-easement, restrictions or similar agreement encumbering or affecting a Property and any adjoining property, and (b) each property management agreement and leasing agreement with respect to a Property entered into with any Person.
Major Lease means any Lease (or collection of Leases to one tenant) (a) which encumbers more than the lesser of (i) 10% of the net rentable space of the Properties, in the aggregate (as of the date of determination) or (ii) the greater of (A) 10% of the net rentable space of a Property or (B) 50,000 square feet, or (b) under which a Borrowers obligation as to the cost of tenant improvements exceeds 130% of the estimated tenant improvement allowance (per rentable square foot) as set forth in the then most recent Appraisal, or (c) under which the Net Effective Rental Rate is less than 85% of the amount assumed for such lease in the then most recent Appraisal.
Manager means KBS Capital Advisors LLC.
Management Agreement means the Advisory Agreement dated May 21, 2008 between Manager and KBS REIT.
Material Adverse Effect means (a) with respect to a Borrower, a material adverse effect upon the condition (financial or otherwise), operations, performance, properties or prospects of such Borrower that could reasonably be expected to impair, to a material extent, such Borrowers ability to perform its obligations under the Loan Documents; and (b) with respect to a Property, a material adverse effect upon the physical condition of such Property, or upon its operations, performance or prospects, that reduces the Appraised Value of the Property to an amount that is less than eighty percent (80%) of the Appraised Value of the Property as of the date hereof. The phrase has a Material Adverse Effect or will result in a Material Adverse Effect or words substantially similar thereto shall in all cases be intended to mean has resulted, or will or could reasonably be anticipated to result, in a Material Adverse Effect, and the phrase has no (or does not have a) Material Adverse Effect or will not result in a Material Adverse Effect or words substantially similar thereto shall in all cases be intended to mean does not or will not or could not reasonably be anticipated to result in a Material Adverse Effect.
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Maturity Date means the Initial Maturity Date, the First Extended Maturity Date or the Second Extended Maturity Date, as applicable.
Maximum Applicable Loan-to-Value Percentage means a percentage determined with reference to the outstanding principal balance of the Loan (as of the date of determination) in accordance with the following:
Outstanding Principal Balance of the Loan
|
Maximum Applicable Loan-to-Value Percentage | |
Greater than or equal to $70,000,000
|
57.00% | |
Less than $70,000,000
|
50.00% |
Minimum Applicable Loan Constant means a percentage determined with reference to the outstanding principal balance of the Loan (as of the date of determination) in accordance with the following:
Outstanding Principal Balance of the Loan
|
Minimum Applicable Loan Constant | |
Greater than $115,000,000
|
13% | |
Less than or equal to $115,000,000 but greater than $70,000,000
|
15% | |
Less than or equal to $70,000,000
|
17%
|
Minimum DSCR means Debt Service Coverage Ratio of not less than 1.50:1.00.
National City Loan Agreement shall have the meaning given to such term in the Recitals hereto.
National City Property shall have the meaning given to such term in the Recitals hereto.
Net Effective Rental Rate means (i) the actual recurring contractual base rental payment required to be paid by a tenant under a Lease, taking into account any adjustment regarding Concessions, plus (ii) with respect to triple-net Leases, expense reimbursement payments required to be paid by a tenant under a Lease, which shall be calculated on a historical basis for the purpose of projecting Gross Rental Income.
Net Operating Income shall mean, as of any date of determination: (a) Gross Operating Income ((i) adjusted downwards by Administrative Agent in accordance with the definition of Concessions and (ii) adjusted upward to give credit for rents of tenants in possession but not paying rent due to a free rent period; provided, (a) the amount credited shall be the monthly rent, at the monthly Net Effective Rental Rate, that the applicable tenant is required to pay during the first month in which it is required to pay rent under its lease and (b) no credit shall be given for any month if after such month six months would remain in the applicable tenants free rent period (whether or not consecutive)*) for the immediately preceding Fiscal Quarter (excluding any amounts received by tenants under Leases not entered into in compliance with Section 9.3 and, for purposes of calculating Net Operating Income as an input for calculating Loan Constant under Section 2.10 only, excluding any amounts received by tenants under Leases which are subject to a tenants right of termination (to the extent such right has been exercised) occurring in the twelve months following the calculation date) multiplied by four, excluding security or other deposits, late fees, lease termination or other similar charges, delinquent rent recoveries to the extent the same would not have been included in the relevant testing period, unless previously reflected in reserves, or any other items of a non-recurring nature and adjusted for the impacts of any change in occupancy during such period; minus (b) the sum of (i) the actual reasonable Operating Expenses for the immediately preceding Fiscal Quarters multiplied by four (and adjusted for the impacts of any changes in occupancy during such period, which adjustment shall be consistent with the adjustment made to Gross Operating Income); and (ii) an amount for reasonable capital reserves equal to (A) $0.10 per square foot of net
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rentable area of any industrial properties, and (B) $0.25 per square foot of net rentable area of office properties, and adjusted by Administrative Agent to account for items that have accrued, but have not been paid during the relevant period (e.g., real estate taxes and insurance premiums).
*By way of example, if at the expiration of the applicable test quarter, four months remain in the free rent period for a particular tenant, then Net Operating Income shall be adjusted upward to give credit for two months of the rent to be paid by the applicable tenant. The amount credited shall be two times the monthly rent (at the Net Effective Rental Rate) that such tenant is required to pay for the first month in which it is required to pay rent under its lease.
Non-Pro Rata Advance shall mean a Protective Advance or a disbursement under the Loan with respect to which fewer than all Lenders have funded their respective Pro Rata Shares in breach of their obligations under this Agreement.
Note or Notes means each secured promissory note, collectively in the original principal amount of the Loan, executed by Borrowers and payable to the order of a Lender, together with such other replacement notes as may be issued from time to time pursuant to Section 13.13, as hereafter amended, supplemented, replaced or modified.
Obligations means, from time to time, all Indebtedness of Borrowers owing to Lenders, to any Person entitled to indemnification pursuant to Section 13.1, or to any of their respective successors, transferees or assigns, of every type and description, whether or not evidenced by any note, guaranty or other instrument, arising under or in connection with this Agreement or any other Loan Document, whether or not for the payment of money, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, reasonable attorneys fees and disbursements, reasonable fees and disbursements of expert witnesses and other consultants, and any other sum now or hereinafter chargeable to Borrowers under or in connection with this Agreement or any other Loan Document. (Notwithstanding the foregoing definition of Obligations, Borrowers obligations under any environmental indemnity agreement constituting a Loan Document, or any environmental representation, warranty, covenant, indemnity or similar provision in this Agreement or any other Loan Document, shall be secured by the Properties only to the extent, if any, specifically provided in the Security Documents).
Operating Expenses shall mean all reasonable operating expenses of the Properties, including, without limitation, those for maintenance, property management (subject to an imputed minimum of two and one half percent (2.5%) of Gross Rental Income for all Properties other than the Granite Tower Property, the National City Property, the Two Westlake Property, the Ground Leased Property and the Crescent Property, for which such imputed amount shall equal two percent (2.0%) of Gross Rental Income), repairs, annual taxes, bond assessments, ground lease payments (if any), insurance, utilities and other annual expenses (but not costs of tenant retrofit, lease commission, capital improvements or capital repairs) and non-capital reserves that are customary and standard for properties of this type. Operating Expenses for this purpose shall not include any interest or principal payments on the Loan or any allowance for depreciation; recurring expenses, which are not paid monthly, shall be accounted for monthly, without duplication, on an accrual basis.
Operating Statement shall have the meaning given to such term in Section 10.1.
Original Horizon Loan shall have the meaning given to such term in the Recitals hereto.
Original National City Loan shall have the meaning given to such term in the Recitals hereto.
Other Related Documents means those documents, as hereafter amended, supplemented, replaced or modified from time to time, properly executed and in recordable form, if necessary, listed in Exhibit B as Other Related Documents.
Par Loan Value means the amount of the Commitment allocable to an individual Property, as more specifically detailed on Schedule 1.1(B) attached hereto.
Participant shall have the meaning given to such term in Section 13.13.
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Permit means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law.
Permitted Liens means:
(a) | Liens (other than environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due; |
(b) | Any laws, ordinances or regulations affecting the Properties; |
(c) | Liens imposed by laws, such as mechanics liens and other similar liens, arising in the ordinary course of business which secure payment of obligations not more than thirty (30) days past due; |
(d) | All matters shown on the Title Policies as exceptions to Lenders coverage thereunder; |
(e) | Liens in favor of Administrative Agent, for the benefit of Lenders, under the Security Documents; |
(f) | All existing Leases at the Properties and any future Leases at the Properties entered into in accordance with this Agreement; and |
(g) | Liens in favor of Wells Fargo Bank, National Association, relating to any Swap Agreement, which liens shall be pari passu with the liens of all other Secured Obligations, as such term is defined in the Security Documents. |
Permitted Operating Expenses shall mean the following expenses to the extent that such expenses are reasonable in amount and customary for properties of the same type as the Properties: (i) taxes and assessments imposed upon any Property to the extent that such taxes and assessments are required to be paid by the Borrower that owns such Property and are actually paid or reserved for by such Borrower; (ii) bond assessments; (iii) insurance premiums for casualty insurance (including, without limitation, earthquake and terrorism coverage) and liability insurance carried in connection with any Property to the extent that such premiums are actually paid or reserved for by the Borrower that owns such Property, provided, however, if any, insurance is maintained as part of a blanket policy covering such Property and other properties, the insurance premium included in this subparagraph shall be the premium fairly allocable to such Property; and (iv) operating expenses and capital expenditures incurred by a Borrower for the management, operation, cleaning, leasing, maintenance and repair of a Property owned by such Borrower in the ordinary course. Permitted Operating Expenses shall not include any interest or principal payments on the Loan or any allowance for depreciation.
Person means any natural person, corporation, limited partnership, general partnership, joint stock company, limited liability company, limited liability partnership, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, or any other nongovernmental entity, or any Governmental Authority.
Potential Default means an event, circumstance or condition which, with the giving of notice or the lapse of time, or both, would constitute a Default.
Price Adjustment Date shall have the meaning given to such term in Section 2.7(h).
Proceedings means, collectively, all actions, suits, arbitrations and proceedings, at law, in equity or otherwise, before, and investigations commenced or threatened by or before, any court or Governmental Authority with respect to a Person.
Property or Properties shall have the meaning given to such term in Recital D. The initial Properties as of the Effective Date are identified on Schedule 1.1(C).
Property Release shall have the meaning given to such term in Section 2.10.
Pro Rata Share means, as to each Lender, the ratio, expressed as a percentage, of (a) the amount of such Lenders Commitment to (b) the aggregate amount of the Commitments of all Lenders hereunder; provided, however, that if at the time of determination the Commitments have terminated or been reduced to zero, the Pro
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Rata Share of each Lender shall be calculated based upon each Lenders outstanding Commitment (i.e., advanced to Borrower) in effect immediately prior to such termination or reduction.
Protective Advance shall mean any advances made by Administrative Agent in accordance with the provisions of Section 12.7(e) to protect the Collateral securing the Loan.
Regulatory Costs are, collectively, future, supplemental, emergency or other changes in Reserve Percentages, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign Governmental Authority and related in any manner to a Fixed Rate.
REIT Operating Expenses means the Allocated Share of all actual costs, expenses and/or amounts incurred by, or payable or reimbursable by, KBS REIT or KBS Limited Partnership II for any of the following: (a) charges and fees charged by banks, audit fees, tax preparation fees, legal fees, transfer agent fees, accounting consulting fees related to emerging technical pronouncements, tax consulting fees relating to Real Estate Investment Trust issues, due diligence costs and fees arising from state and local taxes, fees and expenses incurred in connection with annual corporate filings, and local, state and federal income taxes, and (b) professional fees related to corporate structuring and/or filings, consulting fees and filing fees arising from SEC reporting requirements including, without limitation, 10K filings, 10Q filings, and 8k filings, consulting fees and other fees and costs related to Sarbanes- Oxley 404 compliance requirements.
Release means the release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment or into or out of any property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or property.
Release Price means an amount equal to the Par Loan Value of the relevant Property multiplied by the Release Percentage determined with reference to the following schedule:
Aggregate Loan Commitment After
the
|
Release Percentage | |
Greater than $115,000,000
|
110%
| |
Less than or equal to $115,000,000 but greater than $70,000,000
|
120%
| |
Less than or equal to $70,000,000
|
125%
|
Notwithstanding the foregoing, with respect to the National City Property, Release Price means an amount equal to the Par Loan Value of the National City Property multiplied by the Release Percentage determined with reference to the following schedule:
Aggregate Loan Commitment After the Applicable Release
|
Release Percentage | |
Greater than $70,000,000
|
120%
| |
Less than or equal to $70,000,000
|
125%
|
In each case, the Release Percentage shall be determined after giving effect to the relevant release of Collateral and any accompanying prepayment.
Remedial Action means any action required by applicable Hazardous Materials Laws to (a) clean up, remove, treat or in any other way address Hazardous Materials in the indoor or outdoor environment; (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so they do not migrate
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or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.
Requirements of Law means, as to any entity, the charter and by-laws, partnership agreement or other organizational or governing documents of such entity, and any law, rule or regulation, Permit, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such entity or any of its property or to which such entity or any of its property is subject, including without limitation, applicable securities laws and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or Permit or occupational safety or health law, rule or regulation.
Requisite Lenders means, as of any date, Lenders (which must include the Lender then acting as Administrative Agent) having at least 66 2/3% of the aggregate amount of the Commitments, or, if the Commitments have been terminated or reduced to zero, Lenders holding at least 66 2/3% of the principal amount outstanding under the Loan, provided that (a) in determining such percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of the Loan of Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata Shares of the Loan of such Defaulting Lenders, and (b) at all times when two or more Lenders are party to this Agreement, the term Requisite Lenders shall in no event mean less than two Lenders.
Reserve Percentage is at any time the percentage announced by Administrative Agent as the reserve percentage under Regulation D for loans and obligations making reference to an Applicable LIBO Rate for a Fixed Rate Period or time remaining in a Fixed Rate Period on a Price Adjustment Date, as appropriate. The Reserve Percentage shall be based on Regulation D or other regulations from time to time in effect concerning reserves for Eurocurrency Liabilities as defined in Regulation D from related institutions as though Administrative Agent were in a net borrowing position, as promulgated by the Board of Governors of the Federal Reserve System, or its successor.
Second Extended Maturity Date means January 27, 2018.
Second Extension Option shall have the meaning given to such term in Section 2.14.
Secured Swap Obligations means all liabilities of Borrowers under any Swap Agreement; provided that any such liabilities under any Swap Agreement with an Affiliate of a Lender shall not constitute Swap Obligations hereunder unless and until such liabilities are certified as such in writing to Administrative Agent by Borrowers and such Affiliate of a Lender.
Security Documents means, individually and collectively, each of the deeds of trust and mortgages (including any modifications or amendments thereto) executed by a Borrower in favor of Administrative Agent, for the benefit of Lenders, which recite that they are security for the Loan, as the same may be amended, supplemented, replaced or modified from time to time.
Single Purpose Entity means a corporation or other limited liability organization which, at all times since its formation and thereafter, was and will be organized solely for the purpose of acquiring and developing its interest in a Property.
Solvent means, as to any Person at the time of determination, that such Person (a) owns property the value of which (both at fair valuation and at present fair salable value and taking into account (i) the value of such Persons rights of reimbursement, contribution, subrogation and indemnity against any other Person, and (ii) the value of any property, owned by another Person, that secures any liabilities of the Person whose Solvency is being determined) is equal to or greater than the amount required to pay all of such Persons liabilities (including contingent liabilities and debts); (b) is able to pay all of its debts as such debts mature; and (c) has capital sufficient to carry on its business and transaction and all business and transactions in which it is about to engage.
Subdivision Map shall have the meaning given to such term in Section 9.5.
Swap Agreement means any rate swap, forward rate, cap, floor, collar, exchange, hedge or similar transaction (including, but not limited to, any transaction subject to the terms of any form of master agreement published by the International Swaps and Derivatives Association, Inc., and any related confirmations) entered
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into between Borrowers and any Lender or any Affiliate of any Lender, providing protection against fluctuations in interest rates with respect to the Loan.
Swept Funds Blocked Account shall have the meaning given to such term in Section 8.1.
Swept Funds Disbursement Account shall have the meaning given to such term in Section 8.1.
Termination Payment shall have the meaning given to such term in Section 9.3(d).
Title Policy means each ALTA Lenders Policy of Title Insurance issued or to be issued by Commonwealth Land Title Insurance Company with respect to the Properties, together with any endorsements which Administrative Agent may require. Such policies shall, insure Administrative Agent, for the benefit of Lenders, in the aggregate amount of the outstanding principal amount of the Loan, of the validity and priority of the liens of the Security Documents on the Properties, subject only to matters approved by Administrative Agent in writing and shall be referred to herein together as the Title Policies.
Torrey Reserve Borrower means, KBSII Torrey Reserve West, LLC, a Delaware limited liability company.
Torrey Reserve Holdback Amount means an amount equal to $15,298,132, or such lesser amount as would cause the conditions in Section 3.4(b)(viii) to be satisfied.
Torrey Reserve Property shall mean 3390, 3394 and 3398 Carmel Mountain Road, San Diego, California.
Two Westlake Borrower means a Single Purpose Entity that owns the Two Westlake Property and is an Affiliate of Borrowers.
Two Westlake Property means the Property located at 580 Westlake Park Blvd., Houston, Texas.
Two Westlake Holdback Amount means an amount equal to $48,300,000, or such lesser amount as would cause the conditions in Section 3.4(c)(viii) to be satisfied.
Variable Rate - means the sum of: (a) the LIBOR Market Index Rate and (b) the Applicable Spread; provided, that if for any reason the LIBOR Market Index Rate is unavailable, Variable Rate shall mean the sum of: (a) the per annum rate of interest equal to the Federal Funds Rate plus 1.50%, and (b) the Applicable Spread.
Wells Fargo shall have the meaning given to such term in the preamble hereto.
1.2 SCHEDULES AND EXHIBITS INCORPORATED. Schedules 1.1(A), 1.1(B), 1.1(C), 6.3, 6.11, 6.24, and 7.1 and Exhibits A, B, C, D, E, F, G, H, I, J and K all attached hereto, are hereby incorporated into this Agreement.
ARTICLE 2. LOAN
2.1 LOAN. By and subject to the terms of this Agreement, Administrative Agent and Lenders have agreed to make a loan to Borrowers in the aggregate principal sum of Three Hundred and Sixty Million Dollars ($360,000,000) (which amount may be increased up to a maximum amount of $372,000,000, subject to the terms of Section 2.15), which Loan shall be evidenced by the Notes. The Notes shall be secured, in part, by the Security Documents encumbering certain real property and improvements as legally defined therein. The Loan shall be used to finance the Properties and for such other purposes as Borrowers may elect.
2.2 LOAN FEES. Borrowers shall pay to Administrative Agent, at Loan closing, a loan fee as set forth in a separate letter agreement between Borrowers and Administrative Agent. Additionally, Borrowers shall pay to Administrative Agent for Administrative Agents sole benefit certain other fees, each in the amount and at the times as set forth in a separate letter agreement between Borrowers and Administrative Agent dated January 27, 2011 (the Fee Letter).
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2.3 LOAN DOCUMENTS. Borrowers shall execute and deliver to Administrative Agent (or cause to be executed and delivered) concurrently with this Agreement each of the documents, properly executed and in recordable form, as applicable, described in Exhibit B as Loan Documents, together with those documents described in Exhibit B as Other Related Documents, but excluding the deeds of trust relating to the I-81 Properties, the Torrey Reserve Property, the Two Westlake Property and any Future Property, each of which shall be delivered when required pursuant to Section 3.4.
2.4 EFFECTIVE DATE. The date of the Loan Documents is for reference purposes only. The effective date of delivery and transfer to Administrative Agent of the security under the Loan Documents and of Borrowers and Lenders obligations under the Loan Documents shall be the Effective Date.
2.5 MATURITY DATE. The outstanding balance of the Loan, together with all accrued and unpaid interest and other amounts accrued and unpaid under the Loan Documents, shall be payable in full on the Maturity Date.
2.6 AMENDED AND RESTATED AND CONSOLIDATED LOAN. Borrowers acknowledge that this Agreement amends and restates and consolidates the Horizon Loan Agreement and the National City Loan Agreement and that such amendment and restatement shall not cause or constitute a novation, release, impairment or discharge of the obligations existing under the Horizon Loan Agreement or the National City Loan Agreement. Borrowers acknowledge that as of the Effective Date, the Original Horizon Loan has been disbursed by Lenders in the aggregate principal amount of $40,621,915 and the Original National City Loan has been disbursed by Lenders in the aggregate principal amount of $69,000,000.
2.7 INTEREST ON THE LOAN.
(a) Interest Payments. Interest accrued on the outstanding principal balance of the Loan shall be due, and payable in the manner provided in Section 2.8, on the first Business Day of each month commencing with the first month after the Effective Date.
(b) Default Interest. Notwithstanding the rates of interest specified in Sections 2.7(e) below and the payment dates specified in Section 2.7(a), at Requisite Lenders discretion at any time following the occurrence and during the continuance of any Default, the principal balance of the Loan then outstanding and, to the extent permitted by applicable law, any interest payments on the Loan not paid when due, shall bear interest payable upon demand at the Alternate Rate. All other amounts due Administrative Agent or Lenders (whether directly or for reimbursement) under this Agreement or any of the other Loan Documents if not paid when due, or if no time period is expressed, if not paid within ten (10) days after demand, shall likewise, at the option of Requisite Lenders, bear interest from and after demand at the Alternate Rate.
(c) Late Fee. Borrowers acknowledge that late payment to Administrative Agent will cause Administrative Agent and Lenders to incur costs not contemplated by this Agreement. Such costs include, without limitation, processing and accounting charges. Therefore, if Borrowers fail timely to pay interest due hereunder within fifteen (15) days after such payment is due, then Borrowers shall at, Administrative Agents option, pay a late or collection charge equal to four percent (4%) of the amount of such unpaid interest payment to Administrative Agent (for the benefit of Lenders). Borrowers and Administrative Agent agree that this late charge represents a reasonable sum considering all of the circumstances existing on the date hereof and represents a fair and reasonable estimate of the costs that Administrative Agent and Lenders will incur by reason of late payment. Borrowers and Administrative Agent further agree that proof of actual damages would be costly and inconvenient. Acceptance of any late charge shall not constitute a waiver of the default with respect to the overdue installment, and shall not prevent Administrative Agent from exercising any of the other rights available hereunder or any other Loan Document. Such late charge shall be paid without prejudice to any other rights of Administrative Agent.
(d) Computation of Interest. Interest shall be computed on the basis of the actual number of days elapsed in the period during which interest or fees accrue and a year of three hundred sixty (360) days on the principal balance of the Loan outstanding from time to time. In computing interest on the Loan, the date of the making of a disbursement under the Loan shall be included and the date of payment
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shall be excluded. Notwithstanding any provision in this Section 2.7, interest in respect of the Loan shall not exceed the maximum rate permitted by applicable law.
(e) Effective Rate. The Effective Rate upon which interest shall be calculated for the Loan shall, from and after the Effective Date of this Agreement, be one or more of the following:
(i) Provided no Default exists under this Agreement:
(A) For those portions of the principal balance of the Notes which are not Fixed Rate Portions, the Effective Rate shall be the Variable Rate.
(B) For those portions of the principal balance of the Notes which are Fixed Rate Portions, the Effective Rate for the Fixed Rate Period thereof shall be the Fixed Rate accepted by Borrowers for the Fixed Rate Period selected by Borrowers with respect to each Fixed Rate Portion and set in accordance with the provisions hereof.
(C) With respect to any portion of the Loan then subject to a Swap Agreement, Borrowers may not select a rate of interest, including, without limitation, a Fixed Rate for a Fixed Rate Period, that is inconsistent with the terms of such Swap Agreement.
(D) If any of the transactions necessary for the calculation of interest at any Fixed Rate requested or selected by Borrowers should be or become prohibited or unavailable to Administrative Agent, or, if in Administrative Agents good faith judgment it is not possible or practical for Administrative Agent to set a Fixed Rate for a Fixed Rate Portion and Fixed Rate Period as requested or selected by Borrowers, the Effective Rate for the principal balance of the Notes subject to such unavailable interest rate shall remain or revert to the Variable Rate.
(ii) During such time as a Default exists under this Agreement; or from and after the date on which all sums owing under the applicable Note becomes due and payable by acceleration or otherwise; or from and after the date on which the Collateral or any portion thereof or interest therein, is sold, transferred, mortgaged, assigned, or encumbered, whether voluntarily or involuntarily, or by operation of law or otherwise, without Administrative Agents prior written consent (except as otherwise permitted herein or in any of the Loan Documents) (whether or not the sums owing under the applicable Note becomes due and payable by acceleration); or from and after the Maturity Date, then at the option of Requisite Lenders in each case, the interest rate applicable to the then outstanding principal balance of the Loan shall be the Alternate Rate.
(f) Selection of Fixed Rate. Provided no Default or Potential Default exists under this Agreement, Borrowers, at their option and upon satisfaction of the conditions set forth herein, may request a Fixed Rate as the Effective Rate for calculating interest on the portion of the unpaid principal balance and for the period selected in accordance with and subject to the following procedures and conditions, provided, however, that Borrowers may not have in effect at any one time more than five (5) Fixed Rates:
(i) Borrowers shall deliver to the Los Angeles Loan Center, 2120 East Park Place, Suite 100, El Segundo, California, 90245, Attn: Eva Lopez, with a copy to: Wells Fargo Bank, National Association, Real Estate Group, Orange County, 2030 Main Street, Suite 800, Irvine, CA 92614, Attention: Bryan Stevens, Senior Vice President, or such other addresses as Administrative Agent shall designate, an original or facsimile Fixed Rate Notice no later than 9:00 A.M. (California time), and not less than three (3) nor more than five (5) Business Days prior to the proposed Fixed Rate Period for each Fixed Rate Portion. Any Fixed Rate Notice pursuant to this subsection (i) is irrevocable.
Administrative Agent is authorized to rely upon the telephonic request and acceptance of any of the following, acting alone, as Borrowers duly authorized agents, or such additional authorized agents as Borrowers shall designate in writing to Administrative Agent: Kim
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Westerbeck, Lori Lewis, Stacie Yamane, Dave Snyder, Ann Marie Watters, Robert M. Durand and Marne Kaufman. Borrowers telephonic notices, requests and acceptances shall be directed to such officers of Administrative Agent as Administrative Agent may from time to time designate.
(ii) Borrower may, with a timely and complying Fixed Rate Notice, elect (A) to convert all or a portion of the principal balance of the Notes which is accruing interest at the Variable Rate to a Fixed Rate Portion, or (B) to convert a matured Fixed Rate Portion into a new Fixed Rate Portion, provided, however, that the aggregate amount of the advance being converted into or continued as a Fixed Rate Portion shall comply with the definition thereof as to Dollar amount. The conversion of a matured Fixed Rate Portion back to the Variable Rate or to a new Fixed Rate Portion shall occur on the last Business Day of the Fixed Rate Period relating to such Fixed Rate Portion. Each Fixed Rate Notice shall specify (A) the amount of the Fixed Rate Portion, (B) the Fixed Rate Period, and (C) the Fixed Rate Commencement Date.
(iii) Upon receipt of a Fixed Rate Notice in the proper form requesting a Fixed Rate Portion advance under subsections (i) and (ii) above, Administrative Agent shall determine the Fixed Rate applicable to the Fixed Rate Period for such Fixed Rate Portion two (2) Business Days prior to the beginning of such Fixed Rate Period. Each determination by Administrative Agent of the Fixed Rate shall be conclusive and binding upon the parties hereto in the absence of manifest error. Administrative Agent shall deliver to Borrowers and each Lender (by facsimile) an acknowledgment of receipt and confirmation of the Fixed Rate Notice; provided, however, that failure to provide such acknowledgment of receipt and confirmation of the Fixed Rate Notice to Borrowers or any Lender shall not affect the validity of such rate.
(iv) If Borrowers do not make a timely election to convert all or a portion of a matured Fixed Rate Portion into a new Fixed Rate Portion in accordance with this Section 2.7(f) above, such Fixed Rate Portion shall begin to accrue interest at the Variable Rate upon the expiration of the Fixed Rate Period applicable to such Fixed Rate Portion.
(g) Fixed Rate Taxes, Regulatory Costs and Reserve Percentages. Upon Administrative Agents demand, Borrower shall pay to Administrative Agent for the account of each Lender, in addition to all other amounts which may be, or become, due and payable under this agreement and the other Loan Documents, any and all Fixed Rate Taxes and Regulatory Costs, to the extent they are not internalized by calculation of a Fixed Rate. Further, at Administrative Agents option, the Fixed Rate shall be automatically adjusted by adjusting the Reserve Percentage, as determined by Administrative Agent in its prudent banking judgment, from the date of imposition (or subsequent date selected by Administrative Agent) of any such Regulatory Costs. Administrative Agent shall notify the Borrower of any event entitling any Lender to Fixed Rate Taxes or Regulatory Costs (setting forth in reasonable detail the basis of such determination) as promptly as practicable, but in any event within ninety (90) days after Administrative Agent obtains actual knowledge thereof; provided that if Administrative Agent fails to give such notice within ninety (90) days after it obtains actual knowledge of such an event, such Lender shall be entitled to payment only for Fixed Rate Taxes and Regulatory Costs incurred from and after the date ninety (90) days prior to the date that Administrative Agent does give such notice.
(h) Fixed Rate Price Adjustment. Borrowers acknowledge that prepayment or acceleration of a Fixed Rate Portion during a Fixed Rate Period shall result in Lenders incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. Therefore, on the date a Fixed Rate Portion is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise (Price Adjustment Date), Borrowers will pay Administrative Agent, for the account of each Lender (in addition to all other sums then owing to Lenders) an amount (Fixed Rate Price Adjustment) equal to the then present value of (i) the amount of interest that would have accrued on the Fixed Rate Portion for the remainder of the Fixed Rate Period at the Fixed Rate set on the Fixed Rate Commencement Date, less (ii) the amount of interest that would accrue on the same Fixed Rate Portion for the same period if the Fixed Rate were set on the Price Adjustment Date at the Applicable LIBO Rate in effect on the Price Adjustment Date. The present value shall be calculated by the Administrative Agent, for the benefit of the Lenders, using as a discount rate the LIBO Rate quoted on the Price Adjustment Date.
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By initialing this provision where indicated below, Borrowers confirm that Lenders agreement to make the Loan at the interest rates and on the other terms set forth herein and in the other Loan Documents constitutes adequate and valuable consideration, given individual weight by Borrowers, for this agreement
Borrower Initials.
Borrower Initials.
Borrower Initials.
Borrower Initials.
Borrower Initials.
Borrower Initials.
Borrower Initials.
Borrower Initials.
(i) Purchase, Sale and Matching of Funds. Borrowers understand, agree and acknowledge the following: (a) Lenders have no obligation to purchase, sell and/or match funds in connection with the use of a LIBO Rate as a basis for calculating a Fixed Rate or Fixed Rate Price Adjustment; (b) a LIBO Rate is used merely as a reference in determining a Fixed Rate and Fixed Rate Price Adjustment; and (c) Borrowers have accepted a LIBO Rate as a reasonable and fair basis for calculating a Fixed Rate and a Fixed Rate Price Adjustment. Borrowers further agree to pay the Fixed Rate Price Adjustment, Fixed Rate Taxes and Regulatory Costs, if any, whether or not any Lender elects to purchase, sell and/or match funds.
2.8 | PAYMENTS. |
(a) Manner and Time of Payment. All principal, interest and fees payable hereunder shall be paid to Administrative Agent and shall be made without condition or reservation of right and free of set-off or counterclaim, in Dollars and by wire transfer (pursuant to Administrative Agents written wire transfer instructions) of immediately available funds for the account of each Lender as applicable, not later than 11:00 A.M. (San Francisco time) on the date due; and funds received by Administrative Agent after that time and date shall be deemed to have been paid on the next succeeding Business Day. Borrowers shall have no obligation to make any payments of amounts due hereunder directly to Lenders; all such amounts shall be payable to Administrative Agent.
(b) Payments on Non-Business Days. Whenever any payment to be made by Borrowers hereunder shall be stated to be due on a day which is not a Business Day, payments shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder and of any fees due under this Agreement, as the case may be.
(c) Auto-Debit. In order to assure timely payment to Administrative Agent, for the benefit of Lenders, of accrued interest, principal, fees and late charges due and owing under the Loan, Borrowers hereby irrevocably authorize Administrative Agent to directly debit the Debit Account for payment when due of all such amounts payable to Administrative Agent or any Lender. Written confirmation of the amount and purpose of any such direct debit shall be given to Borrowers by Administrative Agent not less frequently than monthly. In the event any direct debit hereunder is returned for insufficient funds, Borrowers shall pay Administrative Agent, for the benefit of Lenders, upon demand, in immediately available funds, all amounts and expenses due and owing, including without limitation any late fees incurred, to Administrative Agent or any Lender. Notwithstanding anything to the contrary, Administrative Agent hereby agrees that it shall not auto-debit the Debit Account for interest payments due under the Loan until the seventh (7th) day of each calendar month during the term of the Loan (notwithstanding the fact that interest is due and payable under the Loan on the first day of each month).
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(d) Voluntary Prepayment.
(i) Borrowers may, upon not less than three (3) Business Days prior written notice to Administrative Agent not later than 11:00 A.M. (San Francisco time) on the date given, at any time and from time to time, prepay all or any portion of the Loan.
(ii) Any notice of prepayment given to Administrative Agent under this Section 2.8(d) shall specify the date of prepayment and the principal amount of the prepayment. In the event of a prepayment of any Fixed Rate Portion, Borrower shall concurrently pay any Fixed Rate Price Adjustment payable in respect thereof. Any principal balance reduction shall reduce the Aggregate Loan Commitment by a like amount (which such reduction shall automatically reduce each Lenders Commitment on a pro rata basis), and any such amounts repaid by Borrower may not be reborrowed.
(e) Exit Fee. Concurrently with Borrowers prepayment of the Loan, in whole or in part, and whether or not the Loan is repaid by Borrowers or otherwise satisfied (including in connection with a foreclosure or earlier acceleration of the Loan following a Default or a deed in lieu thereof), in addition to any Fixed Rate Price Adjustment then due, Borrowers shall pay to Administrative Agent a non-refundable exit fee (Exit Fee) with respect to the amount of the Loan prepaid, as follows, with any such Exit Fee deemed fully earned when paid:
Time of Prepayment
|
Amount of Exit Fee
| |
Prior to July 27, 2013 | 2.00%, although this fee will be reduced to 1.00% (in connection with a prepayment of not more than 50% of the Loan, in the aggregate) if the prepayment is due to a sale of a Property (or Properties) to an unaffiliated third party on arms-length terms after May 27, 2012 and prior to July 27, 2013
| |
On or after July 27, 2013 and prior to January 27, 2015 |
1.00% although this fee will be reduced to 0.50% if the prepayment is due to a sale of a Property (or Properties) to an unaffiliated third party on arms-length terms
| |
On or after January 27, 2015 and prior to October 27, 2015 |
0.50%, although there will be no Exit Fee during this period if the prepayment is due to a sale of a Property to an unaffiliated third party on arms-length terms
| |
On or after October 27, 2015 | No Exit Fee
|
Notwithstanding the foregoing, no Exit Fee shall be payable with respect to the payment of the Release Price (i) in connection with the sale of the Granite Tower Property to an unaffiliated third-party purchaser at any time after January 27, 2013, (ii) in connection with the sale of the National City Tower Property to an unaffiliated third-party purchaser at any time after January 27, 2014, or (iii) in the limited circumstances set forth in Section 2.10(a)(vii), Section 2.10(c)(iii)(A), Section 2.15(e), Section 8.1 and Section 9.21(e) below.
2.9 FULL REPAYMENT AND RECONVEYANCE. Upon receipt of all sums owing and outstanding under the Loan Documents, Administrative Agent shall issue full reconveyances of the Properties from the liens of the Security Documents; provided, that Administrative Agent, for the benefit of Lenders, shall have received all escrow, closing and recording costs, the costs of preparing and delivering such reconveyances and any sums then due and payable under the Loan Documents. Lenders obligations to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such full release or reconveyance, and any commitment of Lenders to lend any undisbursed portion of the Loan shall be canceled.
2.10 PARTIAL RELEASE OF PROPERTY.
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(a) From time to time Borrowers may request, upon not less than thirty (30) days prior written notice to Administrative Agent, that a Property be released from the Lien created by the Security Document applicable thereto, which release (the Property Release) shall be effected by the Administrative Agent if the Administrative Agent determines all of the following conditions are satisfied as of the date of such Property Release:
(i) No Default or Potential Default exists or will exist immediately after giving effect to such Property Release by reason of the release of such Property;
(ii) After giving effect to such Property Release, the Aggregate Loan Commitment will be greater than or equal to $25,000,000 and not fewer than three Properties will remain encumbered by the Lien of the Security Documents (provided, for purposes of determining the number of Properties remaining encumbered, (i) the Gateway Center Property (if any portion of such Property remains encumbered at such time) may not be counted as one of the three required Properties and (ii) the I-81 Properties (or any portions thereof that remain encumbered by the Lien of the Security Documents) shall be deemed to be a single Property);
(iii) Borrowers shall confirm (via reasonable substantiating documentation) to the satisfaction of Administrative Agent that, after giving effect to the Property Release, Net Operating Income from the Properties remaining encumbered by the Lien of the Security Documents is sufficient to yield a Loan Constant which is not less than the Minimum Applicable Loan Constant;
(iv) If, after giving effect to the Property Release, (x) the Aggregate Loan Commitment would be less than $70,000,000 or (y) fewer than five (5) Properties would remain encumbered by the Lien of the Security Documents (provided, for purposes of determining the number of Properties remaining encumbered, the I-81 Properties (or any portions thereof that remain encumbered by the Lien of the Security Documents) shall be deemed to be a single Property), the Loan-to-Value Percentage (which, if requested by Administrative Agent, shall be determined based on new Appraisals ordered by Administrative Agent at Borrowers expense (subject to Section 3.2 below)) shall not be greater than fifty percent (50%);
(v) Borrowers shall confirm (via reasonable substantiating documentation) to the satisfaction of Administrative Agent, that, after giving effect to the Property Release:
(A) not more than thirty-five percent (35%) of Gross Rents from all remaining Properties is to be derived from Leases expiring (or which provide for a valid right of termination by the tenant) within the twelve month period following such Property Release; and
(B) not more than forty-five percent (45%) of Gross Rents from all remaining Properties is to be derived from Leases expiring (or which provide for a valid right of termination by the tenant) within the twenty-four month period following such Property Release; and
(C) not more than fifty-five percent (55%) of Gross Rents from all remaining Properties is to be derived from Leases expiring (or which provide for a valid right of termination by the tenant) within the thirty-six month period following such Property Release.
Notwithstanding the foregoing, Borrowers shall be deemed to have satisfied the requirements of this clause (v) even if the percentage of Gross Rents derived from the remaining Properties exceeds the applicable thresholds so long as, after giving effect to the Property Release, the Adjusted Loan Constant (as defined in and calculated in accordance with Exhibit K) is greater than or equal to the Minimum Applicable Loan Constant.
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(vi) Borrowers shall pay to Administrative Agent, for the benefit of Lenders, the applicable Release Price;
(vii) Borrowers shall pay to Administrative Agent any applicable Exit Fee; provided, however, that if, in connection with a proposed sale of a Property to an unaffiliated third-party purchaser, the release of the Property in question would otherwise be prohibited by the provisions of subsection (v) above, then Borrowers shall be permitted, concurrently with the sale of such Property to the unaffiliated third-party purchaser, to obtain a Property Release of such other Property as is necessary in order to satisfy the requirements of such subsection (v) above, without payment of an Exit Fee on the Release Price paid in connection with such additional Property (though Borrowers shall pay an Exit Fee with respect to the Release Price paid on the original Property conveyed to the unaffiliated third party purchaser); and provided further, that if, in connection with a proposed sale of a Property to an unaffiliated third-party purchaser the release of the Property in question would otherwise be prohibited by the provisions of subsection (iii), (iv) or (v) above, then Borrowers shall be permitted, concurrently with the sale of such Property to the unaffiliated third-party purchaser, to repay principal in order to comply with such subsection without payment of an Exit Fee with respect to the amount so repaid; and
(viii) Borrowers shall have delivered to Administrative Agent all documents and instruments reasonably requested by Administrative Agent in connection with such Property Release including, without limitation, the reconveyance or other instruments to be used to effect such Property Release and, if required by Administrative Agent and available, appropriate endorsements to the Title Policies in effect with respect to the remaining Properties.
(ix) If Guarantor has been released from liability under clause (h) of Section 1 of the Limited Guaranty referenced in Exhibit B, then after giving effect to the Property Release, the Par Loan Value allocated to the Granite Tower Property shall not exceed fifty percent (50%) of the aggregate Par Loan Values of all Properties remaining encumbered by Security Documents; provided, however, that if following the applicable Property Release the foregoing condition would not be satisfied, then Borrowers, at their election, may elect to either (A) cause the Granite Property to be released from the lien of the Security Document applicable thereto in accordance with the terms of this Section 2.10 (provided, Borrowers shall have no obligation to pay an Exit Fee with respect to the amount repaid by Borrowers in connection with such Property Release) or (B) cause Guarantors liability under clause (h) of Section 1 of the Limited Guaranty referenced in Exhibit B hereto to be reinstated.
(b) Provided the applicable Borrower does not own any Properties that will remain encumbered by the Lien of the Security Documents following the applicable Property Release, then concurrent with the release of a Property from the Lien created by the Security Document applicable thereto, the Borrower that owns the Property which is the subject of the Property Release shall be automatically released from any future obligations under this Agreement or any of the Loan Documents, excepting, however, any obligations that may arise under the Hazardous Materials Indemnity Agreement.
(c) If Administrative Agent elects to obtain Appraisals of the Properties as a condition to a Property Release (as permitted by this Section 2.10) and has either not received or not had an opportunity to review and approve the Appraisals, or if there is a dispute regarding the Appraisals, then:
(i) Borrowers shall be permitted to release the relevant Property from the Lien of the Security Documents, provided Borrowers deliver one hundred percent (100%) of the net proceeds from the sale of the relevant Property to Administrative Agent;
(ii) Administrative Agent shall hold such proceeds (net of the applicable Release Price which will first be deducted therefrom and applied in reduction of the outstanding principal balance of the Loan as contemplated herein above) in a separate interest-bearing account, with interest accruing for the benefit of Borrowers, which Borrowers hereby pledge as additional collateral for the Loan; and
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(iii) Following Administrative Agents receipt, review and approval of the relevant Appraisal (or Appraisals):
(A) If the Appraisal(s) confirm that the relevant Property Release should not have been permitted, then (1) if such Property Release should not have been permitted due to Borrowers failure to meet a requirement of Section 2.10 that is susceptible to cure by repayment of a portion of the outstanding principal amount of the Loan, then Borrowers shall repay any amounts necessary to satisfy such requirement, but shall not be required to pay an Exit Fee with respect to such repayment and/or (2) if such Property Release should not have been permitted due to Borrowers failure to meet a requirement of Section 2.10 that is susceptible to cure by releasing an additional Property from the Lien of the Security Documents, then Borrowers shall be required to release such additional Property, which release shall be treated in the same manner as a Property Release under clause (a)(vii) above (i.e., no Exit Fee shall be due on account of such Property Release); and
(B) If (1) the Appraisal(s) confirm that Borrowers were entitled to the Property Release (i.e., Borrowers have satisfied all of the conditions to such Property Release set forth in Section 2.10) or (2) Borrowers subsequently satisfy the conditions set forth in Section 2.10 by releasing an additional Property or repaying a portion of the outstanding principal amount of the Loan in accordance with clause (A) above, then any sales proceeds remaining on deposit with Administrative Agent shall be released to Borrowers.
2.11 LENDERS ACCOUNTING. Administrative Agent shall maintain a loan account (the Loan Account) on its books in which shall be recorded (a) the names and addresses and the Pro Rata Shares of the commitment of each of the Lenders, and principal amount of the Loan owing to each Lender from time to time, and (b) all repayments of principal and payments of accrued interest, as well as payments of fees required to be paid pursuant to this Agreement. All entries in the Loan Account shall be made in accordance with Administrative Agents customary accounting practices as in effect from time to time. Monthly or at such other interval as is customary with Administrative Agents practice, Administrative Agent will render a statement of the Loan Account to Borrowers and will deliver a copy thereof to each Lender. Each such statement shall be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein (absent manifest error).
2.12 SECURED SWAP OBLIGATIONS. Lenders agree that the Security Documents shall secure the payment of the Loan and the payment of Borrowers obligations under any Secured Swap Obligations on a pari passu basis.
2.13 PAR LOAN VALUE. The parties hereby agree, for informational and reference purposes, that the Par Loan Value of each Property, except any Future Property that becomes a Property hereunder, is as set forth on Schedule 1.1(B) attached hereto. Administrative Agent shall determine the Par Loan Value of each Future Property when such Future Property becomes a Property hereunder, in Administrative Agents reasonable discretion.
2.14 EXTENSION OPTIONS. Borrowers shall have the right to extend the Maturity Date from the Initial Maturity Date to the First Extended Maturity Date (the First Extension Option) and, provided Borrower has validly exercised the First Extension Option, Borrowers shall have the right to extend the Maturity Date from the First Extended Maturity Date to the Second Extended Maturity Date (the Second Extension Option), in each case subject to Borrowers satisfaction of the following conditions:
(a) Borrowers shall give Administrative Agent written notice of Borrowers request for an extension of the Maturity Date not earlier than ninety (90) days, nor later than forty-five (45) days, prior to (x) the Initial Maturity Date, with respect to the First Extension Option, or (y) the First Extended Maturity Date, with respect to the Second Extension Option;
(b) As of the date of such notice, and as of (x) the Initial Maturity Date, with respect to the First Extension Option, or (y) the First Extended Maturity Date, with respect to the Second Extension Option, there shall exist no Default or Potential Default (provided that Borrowers shall have an opportunity
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to cure such Potential Default prior to such Maturity Date to the extent of applicable cure periods under this Agreement or the applicable Loan Document);
(c) At Administrative Agents request, Borrowers shall have caused to be issued to Lenders, at Borrowers sole cost and expense, appropriate endorsements to the Title Policies (but only to the extent available) which confirm the existence and priority of the Liens securing the Obligations in connection with the requested extension;
(d) There shall have been no change in the financial condition of Borrowers, or in the condition of the Properties from that which existed on the Effective Date (or with respect to a Property that became a Property hereunder after the Effective Date, from the condition of such Property on the date on which it first became a Property hereunder) which change, as determined by Administrative Agent in its reasonable discretion, has a Material Adverse Effect;
(e) The Loan-to-Value Percentage based upon new (or recently obtained) Appraisals obtained by Administrative Agent at Borrowers sole cost and expense and with valuation dates within sixty (60) days of (x) the Initial Maturity Date, with respect to the First Extension Option, or (y) the First Extended Maturity Date, with respect to the Second Extension Option, shall not exceed the Maximum Applicable Loan-to-Value Percentage;
(f) Borrowers shall have provided to Administrative Agent satisfactory evidence (which evidence shall include, without limitation, a detailed current rent roll and a current historical operating statement for each Property) that the Net Operating Income from the Properties is sufficient to yield a Loan Constant which is not less than the Minimum Applicable Loan Constant as of (x) the Initial Maturity Date, with respect to the First Extension Option, or (y) the First Extended Maturity Date, with respect to the Second Extension Option;
(g) The Net Operating Income from the Properties shall be sufficient to yield a Debt Service Coverage Ratio of not less than the Minimum DSCR as of (x) the Initial Maturity Date, with respect to the First Extension Option, or (y) the First Extended Maturity Date, with respect to the Second Extension Option; and
(h) Borrowers shall pay to Administrative Agent a non-refundable extension fee in an amount equal to two tenths of one percent (0.20%) of the then-current Aggregate Loan Commitment on or before (x) the Initial Maturity Date, with respect to the First Extension Option, and (y) the First Extended Maturity Date, with respect to the Second Extension Option.
Notwithstanding the foregoing, with respect to the exercise of both the First Extension Option and the Second Extension Option, Borrowers shall have the right to repay principal outstanding under the Loan in such amount as may be required to reduce the Aggregate Loan Commitment, after giving effect to the required reduction, to an amount such that Borrowers are in compliance with subsections (e), (f) and (g) above.
2.15 INCREASE IN AGGREGATE LOAN COMMITMENT.
(a) In the event that (i) the 550 Oak Ridge Property is a Property hereunder, and (ii) Amazon.com shall have exercised the Amazon Expansion Option, the Borrowers shall have the right to request a one-time increase in the Aggregate Loan Commitment to fund the construction of such expansion space (the Amazon Increase) by providing written notice to the Administrative Agent (and Lender shall respond to such Borrowers request promptly, however not later than thirty (30) days from Lenders receipt thereof); provided, however, that the aggregate amount of such increase shall not exceed $12,000,000 and no Lender shall be obligated to participate in any such Commitment increase.
(b) The Administrative Agent shall notify the Lenders of such request and shall manage all aspects of the syndication of such increase in the Aggregate Loan Commitment, including decisions as to the allocations of the increase in the Aggregate Loan Commitment among the Lenders and adjustment in the Pro Rata Shares of the Lenders to give effect to the changed Commitments. No Lender shall be obligated in any way whatsoever to increase its Commitment.
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(c) The Amazon Increase shall be funded solely by those Lenders participating in such Amazon Increase, based on the pro-rata shares of the Lender group participating in such Amazon Increase.
(d) Effecting the increase of the Aggregate Loan Commitment under this Section is subject to the following conditions precedent:
(i) the lease of the expansion premises under the Amazon Lease shall have a term of no fewer than five (5) years and shall be in form and substance reasonably satisfactory to Administrative Agent;
(ii) taking account of such increase, the Loan-to-Value Percentage (calculated by taking the stabilized Appraised Value of the 550 Oak Ridge Property and such expansion space together with the aggregate Appraised Values of the remainder of the Properties) shall not exceed the Maximum Applicable Loan-to-Value Percentage;
(iii) taking account of such increase, the Loan Constant (calculated by taking the pro forma Net Operating Income with respect to such expansion space together with the Net Operating Income of the remainder of the Properties) shall be greater than or equal to the Minimum Applicable Loan Constant;
(iv) Administrative Agent shall have received and approved all other items and information requested by Administrative Agent with respect to the construction of such expansion space, including, without limitation, a project budget, construction schedule, plans and specifications and copies of all required building permits;
(v) no Default or Potential Default shall exist on the date of Borrowers request for the Amazon Increase or on the effective date of such increase;
(vi) the representations and warranties made or deemed made by the Borrowers or any other Loan Party in any Loan Document to which such Loan Party is a party shall be true and correct in all material respects on the date of Borrowers request for the Amazon Increase and on the effective date of such increase, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically and expressly permitted hereunder;
(vii) Administrative Agent shall have received each of the following, in form and substance satisfactory to the Administrative Agent: (w) if not previously delivered to the Administrative Agent, copies certified by an authorized officer of (A) all limited liability company or other necessary action taken by each of the Borrowers to authorize such increase and (B) all limited liability company or other necessary action taken by the Guarantor authorizing the guaranty of such increase; (x) an opinion of counsel to the Borrowers and the Guarantor, and addressed to the Administrative Agent and the Lenders covering such matters as reasonably requested by the Administrative Agent; (y) replacement Notes executed by the Borrowers, payable to any Lenders increasing their Commitments, in the amount of such Lenders Commitment at the time of the effectiveness of the applicable increase in the Aggregate Loan Commitment; and (z) (i) an additional advance endorsement to the Title Policy for the 550 Oak Ridge Property in the amount of the Amazon Increase and in form acceptable to Administrative Agent and (ii) if required by Administrative Agent, modified tie-in endorsements for the Title Policies for all of the Properties (including the 550 Oak Ridge Property) effective to aggregate coverage under all of the Title Policies; provided, however, that Borrowers shall not be responsible for any costs in excess of $5,000 relating specifically to the tie-in endorsements (notwithstanding the foregoing, no date-down endorsements shall be required for the other properties);
(viii) Borrowers and Administrative Agent shall have executed such documents as may be reasonably requested by Administrative Agent for purposes of memorializing the conditions to disbursement of the Amazon Increase, which conditions shall be reasonably
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consistent with Administrative Agents typical construction disbursement conditions for construction projects of similar size, type, quality and character; and
(ix) Borrowers shall have paid to Administrative Agent, for the benefit of the Lenders funding the Amazon Increase, a commitment fee in an amount equal to (A) the lesser of (1) seven tenths of one percent (0.70%) and (2) one fifth of one percent (0.20%) multiplied by the number of years remaining in the term of the Loan (excluding any extension terms and pro-rated for any partial years) multiplied by (B) the increase in the Aggregate Loan Commitment agreed to pursuant to the foregoing.
(e) Notwithstanding anything herein to the contrary, if the Lenders do not elect to increase their respective Commitments in amounts sufficient to fund the requested increase in the Aggregate Loan Commitment, Borrowers shall have the right to effect a Property Release with respect to the 550 Oak Ridge Property in accordance with the provisions of Section 2.10 hereof, provided, that no Exit Fee shall be payable in connection therewith and further provided, that if the outstanding principal amount of the Loan is greater than $133,300,000 as of the date prior to such Property Release, then the Release Price for the 550 Oak Ridge Property shall be the Par Loan Value of such Property.
ARTICLE 3. DISBURSEMENT
3.1 CONDITIONS PRECEDENT. Administrative Agents and Lenders obligation to make any disbursements or take any other action under the Loan Documents shall be subject to satisfaction of each of the following conditions precedent:
(a) There shall exist no Default or Potential Default, as defined in this Agreement, or Default as defined in any of the other Loan Documents or in the Other Related Documents; and
(b) Administrative Agent shall have received all Loan Documents, other documents, instruments, policies, and forms of evidence or other materials requested by Administrative Agent or any Lender under the terms of this Agreement or any of the other Loan Documents; and
(c) Administrative Agent shall have received, with respect to each of the Properties:
(i) To the extent available, operating statements for the previous two (2) years;
(ii) A current rent roll, in form satisfactory to Administrative Agent, and certified by the applicable Borrower to be true and correct to the best of such Borrowers knowledge and, to the extent available, an uncertified two-year operating and occupancy history;
(iii) A Title Policy insuring the first lien priority of the Security Document encumbering such Property, together with all endorsements thereto requested by Administrative Agent, including, as applicable, a tie-in endorsement effective to aggregate the coverage of such Title Policy with the coverage of the Title Policies insuring all of the other Properties;
(iv) A survey certified by a surveyor licensed in the applicable jurisdiction to have been prepared in accordance with the then effective Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, including a certification that the applicable Property is not located in a Special Flood Hazard Area as defined by the Federal Insurance Administration;
(v) A Phase I environmental assessment, not more than twelve (12) months old for any new Property;
(vi) Copies (true and correct, to the best of the applicable Borrowers knowledge) of all Major Agreements and Leases affecting a Property;
(vii) Copies (true and correct, to the best of the applicable Borrowers knowledge) of engineering, mechanical, structural or maintenance studies performed (if not previously performed, such studies as shall be required by Administrative Agent);
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(viii) A property condition report, not more than six (6) months old for any new Property; and
(ix) an estoppel certificate, in form acceptable to Administrative Agent, from each tenant leasing more than fifty thousand (50,000) square feet of net rentable area of a Property as of the Effective Date; provided Administrative Agent hereby agrees to accept, in satisfaction of the forgoing, estoppel certificates obtained by Borrowers in connection with the acquisition of the relevant Properties (with the exception of Torrey Reserve Property) as long as such estoppel certificates may be relied on by the applicable Borrowers lender.
(d) Administrative Agent shall have received evidence that Borrowers have obtained an interest rate protection product in the form of a Swap Agreement reasonably acceptable to Administrative Agent, which product shall hedge at least fifty percent (50%) of the Aggregate Loan Commitment actually disbursed hereunder (taking into account the requested disbursement) through January 31, 2014; and
(e) Administrative Agent shall have received from each Lender such Lenders Pro Rata Share of such disbursement.
3.2 APPRAISALS. The Appraised Value of the Properties shall be determined or redetermined, as applicable, under each of the following circumstances:
(a) Administrative Agent will determine the Appraised Value of the Properties on or before the Effective Date, and, with respect to a property that is not a Property as of the Effective Date, as a condition to such Property becoming a Property hereunder, as contemplated by Section 3.4 below;
(b) At Administrative Agents election, Administrative Agent will determine the Appraised Value of the Properties in connection with, and prior to, the extension of the Maturity Date to the First Extended Maturity Date and/or the Second Extended Maturity Date;
(c) At Administrative Agents election, but solely to the extent Loan-to-Value Percentage is being determined in connection with Section 2.10(a)(iv) above, Administrative Agent will determine the Appraised Value of the Properties in connection with, and prior to, a Property Release;
(d) At any time and from time to time, upon five (5) Business Days prior written notice to Borrowers, Administrative Agent may redetermine the Appraised Value of the affected Properties (i.e., affected by the events set forth below) in any of the following circumstances:
(i) if a major casualty, condemnation, contamination or violation of any Requirements of Law occurs, or is discovered to exist, with respect to one or more of the Properties, or if Administrative Agent reasonably believes that a Material Adverse Effect may have occurred; or
(ii) if necessary in order to comply with Requirements of Law applicable to Administrative Agent or any of the Lenders.
Administrative Agent shall notify Borrowers of any change in Appraised Value. Except as otherwise provided, the costs of any Appraisal commissioned pursuant to this Section 3.2 shall be paid by Borrowers; provided, however, that, with respect to Appraisals commissioned pursuant to subsection (a) and (c) above, (i) Borrower shall not be obligated to pay for the cost of an Appraisal of any Property more frequently than once in any six (6) month period and (ii) Borrower shall only be required to pay for two (2) Appraisals on any Property in any twelve (12) month period for a maximum of three (3) Properties.
Notwithstanding anything to the contrary contained in this Section 3.2, Administrative Agent may reappraise one or more of the Properties at any time, without limitation, at its sole cost and expense.
3.3 INITIAL DISBURSEMENT. Subject to the conditions set forth in Section 3.1, the Initial Disbursement, which amount is equal to the Aggregate Loan Commitment, less all amounts disbursed prior to the Effective Date with respect to the Original Horizon Loan and the Original National City Loan, less an amount
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equal to the Aggregate Holdback, shall be disbursed at the closing to or for the account of, and as directed by, Borrowers. An amount equal to the Aggregate Holdback shall be retained by Administrative Agent and disbursed to Borrowers, if at all, in accordance with the terms and conditions of Section 3.4 below.
3.4 SUBSEQUENT DISBURSEMENT. The I-81 Holdback Amount shall be disbursed to or for the benefit of, and as directed by, Borrowers, within five (5) Business Days after Borrowers request to Administrative Agent after each condition set forth in subsection (a) below has been satisfied. The Torrey Reserve Holdback Amount shall be disbursed to or for the benefit of, and as directed by, Borrowers, within five (5) Business Days after Borrowers request to Administrative Agent after each condition set forth in subsection (b) below has been satisfied. Any remaining portion of the Aggregate Holdback, if any, may be disbursed, if at all, in one or more disbursements, to or for the benefit of, and as directed by, Borrowers, within five (5) Business Days after Borrowers request to Administrative Agent after each condition set forth in subsection (c) below has been satisfied.
(a) I-81 Holdback Disbursement. The I-81 Holdback Amount shall be disbursed only after satisfaction of the conditions set forth in Sections 3.1(a) and 3.1(e) and subject to the following conditions:
(i) the acquisition by the I-81 Borrower of the I-81 Properties;
(ii) the execution by the I-81 Borrower of a Joinder to this Agreement and a joinder to the Hazardous Materials Indemnity Agreement in the form attached thereto;
(iii) the execution, and delivery to Administrative Agent, by each of the Borrowers, including the I-81 Borrower, of replacement Notes, in form acceptable to the Lenders;
(iv) the encumbrance of each of the I-81 Properties by a Security Document;
(v) Administrative Agents receipt of a legal opinion of counsel to Borrowers regarding the enforceability of the Loan Documents, including the Security Documents encumbering each of the I-81 Properties, against the I-81 Borrower, as well as such other matters as Administrative Agent shall reasonably request;
(vi) Administrative Agents receipt from the Title Company of an amendment to the reinsurance agreement confirming Administrative Agents requested allocation of the increase in liability resulting from the addition of the I-81 Properties to the aggregate liability under the Title Policies;
(vii) Administrative Agents receipt, at Borrowers sole cost and expense, of each of the items listed in Section 3.1(c) hereof;
(viii) the determination by Administrative Agent of the aggregate Appraised Value of the I-81 Properties, which determination shall be made with reference to Appraisals ordered by Administrative Agent for such purpose at Borrowers expense;
(ix) the I-81 Holdback Amount, together with the then outstanding principal amount of the Loan, shall not exceed the lesser of (A) an amount equal to fifty-seven percent (57%) of the sum of (x) the Appraised Value of all Properties then-currently encumbered by a Security Document, in the aggregate, plus (y) the aggregate Appraised Value of the I-81 Properties, (B) an amount equal to fifty-seven percent (57%) of the aggregate actual acquisition cost paid by the Borrowers and the I-81 Borrower, or one or more Affiliates thereof, as applicable, to purchase (x) the Properties then-currently encumbered by a Security Document and (y) the I-81 Properties, and (C) an amount equal to the quotient of (x) the sum of (i) the Net Operating Income for all Properties then-currently encumbered by a Security Document, in the aggregate, plus (ii) the Net Operating Income for the I-81 Properties, divided by (B) 0.13;
(x) the delivery by the I-81 Borrower of such other due diligence items as are reasonably requested by Administrative Agent; and
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(xi) Borrowers payment to Administrative Agent of the portion of the Holdback Fee applicable to the portion of the Aggregate Holdback being disbursed.
(b) Torrey Reserve Holdback Disbursement. The Torrey Reserve Holdback Amount shall be disbursed only after satisfaction of the conditions set forth in Sections 3.1(a) and 3.1(e) and the following conditions:
(i) the execution by the Torrey Reserve Borrower of a Joinder to this Agreement and a joinder to the Hazardous Materials Indemnity Agreement in the form attached thereto;
(ii) the execution, and delivery to Administrative Agent, by each of the Borrowers, including the Torrey Reserve Borrower, of replacement Notes, in form acceptable to the Lenders;
(iii) the encumbrance of the Torrey Reserve Property by a Security Document;
(iv) Administrative Agents receipt of a legal opinion of counsel to Borrower regarding the enforceability of the Loan Documents, including the Security Document encumbering the Torrey Reserve Property, against the Torrey Reserve Borrower, as applicable, as well as such other matters as Administrative Agent shall reasonably request;
(v) Administrative Agents receipt from the Title Company of an amendment to the reinsurance agreement confirming Administrative Agents requested allocation of the increase in liability resulting from the addition of the Torrey Reserve Property to the aggregate liability under the Title Policies;
(vi) Administrative Agents receipt, at Borrowers sole cost and expense, of each of the items listed in Section 3.1(c) hereof;
(vii) the determination by Administrative Agent of the Appraised Value of the Torrey Reserve Property, which determination shall be made with reference to an Appraisal order by Administrative Agent for such purpose at Borrowers expense;
(viii) the Torrey Reserve Holdback Amount, together with the then outstanding principal amount of the Loan, shall not exceed the lesser of (A) an amount equal to fifty-seven percent (57%) of the sum of (x) the Appraised Value of all Properties then-currently encumbered by a Security Document, in the aggregate, plus (y) the Appraised Value of the Torrey Reserve Property, and (B) an amount equal to fifty-seven percent (57%) of the aggregate acquisition cost price paid by the Borrowers and the Torrey Reserve Borrower, or one or more Affiliates thereof, as applicable, to purchase (i) the Properties then-currently encumbered by a Security Document and (ii) the Torrey Reserve Property, and (C) an amount equal to the quotient of (x) the sum of (i) the Net Operating Income for all Properties then-currently encumbered by a Security Document, in the aggregate, plus (ii) the Net Operating Income for the Torrey Reserve Property, divided by (B) 0.13;
(ix) the delivery by the Torrey Reserve Borrower of such other due diligence items as are reasonably requested by Administrative Agent; and
(x) Borrowers payment to Administrative Agent of the portion of the Holdback Fee applicable to the portion of the Aggregate Holdback being disbursed.
(c) Two Westlake Holdback Disbursement. The Two Westlake Holdback Amount shall be disbursed only after satisfaction of the conditions set forth in Sections 3.1(a) and 3.1(e) and subject to the following conditions:
(i) the acquisition by the Two Westlake Borrower of the Two Westlake Property;
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(ii) the execution by the Two Westlake Borrower of a Joinder to this Agreement and a joinder to the Hazardous Materials Indemnity Agreement in the form attached thereto;
(iii) the execution, and delivery to Administrative Agent, by each of the Borrowers, including the Two Westlake Borrower, of replacement Notes, in form acceptable to the Lenders;
(iv) the encumbrance of the Two Westlake Property by a Security Document;
(v) Administrative Agents receipt of a legal opinion of counsel to Borrowers regarding the enforceability of the Loan Documents, including the Security Documents encumbering the Two Westlake Property, against the Two Westlake Borrower, as well as such other matters as Administrative Agent shall reasonably request.
(vi) Administrative Agents receipt, at Borrowers sole cost and expense, of each of the items listed in Section 3.1(c) hereof;
(vii) the determination by Administrative Agent of the Appraised Value of the Two Westlake Property, which determination shall be made with reference to an Appraisals ordered by Administrative Agent for such purpose at Borrowers expense;
(viii) the Two Westlake Holdback Amount, together with the then outstanding principal amount of the Loan, shall not exceed the lesser of (A) an amount equal to fifty-seven percent (57%) of the sum of (x) the Appraised Value of all Properties then-currently encumbered by a Security Document, in the aggregate, plus (y) the Appraised Value of the Two Westlake Property, (B) an amount equal to sixty percent (60%) of the aggregate acquisition cost paid by the Borrowers and the Two Westlake Borrower, or one or more Affiliates thereof, as applicable, to purchase (x) the Properties then-currently encumbered by a Security Document and (y) the Two Westlake Property, and (C) an amount equal to the quotient of (x) the sum of (i) the Net Operating Income for all Properties then-currently encumbered by a Security Document, in the aggregate, plus (ii) the Net Operating Income for the Two Westlake Property, divided by (B) 0.13;
(ix) the delivery by the Two Westlake Borrower of such other due diligence items as are reasonably requested by Administrative Agent;
(x) Borrowers payment to Administrative Agent of the portion of the Holdback Fee applicable to the portion of the Aggregate Holdback being disbursed; and
(xi) Administrative Agents receipt from the Title Company of an amendment to the reinsurance agreement confirming Administrative Agents requested allocation of the increase in liability resulting from the addition of the Torrey Reserve Property to the aggregate liability under the Title Policies.
(d) Disbursement for Future Properties. Any portion of the Aggregate Holdback not previously disbursed pursuant to Sections 3.4(a), 3.4(b), 3.4(c) or 3.4(d) may be disbursed, at Borrowers request, to finance Future Properties, subject to the following conditions: (i) Requisite Lenders shall have approved of the addition of the proposed Future Property as a Property hereunder, (ii) the amount of any such disbursements made with respect to any one Future Property shall not, in the aggregate, exceed fifty-five percent (55%) of the aggregate actual acquisition cost paid by the applicable Future Borrower, to purchase such Future Property, and (iii) conditions similar to those set forth in subsections (a) (b) and (c) above with respect to the I-81 Holdback Amount, the Torrey Reserve Holdback Amount and the Two Westlake Holdback Amount have been satisfied with respect to any applicable Future Property to the satisfaction of Administrative Agent, including, without limitation, those set forth in subsections (a)(ix), (b)(viii), (c)(viii) above.
(e) Cancellation of Holdback Disbursements. On the earlier of (i) either (A) the date which occurs one hundred eighty (180) days following the Effective Date or (B) if, on or before the date described in (A), Borrowers pay the Holdback Extension Fee to Administrative Agent for the benefit of the
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Lenders, the date which occurs one (1) year following the Effective Date and (ii) the date on which any Property is released from the lien of the applicable Security Document pursuant to the provisions of Section 2.10, to the extent that any portion of the Aggregate Holdback remains undisbursed, the Commitments of the Lenders to fund any unfunded portion of the Aggregate Holdback shall be automatically cancelled as of such date. Notwithstanding the foregoing, rather than paying the Holdback Extension Fee with respect to the entire amount of the then-unfunded portion of the Aggregate Holdback, Borrowers shall have the right to pay the Holdback Extension Fee allocable to a portion of the then-unfunded Aggregate Holdback. If Borrowers so elect, then for purposes of clause (i) above, the portion of the then-unfunded Aggregate Holdback for which Borrower have paid the Holdback Extension Fee shall be extended in accordance with clause (i)(B) and the portion for which Borrowers have not paid the Holdback Extension Fee shall be cancelled in accordance with clause (i)(A).
(f) Addition of Property. If the conditions of subsections (a), (b) (c) and/or (d) shall be satisfied with respect to the I-81 Properties, the Torrey Reserve Property, the Two Westlake Property and/or any Future Property, respectively, the real property with respect to which such conditions are satisfied shall automatically become a Property hereunder and, after execution of the Joinder, the owner of such Property shall become a Borrower hereunder.
3.5 FUNDS TRANSFER DISBURSEMENTS.
(a) Borrowers hereby authorize Administrative Agent to disburse the proceeds of any Loan made by Lenders or any of their Affiliates pursuant to the Loan Documents as requested by an authorized representative of the Borrowers to any of the accounts designated in the Transfer Authorizer Designation form. Borrowers agree to be bound by any transfer request: (i) authorized or transmitted by Borrowers; or (ii) made in Borrowers name(s) and accepted by Administrative Agent in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrowers. Borrowers further agree and acknowledge that Administrative Agent may rely solely on any bank routing number or identifying bank account number or name provided by Borrowers to effect a wire of funds transfer even if the information provided by Borrowers identifies a different bank or account holder than named by the Borrowers. Administrative Agent is not obligated or required in any way to take any actions to detect errors in information provided by Borrowers.
(b) If Administrative Agent takes any actions in an attempt to detect errors in the transmission or content of transfer requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrowers agree that no matter how many times Administrative Agent takes these actions Administrative Agent will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Administrative Agent and Borrowers. Borrowers agree to notify Administrative Agent of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within fourteen (14) days after Administrative Agents confirmation to Borrowers of such transfer.
(c) Administrative Agent will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Administrative Agent, may delay or refuse to accept a funds transfer request if the transfer would: (a) violate the terms of this authorization, (b) require use of a bank unacceptable to Administrative Agent or any Lender or prohibited by government authority; (iii) cause Administrative Agent or any Lender to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Administrative Agent or any Lender to violate any applicable law or regulation.
(d) Neither Administrative Agent nor any Lender shall be liable to Borrowers or any other parties for: (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrowers transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of Administrative Agent or any Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Administrative Agent or any Lenders control, or (iii) any special, consequential, indirect or punitive damages, whether or not (a) any claim for these damages is based on tort or contract or (b)
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Administrative Agent or any Lender or Borrowers knew or should have known the likelihood of these damages in any situation. Neither Administrative Agent nor any Lender makes any representations or warranties other than those expressly made in this Agreement.
3.6 BORROWERS REPRESENTATIVES. In order to facilitate timely and efficient management of the Loan, each Borrower hereby appoints and authorizes Manager, acting alone, to serve as the authorized representative of all Borrowers. Accordingly, any notice or correspondence directed to Manager shall be deemed given to each Borrower, and any action taken by Manager with respect to the Loan shall be deemed taken by each Borrowers hereunder.
ARTICLE 4. INTENTIONALLY OMITTED
ARTICLE 5. INSURANCE
In addition to such title insurance as each Borrower is required to maintain in respect of a Property, each Borrower shall maintain or cause to be maintained insurance covering the Property or Properties owned by such Borrower, at Borrowers sole expense, with licensed insurers approved by Administrative Agent, the following policies of insurance in form and substance satisfactory to Administrative Agent:
(a) At all times, any real property under construction at a Property shall be covered by a policy of commercial property insurance, which shall include, without limitation, such endorsements as Administrative Agent may require, insuring Administrative Agent against damage to such Property and improvements thereon, in an amount acceptable to Administrative Agent. Administrative Agent, for the benefit of Lenders, shall be named on the policy under a Lenders Loss Payable Endorsement (form # 438BFU or equivalent).
(b) A policy of flood insurance, as required by applicable governmental regulations or as deemed reasonably necessary by Administrative Agent.
(c) A policy of commercial general liability insurance with limits as reasonably required by Administrative Agent, insuring against liability for injury and/or death to any person and/or damages to property occurring on the Property and/or in the improvements thereon from any cause whatsoever.
(d) A policy of terrorism insurance in an amount acceptable to Administrative Agent.
(e) A policy of environmental insurance in an amount acceptable to Administrative Agent.
Borrowers shall provide to Administrative Agent certificates evidencing all required insurance policies, or other evidence of insurance acceptable to Administrative Agent. All insurance policies shall provide that the insurance shall not be cancelable or materially adversely changed without ten (10) days prior written notice to Administrative Agent. Administrative Agent, on behalf of Lenders, shall be named under a Lenders Loss Payable Endorsement (form # 438BFU or equivalent) with respect to all insurance policies that Borrowers actually maintain with respect to the Properties or the improvements thereon. Borrower shall provide to Administrative Agent evidence of any other hazard insurance Administrative Agent may deem necessary at any time while all or any portion of Lenders commitment remains available or any portion of the Loan remains outstanding.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to make the Loan, Borrowers hereby represent and warrant to Administrative Agent and each Lender as of the Effective Date and continuing thereafter as follows:
6.1 ORGANIZATION; CORPORATE POWERS. Each Borrower (a) is a limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (b) is duly qualified to do business as a foreign entity and in good standing under the laws of each jurisdiction in which it owns or leases real property or in which the nature of its business requires it to be so qualified, except for those jurisdictions where failure to so qualify and be in good standing would not have a Material Adverse Effect, and (c) has all requisite power and authority, as the case may be, to own, operate and encumber its property and assets and to conduct its business as presently conducted and as proposed to be conducted in connection with and following the consummation of the Loan contemplated by the Loan Documents.
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Each Borrowers chief executive office is located at its address for notice set forth below the words Accounting Matters below such Borrowers signature hereto.
6.2 AUTHORITY. Each Borrower has the requisite power and authority to execute, deliver and perform each of the Loan Documents to which it is a party. The execution, delivery and performance thereof, and the consummation of the transactions contemplated thereby, have been duly approved by the equity owners of each Borrower and no other proceedings or authorizations on the part of any Borrower or its equity owners are necessary to consummate such transactions, except for such as have been obtained or effected and true and correct copies of which have been delivered to Administrative Agent. Each of the Loan Documents to which a Borrower is a party has been duly executed and delivered by the applicable Borrower and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other laws affecting creditors rights generally.
6.3 OWNERSHIP OF BORROWERS. Schedule 6.3 sets forth the direct and indirect owners of Borrowers (but not any owners, direct or indirect, of KBS REIT) and the owners respective ownership percentages therein, and there are no other ownership interests outstanding. Except as set forth or referred to in the organizational documents of Borrowers, no ownership interest (or any securities, instruments, warrants, option or purchase rights, conversion or exchange rights, calls, commitments or claims of any character convertible into or exercisable for any ownership interest) of any such Person is subject to issuance under any security, instrument, warrant, option or purchase rights, conversion or exchange rights, call, commitment or claim of any right, title or interest therein or thereto. All of the ownership interests in Borrowers have been issued in compliance with all applicable Requirements of Law.
6.4 NO CONFLICT. The execution, delivery and performance by Borrowers of the Loan Documents, and each of the transactions contemplated thereby, do not and will not (a) conflict with or violate any Borrowers organizational documents, or (b) conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law or Court Order binding upon any Borrower or any of its equity owners, which circumstance would have a Material Adverse Effect, or (c) conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under, or require termination of any Contractual Obligation of any Borrower, which circumstance would have a Material Adverse Effect, or (d) result in or require the creation or imposition of any Lien whatsoever upon any of the properties or assets of any Borrower (other than Liens in favor of Administrative Agent arising pursuant to the Loan Documents or Permitted Liens).
6.5 CONSENTS AND AUTHORIZATIONS. Each Borrower has obtained all consents and authorizations required pursuant to its Contractual Obligations with any other Person, and shall have obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority, as may be necessary to allow Borrowers to lawfully execute, deliver and perform its obligations under the Loan Documents.
6.6 GOVERNMENTAL REGULATION. No Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or any other federal or state statute or regulation such that its ability to incur indebtedness is limited or its ability to consummate the transactions contemplated by the Loan Documents is materially impaired.
6.7 PRIOR FINANCIALS. Any and all balance sheets and income statements of Borrowers delivered to Administrative Agent prior to the date hereof were prepared in accordance with GAAP and fairly present the assets, liabilities and financial condition of Borrowers or such constituent shareholders, partners or members, at such date and the results of its operations and its cash flows, for the period then ended. Notwithstanding the use of GAAP, the calculation of liabilities shall not include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount.
6.8 FINANCIAL STATEMENTS; PROJECTIONS AND FORECASTS. Each of the Financial Statements to be delivered to Administrative Agent by Borrowers pursuant to Section 10.1(b) (a) has been, or will be, as applicable, prepared in accordance with the books and records of the applicable Borrower, and (b) either
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fairly present, or will fairly present, as applicable, the financial condition of the applicable Borrower, at the dates thereof (and, if applicable, subject to normal year-end adjustments) and the results of its operations and cash flows for the period then ended. Each of the projections delivered to Administrative Agent prior to the date hereof and the financial plans and projections to be delivered to Administrative Agent pursuant to Section 10.1 (x) has been, or will be, as applicable, prepared by the applicable Borrower in light of the past business and performance of the applicable Borrower and (y) represent, or will represent, as of the date thereof, the reasonable good faith estimates of the applicable Borrowers financial personnel.
6.9 PRIOR OPERATING STATEMENTS. Each of the operating statements pertaining to the Properties delivered to Administrative Agent prior to the date hereof and prepared by or on behalf of a prior owner of the applicable Property fairly presents, to the best of the applicable Borrowers knowledge, the results of operations of such Property for the period covered thereby. Each of the operating statements pertaining to the Property delivered to Administrative Agent prior to the date hereof and prepared by or on behalf of the applicable Borrower was prepared in accordance with GAAP in effect on the date such operating statement of the applicable Property was prepared and fairly presents the results of operations of such Property for the period then ended.
6.10 OPERATING STATEMENTS AND PROJECTIONS. Each of the Operating Statements to be delivered to Administrative Agent pursuant to Section 10.1(a) (a) has been or will be, as applicable, prepared in accordance with the books and records of the applicable Property, and (b) fairly presents or will fairly present, as applicable, the results of operations of the applicable Property for the period then ended. Each of the projections, financial plans and budgets delivered to Administrative Agent prior to the date hereof (to the best of the applicable Borrowers knowledge) and the projections and budgets to be delivered to Administrative Agent pursuant to Section 10.1(d) (x) has been, or will be, as applicable, prepared for the Property in light of the past business and performance of the applicable Property and (y) represents or will represent, as of the date thereof, the reasonable good faith estimates of the financial personnel of the applicable Borrower.
6.11 LITIGATION; ADVERSE EFFECTS.
(a) To the best of Borrowers knowledge, there is no proceeding, pending or threatened, against any Borrower or any property of Borrowers (including the Properties), which, if adversely determined, would result in a Material Adverse Effect, except as disclosed on Schedule 6.11.
(b) No Borrower is (i) in violation of any applicable law, which violation has a Material Adverse Effect, or (ii) subject to or in default with respect to any court order which has a Material Adverse Effect.
6.12 NO MATERIAL ADVERSE CHANGE. With respect to any and all information contained in those materials delivered to Administrative Agent pursuant to Sections 6.1 through Section 6.11, there has occurred no event which has a Material Adverse Effect.
6.13 PAYMENT OF TAXES. All tax returns and reports to be filed by Borrowers have been timely filed, and all taxes, assessments, fees and other governmental charges shown on such returns or otherwise payable by Borrowers have been paid when due and payable (other than real property taxes, which may be paid prior to delinquency so long as no penalty or interest shall attach thereto), except such taxes, if any, as are reserved against in accordance with GAAP and are being contested in good faith by appropriate proceedings or such taxes, the failure to make payment of which when due and payable will not have, in the aggregate, a Material Adverse Effect. Borrowers have no knowledge of any proposed tax assessment against any Borrower that will have a Material Adverse Effect, which is not being actively contested in good faith by the applicable Borrower.
6.14 MATERIAL ADVERSE AGREEMENTS. No Borrower is a party to or subject to any Contractual Obligation or other restriction contained in its organizational documents which has a Material Adverse Effect.
6.15 PERFORMANCE. No Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation applicable to it, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default under such Contractual Obligation, in each case, except where the consequences, direct or indirect, of such default or defaults, if any, will not have a Material Adverse Effect.
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6.16 FEDERAL RESERVE REGULATIONS. No part of the proceeds of the Loan hereunder will be used to purchase or carry any margin security as defined in Regulation G or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might constitute this transaction a purpose credit within the meaning of said Regulation G. No Borrower is engaged primarily in the business of extending credit for the purpose of purchasing or carrying out any margin stock as defined in Regulation U. No part of the proceeds of the Loan hereunder will be used for any purpose that violates, or which is inconsistent with, the provisions of Regulation X or any other regulation of the Federal Reserve Board.
6.17 DISCLOSURE. The representations and warranties of Borrowers contained in the Loan Documents and all certificates, financial statements and other documents prepared by or on behalf of Borrowers and delivered to Administrative Agent by or on behalf of Borrowers in connection therewith, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Each Borrower has given to Administrative Agent true, correct and complete copies (which representation, with respect to any of the following items made available to the applicable Borrower by Persons other than Affiliates of such Borrower, is made to the best of such Borrowers knowledge) of all Leases, organizational documents, Financial Statements, Operating Statements, and all other documents and instruments referred to in the Loan Documents as having been delivered to Administrative Agent. Borrowers have not intentionally withheld from Administrative Agent, in regard to any matter raised in the Loan Documents, any fact deemed by Borrowers to be material. Notwithstanding the foregoing, with respect to projections of each Borrowers future performance such representations and warranties are made in good faith and to the best judgment of the applicable Borrower.
6.18 REQUIREMENTS OF LAW; ERISA. Each Borrower is in compliance with all Requirements of Law applicable to it and its respective businesses, in each case, where the failure to so comply will have a Material Adverse Effect. Each Borrower is not, and does not hold plan assets of, an employee benefit plan subject to Title I of ERISA or Section 4975 of the Internal Revenue Code.
6.19 ENVIRONMENTAL MATTERS. Except as disclosed in the environmental report(s) set forth on Schedule 7.1, to the best of each Borrowers knowledge, (a) the operations of Borrowers comply in all material respects with all applicable local, state and federal environmental, health and safety Requirements of Law (Environmental Laws); (b) the Properties are not subject to any Remedial Action or other Liabilities and Costs arising from the Release or threatened Release of a Contaminant into the environment in violation of any Environmental Laws; (c) no Borrower has filed any notice under applicable Environmental Laws reporting a Release of a Contaminant into the environment in violation of any Environmental Laws, except as the same may have been heretofore remedied; (d) there is not now on or in the Properties: (i) any underground storage tanks, (ii) any asbestos-containing material, or (iii) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers or other equipment; and (e) no Borrower has received any notice or claim to the effect that it is or may be liable to any Person as a result of the Release or threatened Release of a Contaminant into the environment.
6.20 MAJOR AGREEMENTS; LEASES.
(a) With respect to the Properties, Borrowers have provided to Administrative Agent copies of each Major Agreement and all Leases.
(b) (i) All Major Agreements with respect to the Properties are, to the best of Borrowers knowledge, in full force and effect and have not been and will not be modified or terminated (except for modifications which comply with Section 9.3, and terminations by reason of a material default), and (ii) (in each case, other than any such default or event of default that, had the effect thereof been taken into account by Administrative Agent in determining the Appraised Value of the Properties, would not have resulted in such Appraised Value of the Properties being less than ninety-five percent (95%) of the Appraised Value of the Properties actually determined by Administrative Agent) no default or event of default (or event or occurrence which with the passage of time or the giving of notice, or both, will constitute a default or event of default) exists under any such Major Agreement on the part of any Borrower, or will exist thereunder on the part of such Borrower as a result of the consummation of the transactions contemplated by the Loan Documents, or, to the best of Borrowers knowledge, exists
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thereunder on the part of any other party thereto, or will exist thereunder on the part of any other party thereto as a result of the consummation of the transactions contemplated by the Loan Documents.
(c) To the best knowledge of Borrowers, (i) except as reflected on the most current rent rolls delivered to Administrative Agent, all Leases are in full force and effect, and have not been and, as to Major Leases, will not be modified or terminated (except for modifications which comply with Section 9.3 or that do not require the approval of Administrative Agent, and terminations by reason of a material default) and (ii) no default or event or default (or event or occurrence which with the passage of time or the giving of notice, or both, will constitute a default or event of default) exists thereunder on the part of any Borrower, or will exist thereunder on the part of such Borrower as a result of the consummation of the transactions contemplated by the Loan Documents, or, to the best of Borrowers knowledge, exists thereunder on the part of any other party thereto, or will exist thereunder on the part of any other party thereto as a result of the consummation of the transactions contemplated by the Loan Documents. Notwithstanding that the representations in this subsection (c) are made to the best of Borrowers knowledge, Borrowers will be deemed to have breached this representation if (A) as of any date on which such representations are made, the statements in either clause (i) or clause (ii) hereof are inaccurate, regardless of whether Borrowers had knowledge of such inaccuracy, and (B) if either (1) any Borrower had knowledge of such inaccuracy, or (2) had the effect thereof been taken into account by Administrative Agent in determining the Appraised Value of the Property, such Appraised Value of the Property would have been less than ninety-five percent (95%) of the Appraised Value of the Property actually determined by Administrative Agent).
6.21 SOLVENCY. Each Borrower is and will be Solvent after giving effect to each disbursement of the Loan and the payment and accrual of all fees then payable.
6.22 TITLE TO PROPERTY; NO LIENS. As of the Effective Date, to the best of Borrowers knowledge, Borrowers have good, indefeasible and merchantable title to each of the Properties (and a leasehold Title as to the 2500 Regent Boulevard Property) that it owns, free and clear of all Liens except Permitted Liens.
6.23 USE OF PROCEEDS. Borrowers use of the proceeds of the Loan are, and will continue to be, legal and proper uses (and to the extent necessary, duly authorized by Borrowers constituent shareholders, partners or members, as the case may be) and such uses are consistent with all applicable laws and statutes.
6.24 PROPERTY MANAGEMENT AGREEMENTS. Except as disclosed on Schedule 6.24, no Borrower is a party or subject to any property management or leasing agreement with respect to the Properties.
6.25 SINGLE PURPOSE ENTITY. Each Borrower is a Single Purpose Entity.
6.26 INTENTIONALLY OMITTED.
6.27 ORGANIZATIONAL DOCUMENTS. The organizational documents of each entity owning a direct or indirect ownership interest in Borrowers (expressly excluding any entity owning a direct or indirect interest in KBS REIT), as shown on Schedule 6.3, have not been modified since previously delivered to Administrative Agent, or if such documents have been modified, then such modifications have been provided to Administrative Agent.
ARTICLE 7. INTENTIONALLY OMITTED
ARTICLE 8. LOAN CONSTANT COMPLIANCE
8.1 LOAN CONSTANT COVERAGE. In the event that any Borrowers Certificate delivered in accordance with Section 10.1(c) with respect to any Fiscal Quarter (commencing with the Borrowers Certificate delivered with respect to (a) the Fiscal Quarter ending December 31, 2011 or (b) such earlier Fiscal Quarter during which no portion of the Aggregate Holdback remained undisbursed) indicates that the Net Operating Income from the Properties, on an aggregate basis, at the end of the previous Fiscal Quarter yields a Loan Constant of less than eleven percent (11%) (the Loan Constant Requirement), then commencing on the date on which a Borrowers Certificate evidences Borrowers failure to satisfy the Loan Constant Requirement (or, if Borrowers fail to timely deliver a Borrowers Certificate, then commencing on the date on which such Borrowers Certificate is due) (the Cash Flow Sweep Commencement Date), Borrowers shall be required to deliver some or
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all of the Free Cash Flow from the Properties (as provided in this Section 8.1 below) to Administrative Agent (the Cash Flow Sweep); provided, that such Free Cash Flow shall be delivered by Borrowers to Administrative Agent only one time per month (with such delivery to be made within ten (10) days after the end of the month on account of which Borrowers are delivering such Free Cash Flow); provided further, however, that notwithstanding the fact that a Borrowers Certificate identifying Borrowers failure to satisfy the Loan Constant Requirement is not due until forty-five (45) days after the end of a Fiscal Quarter, Borrowers shall be obligated to deposit Free Cash Flow with Administrative Agent on account of the month immediately following the expiration of the Fiscal Quarter in which Borrowers fail to satisfy the Loan Constant Requirement, provided, such deposit shall be required to be made by Borrowers on the tenth (10th) day of the month immediately following the month during which the Borrowers Certificate is delivered (or was required to be delivered). (By way of example, if Borrowers fail to satisfy the Loan Constant Requirement for the quarter ending March 31, 2012, then Borrowers shall deposit such portion of its Free Cash Flow from April and May, 2012 as it would be required to deposit in accordance with this Section 8.1 on June 10, 2012). Upon receipt thereof, Administrative Agent shall deposit (a) fifty percent (50%) of such funds into an interest-bearing blocked account with Wells Fargo Bank in the name of Borrowers (which account is hereby pledged as collateral for the Loan), from which Borrowers may not withdraw funds, except as provided herein below (the Swept Funds Blocked Account), and (b) fifty percent (50%) of such funds into an interest-bearing blocked account with Wells Fargo Bank in the name of Borrowers (which account is hereby pledged as collateral for the Loan), from which Borrowers may withdraw funds, subject to Section 8.2 below (the Swept Funds Disbursement Account, and together with the Swept Funds Blocked Account, the Cash Flow Collateral Accounts). The percentage of Free Cash Flow to be delivered to Administrative Agent by Borrowers pursuant to the foregoing shall be determined as follows:
(a) If Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant greater than or equal to ten percent (10%), but less than eleven percent (11%), then Borrowers shall be required to deliver two-thirds (2/3) of the Free Cash Flow from the Properties to Administrative Agent until such time as the Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant of eleven and one-half percent (11.5%), as evidenced by a Borrowers Certificate delivered in accordance with Section 10.1(c). Notwithstanding the foregoing, rather than delivering two-thirds (2/3) of the Free Cash Flow from the Properties to Administrative Agent, Borrowers may elect to repay such portion of the outstanding principal amount of the Loan as would cause Net Operating Income from the Properties, on an aggregate basis, to yield a Loan Constant of eleven and one-half percent (11.5%); provided, however, that if such repayment is made by Borrowers in connection with Borrowers delivery of a Borrowers Certificate that would have triggered a Cash Flow Sweep Commencement Date (i.e., immediately prior to delivery of the then-current Borrowers Certificate, a Cash Flow Sweep was not in effect), then Borrowers shall be permitted to repay such portion of the outstanding principal amount of the Loan as would cause Net Operating Income from the Properties, on an aggregate basis, to yield a Loan Constant of eleven percent (11%) (instead of eleven and one-half percent (11.5%)) in order to avoid the Cash Flow Sweep;
(b) If Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant greater than or equal to eight and one-half percent (8.5%), but less than ten percent (10%), then Borrowers shall be required to deliver one hundred percent (100%) of the Free Cash Flow from the Properties to Administrative Agent until such time as the Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant of ten and one-half percent (10.5%), as evidenced by a Borrowers Certificate delivered in accordance with Section 10.1(c). Notwithstanding the foregoing, rather than delivering one hundred percent (100%) of the Free Cash Flow from the Properties to Administrative Agent, Borrowers may elect to repay such portion of the outstanding principal amount of the Loan as would cause Net Operating Income from the Properties, on an aggregate basis, to yield a Loan Constant of either (i) ten and one-half percent (10.5%), in which case Borrowers shall be required to deliver two-thirds (2/3) of the Free Cash Flow from the Properties to Administrative Agent until such time as the Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant of eleven and one-half percent (11.5%) or (ii) eleven and one-half percent (11.5%), in which case Borrowers shall not be required to deliver any Free Cash Flow from the Properties to Administrative Agent; provided, however, that if either such repayment is made by Borrowers in connection with Borrowers delivery of a Borrowers Certificate that would have triggered a Cash Flow Sweep Commencement Date (i.e., immediately prior to delivery of the then-current Borrowers Certificate, a Cash Flow Sweep was not in effect), then Borrowers shall be permitted to repay such portion of the outstanding principal amount of the Loan as would cause Net Operating Income from the Properties, on an aggregate basis, to yield a Loan Constant of (i) ten
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percent (10%) (instead of ten and one-half percent (10.5%)) in order to avoid the one hundred percent (100%) Cash Flow Sweep, in which case Borrowers shall be required to deliver two-thirds (2/3) Free Cash Flow from the Properties or (ii) eleven percent (11%) (instead of eleven and one-half percent (11.5%)) in order to avoid any Cash Flow Sweep;
(c) If Net Operating Income from the Properties, on an aggregate basis, yields a Loan Constant less than eight and one-half percent (8.5%), then Borrowers shall be required to repay such portion of the outstanding principal balance of the Loan as will cause the Loan Constant to be not less than nine and one-half percent (9.5%). In addition, (i) if immediately prior to delivery of the Borrowers Certificate which shows that the Loan Constant is less than eight and one-half percent (8.5%) Borrowers were delivering one hundred percent (100%) of Free Cash Flow from the Properties to Administrative Agent in accordance with subparagraph (b) above, then Borrowers shall continue to deliver one hundred percent (100%) of Free Cash Flow from the Properties to Administrative Agent, (ii) if immediately prior to delivery of the Borrowers Certificate which shows that the Loan Constant is less than eight and one-half percent (8.5%) Borrowers were delivering two thirds (2/3) of Free Cash Flow from the Properties to Administrative Agent in accordance with subparagraph (a) above, then Borrowers shall continue to deliver two thirds (2/3) of Free Cash Flow from the Properties to Administrative Agent and (iii) if immediately prior to delivery of the Borrowers Certificate which shows that the Loan Constant is less than eight and one-half percent (8.5%) Borrowers were not delivering any Free Cash Flow from the Properties to Administrative Agent, then Borrowers shall begin delivering two thirds (2/3) of Free Cash Flow from the Properties to Administrative Agent. Notwithstanding the foregoing, Borrowers may avoid the Cash Flow Sweep by repaying such portion of the Loan as would cause Net Operating Income from the Properties, in the aggregate, to yield a Loan Constant of not less than eleven and one-half percent (11.5%); provided, however, that if immediately prior to delivery of the then-current Borrowers Certificate, a Cash Flow Sweep was not in effect, Borrowers may avoid the Cash Flow Sweep by repaying such portion of the Loan as would cause Net Operating Income from the Properties, on an aggregate basis, to yield a Loan Constant of not less than eleven percent (11%) (instead of eleven and one-half percent (11.5%)).
Borrowers shall not be required to pay an Exit Fee with respect to any amounts paid by Borrowers in reduction of the outstanding principal amount of the Loan in accordance with this Section 8.1. Any amounts repaid may not be reborrowed.
8.2 DISBURSEMENTS OF FUNDS IN SWEPT FUNDS DISBURSEMENT ACCOUNT. Provided no Default has occurred and is continuing, Borrower shall have the right to receive disbursements from the funds in the Swept Funds Disbursement Account as follows:
(a) At Borrowers request, Administrative Agent shall disburse funds from the Swept Funds Disbursement Account (within five (5) Business Days after Borrowers request) at Borrowers option to pay for the actual costs incurred by Borrower for (i) tenant improvement costs and leasing commissions for new Leases and/or renewals of existing Leases, and (ii) pre-approved (by Administrative Agent) capital expenditures identified in the capital budgets delivered by Borrower to Administrative Agent pursuant to Section 10.1(d); provided, in no event shall Administrative Agent be required to disburse any amount for tenant improvement costs and/or leasing commissions in excess of the appraisal estimates for such costs on a dollars per square foot basis, as reflected in the most recent Appraisal of the Property.
(b) So long as a one hundred percent (100%) Cash Flow Sweep is not then in effect, Administrative Agent shall, at Borrowers request, disburse funds from the Swept Funds Disbursement Account (within five (5) Business Days after Borrowers request which request shall provide reasonable backup documentation to evidence Borrowers Allocated Share of REIT Operating Expenses) to or for the benefit of Borrower for the purpose of paying REIT Operating Expenses; provided, that the amount to be disbursed from the Swept Funds Disbursement Account pursuant to this clause (b) during any Fiscal Quarter may not exceed the lesser of $1,600,000 or one-half percent (0.5%) of the outstanding principal amount of the Loan (except that it may not exceed $2,400,000 or three-quarters of one percent (0.75%) of the outstanding principal amount of the Loan for the first Fiscal Quarter of each year), and the cumulative amount of all disbursements from the Swept Funds Disbursement Account pursuant to this clause (b) may not exceed $4,000,000 or one and one-fifth percent (1.2%) of the outstanding principal amount of the Loan.
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8.3 DISBURSEMENTS OF FUNDS IN CASH FLOW COLLATERAL ACCOUNTS. Provided a Default has not occurred which is continuing, within fifteen (15) days after Borrowers request given at any time after either (a) Borrower delivers its second consecutive Borrowers Certificate confirming that Net Operating Income from the Property is sufficient to yield a Loan Constant of not less than eleven and one-half percent (11.5%), or (b) Borrower obtains a Property release in full compliance with the provisions and requirements of Section 2.10 above, Administrative Agent shall disburse all funds in the Cash Flow Collateral Accounts to or for the benefit of Borrower.
ARTICLE 9. OTHER COVENANTS OF BORROWER
9.1 EXPENSES. Borrowers shall immediately pay Administrative Agent upon demand all costs and expenses incurred by Administrative Agent in connection with: (a) the preparation of this Agreement, all other Loan Documents and Other Related Documents contemplated hereby; (b) the administration of this Agreement, the other Loan Documents and Other Related Documents for the term of the Loan; and (c) the enforcement or satisfaction by Administrative Agent or Lenders of any of Borrowers obligations under this Agreement, the other Loan Documents or the Other Related Documents. For all purposes of this Agreement, Administrative Agents and Lenders costs and expenses shall include, without limitation, all Appraisal fees (except as otherwise expressly provided herein), cost engineering and inspection fees, legal fees and expenses, accounting fees, environmental consultant fees, auditor fees, UCC filing fees and/or UCC vendor fees, and the cost to Administrative Agent of any title insurance premiums, title surveys, reconveyance and notary fees. If any of the services described above are provided by an employee of Administrative Agent, Administrative Agents costs and expenses for such services shall be calculated in accordance with Administrative Agents standard charge for such services. Notwithstanding the foregoing, Borrowers shall have no obligation to reimburse Lenders for costs and expenses incurred by Lenders prior to the occurrence of a Default or following the cure, or waiver by Administrative Agent, of such Default.
9.2 ERISA COMPLIANCE. Borrowers shall at all times comply with the provisions of ERISA with respect to any retirement or other employee benefit plan to which it is a party as employer, and as soon as possible after a Borrower knows, or has reason to know, that any Reportable Event (as defined in ERISA) with respect to any such plan of such Borrower has occurred, it shall furnish to Administrative Agent a written statement setting forth details as to such Reportable Event and the action, if any, which such Borrower proposes to take with respect thereto, together with a copy of the notice of such Reportable Event furnished to the Pension Benefit Guaranty Corporation.
9.3 LEASES; LEASE APPROVAL; LEASE TERMINATION.
(a) Unless otherwise consented to by Administrative Agent in writing, all Leases entered into after the date of this Agreement shall (i) be to unaffiliated third parties and under market terms (provided, market terms shall not be deemed to require market rents), including, without limitation, those relating to insurance, waiver of claims, damage and destruction, condemnation, notice to mortgagee and subordination and attornment, (ii) provide for uses of the relevant Property that are consistent with first-class management thereof, and (iii) be on a standard form lease reasonably approved by Administrative Agent subject to modification as reasonably required by the applicable Borrower. Additionally, a Borrower shall not execute any Major Lease nor materially modify or voluntarily terminate any such Major Lease (except for terminations by reason of a material default), in each case without Administrative Agents prior consent, not to be unreasonably withheld; provided, that any Major Lease with respect to more than the lesser of (i) twenty percent (20%) of the net rentable space of the Properties, in the aggregate (as of the date of determination) or (ii) the greater of A) twenty-five percent (25%) of the net rentable space of a Property or (B) 200,000 square feet of net rentable area or shall be subject to the reasonable approval of Requisite Lenders.
(b) With respect to Major Leases, if consent thereto is required pursuant to subsection (a) above, or if a Borrower has requested consent to a Lease which does not comply with the requirements set forth in Sections 9.3(a)(i), (ii) or (iii), then if Administrative Agent has not notified such Borrower of its disapproval of such proposed Lease within five (5) Business Days (or, in cases where Requisite Lenders approval is required, eleven (11) Business Days) after Administrative Agents confirmation of receipt of (1) such proposed Lease (or a term sheet, in a form reasonably approved by Administrative Agent, containing the material business terms, and other applicable information reasonably approved by
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Borrowers and Administrative Agent (the Term Sheet), which may be provided in lieu of such Lease), (2) any other reasonable information requested by Administrative Agent, (3) in the case of a Major Lease, the financial statements and market comparisons as referenced below to the extent available and (4) a transmittal letter requesting that Administrative Agent review such proposed Lease or Term Sheet and approve or disapprove such proposed Lease or Term Sheet within such 5-Business Day period (or, in cases where Requisite Lenders approval is required, such 11-Business Day period) and notifying Administrative Agent that a failure to respond within five (5) Business Days (or eleven (11) Business Days, as applicable) shall constitute deemed approval, then Administrative Agent shall be deemed to have consented to such Lease. Notwithstanding the foregoing, Administrative Agents approval (or deemed approval) of a Term Sheet shall not be deemed to permit Borrower to enter into a Lease on a form other than Borrowers previously approved form lease (subject to modification as reasonably required by Borrowers).
(c) Whether approval is required or not, Borrowers shall promptly provide Administrative Agent with (i) a copy of every Lease executed with tenants occupying 10,000 square feet or more of the Property, and (ii) any and all financial information received by Borrowers from any such tenants.
(d) If a Borrower receives any sums in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease (any such funds, a Termination Payment), then such Termination Payment shall be handled in the manner provided in Section 9.21 below.
9.4 SNDAs.
(a) Borrowers shall use commercially reasonable efforts to obtain, from each tenant leasing more than fifteen thousand (15,000) square feet of net rentable area of a Property as of the Effective Date, a Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement in the form of Exhibit C or in such other form as may be approved by Administrative Agent (each such agreement, a SNDA) within sixty (60) days after the Effective Date.
(b) Borrowers shall use commercially reasonable efforts to obtain (i) SNDAs from any future tenant that leases more than (i) with respect to the Granite Tower Property and the National City Property, ten percent (10%) of the net rentable area of such Property and (ii) with respect to all other Properties, fifteen percent (15%) of the net rentable area of such Property.
9.5 SUBDIVISION MAPS. Prior to recording any final map, plat, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of any Property (collectively, Subdivision Map), Borrowers shall submit such Subdivision Map to Administrative Agent for Administrative Agents review and approval, which approval shall not be unreasonably withheld. Within ten (10) Business Days after Administrative Agents receipt of such Subdivision Map, Administrative Agent shall provide Borrowers written notice if Administrative Agent disapproves of said Subdivision Map. Within five (5) Business Days after Administrative Agents request, Borrowers shall execute, acknowledge and deliver to Administrative Agent such amendments to the Loan Documents as Administrative Agent may reasonably require to reflect the change in the legal description of the applicable Property resulting from the recordation of any Subdivision Map. In connection with and promptly after the recordation of any amendment or other modification to the applicable Security Document recorded in connection with such amendments, Borrowers shall deliver to Administrative Agent, for the benefit of Lenders, at Borrowers sole expense, a title endorsement to the Title Policy in form and substance satisfactory to Administrative Agent insuring the continued first priority lien of the applicable Security Document. Subject to the execution and delivery by Borrowers of any documents required under this Section, Administrative Agent, on behalf of Lenders, shall, if required by applicable law, sign any Subdivision Map approved by Administrative Agent pursuant to this Section.
9.6 OPINIONS OF LEGAL COUNSEL. Borrowers shall provide, at Borrowers expense, opinions of legal counsel in form and content satisfactory to Administrative Agent to the effect that: (a) upon due authorization, execution and recordation or filing as may be specified in each opinion, each of the Loan Documents and Other Related Documents shall be legal, valid and binding instruments, enforceable against the makers thereof in accordance with their respective terms; (b) Borrowers and Guarantor are duly formed and have
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all requisite authority to enter into the Loan Documents and Other Related Documents; and (c) such other matters, incident to the transactions contemplated hereby, as Administrative Agent may reasonably request.
9.7 FURTHER ASSURANCES. Upon Administrative Agents request and at Borrowers sole cost and expense, Borrowers shall execute, acknowledge and deliver any other instruments and perform any other acts necessary, desirable or proper, as determined by Administrative Agent, to carry out the purposes of this Agreement and the other Loan Documents or to perfect and preserve any Liens created by the Loan Documents.
9.8 ASSIGNMENT. Without the prior written consent of Lenders, Borrowers shall not assign Borrowers interest under any of the Loan Documents, or in any monies due or to become due thereunder, and any assignment without such consent shall be void. In this regard, Borrowers acknowledge that Lenders would not make this Loan except in reliance on Borrowers expertise, reputation, prior experience in developing, constructing commercial and managing real property, Lenders knowledge of Borrowers, and Lenders understanding that this Agreement is more in the nature of an agreement involving personal services than a standard loan where Lenders would rely on security which already exists.
9.9 MANAGEMENT OF PROPERTY.
(a) From and after the Effective Date, no Borrower shall enter into, or thereafter amend in any material manner or terminate, any Major Agreement with respect to a Property, except upon thirty (30) days prior written notice to and approval by Administrative Agent. The applicable Borrower shall timely provide to Administrative Agent a copy of any such proposed Major Agreement. Any such proposed Major Agreement submitted to Administrative Agent for approval and not disapproved by Administrative Agent within ten (10) days after receipt thereof shall be deemed to be approved by Administrative Agent. Without limiting in any way Administrative Agents approval rights with respect thereto, each proposed Major Agreement shall provide for fees, reimbursements or other payments by the applicable Borrower to the other party thereto at levels not in excess of applicable market levels.
(b) Notwithstanding the foregoing, for purposes of this Agreement, property management or leasing agreements entered into with CB Richard Ellis, Inc., PM Realty Group, Transwestern, Jones Lang LaSalle, or any other property or leasing manager of equivalent experience and reputation managing or leasing real properties similar to the Properties, do not constitute Major Agreements provided such agreements provide for fees, reimbursements or other payments by the applicable Borrower to the other party thereto at levels not in excess of applicable market levels. If a Borrower enters into such an agreement with any such party, such Borrower shall within ten (10) days after entering into, or modifying, such agreement, notify Administrative Agent of such event and provide Administrative Agent with a true and correct copy of such agreement or amendment, as the case may be.
9.10 REQUIREMENTS OF LAW. Borrowers shall comply with all Requirements of Law and shall use commercially reasonable and good faith efforts to cause other persons or entities to comply with same in a timely manner.
9.11 SPECIAL COVENANTS; SINGLE PURPOSE ENTITY. Each Borrower shall at all times be a Single Purpose Entity.
9.12 LIMITATIONS ON DISTRIBUTIONS, ETC. No Distributions by a Borrower shall be made during the continuance of any Default.
9.13 INCURRENCE OF ADDITIONAL INDEBTEDNESS. Borrowers shall not incur any Indebtedness or other liabilities other than (i) the Obligations, (ii) operating and equipment leases entered into in the ordinary course of Borrowers business, (iii) tenant security deposits, (iv) non-delinquent, accrued but unpaid real estate taxes and insurance premiums, (v) other trade payables in respect of operating expenses (which, for clarity, shall specifically include capital expenditures, tenant improvement costs and leasing commissions) incurred in the ordinary course, (vi) any indebtedness, obligations or other liabilities (other than interest expense liability) in respect of interest rate swap, collar, cap or similar agreements providing interest rate protection and foreign currency exchange agreements with Wells Fargo Bank as the counterparty, (vii) obligations in connection with posting a bond required by a Governmental Authority in connection with the operation of one or more of the Properties and (viii) the obligations under the Ground Lease. Further, the sum of the liabilities referred to in clauses (ii) and (v) shall at no time exceed an amount equal to (a) $1,000,000 per Property, or (b) the lesser of (i)
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$3,500,000 or (ii) one and one-half percent (1.5%) of the outstanding principal amount of the Loan, in the aggregate, for all Properties; provided, for purposes of determining whether the foregoing thresholds have been exceeded, only those liabilities referred to in clause (v) that have been outstanding for more than thirty (30) days (or, with respect to any payable which by its terms permits a longer payment period, such longer period) shall be included in such calculation.
9.14 SPECIAL REPRESENTATIONS, COVENANTS AND WAIVERS.
(a) The parties hereto recognize and acknowledge that a Borrower may from time to time have advanced to it under the Loan an aggregate principal amount in excess of the borrowing that would otherwise be supported by real property collateral encumbered under Security Documents. The Loan has been established in the manner provided herein (and with the possible result referred to in the foregoing sentence) at the express request of, and to accommodate the administrative and operational requirements of, the Borrowers and Guarantor. Specifically, the Loan might have been established to provide a limit on direct borrowings by Borrowers consistent with the specific borrowing base limitations imposed by real property collateral owned by such Borrowers, with additional credit needs of such Borrowers in excess thereof being accommodated by inter-company loans from Borrower(s) with excess borrowing capacity to such other Borrowers requiring additional funds. However, for administrative and operational reasons imposed by the Borrowers and Guarantor, as aforesaid, the Loan has been established as provided herein, but with the intention, as confirmed in subsection (b) below, that the Borrowers and Guarantor ultimately share, among themselves repayment and/or reimbursement obligations under the Loan to the same extent as if such borrowings had been made under the alternative disbursement procedure described in the preceding sentence. In addition, it is further recognized and acknowledged that (i) each Borrower and Guarantor shall directly and indirectly benefit from the expansion of business operations, as facilitated by the Loan, of each other Borrower, including, without limitation, the present and future contracting for goods and services as between the Borrowers and Guarantor in respect of their business operations, and (ii) Administrative Agent and Lenders have no intention or obligation to track the disbursement or use of Loan proceeds as between the various Borrower and Guarantor entities.
(b) In connection with its joint and several obligations under the Loan Documents, each Borrower waives: (i) any defense based upon any legal disability or other defense of any other Borrower, or by reason of the cessation or limitation of the liability of any other Borrower from any cause other than full payment of all sums payable under the Notes or any of the other Loan Documents; (ii) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of any Borrower or any principal thereof or any defect in the formation of any Borrower or any such principal; (iii) any defense based upon the application by any Borrower of the proceeds of the Loan for purposes other than the purposes permitted under this Agreement or any other Loan Document; (iv) any and all rights and defenses arising out of an election of remedies by the Lenders; (v) any defense based upon Administrative Agents or any Lenders failure to disclose any information concerning any other Borrowers financial condition or any other circumstances bearing on any other Borrowers ability to pay all sums payable under the Notes or any of the other Loan Documents; (vi) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects ore burdensome than that of a principal; (vii) any defense based upon the Lenders election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (viii) any defense based upon, any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (ix) any right of subrogation, any right to enforce any remedy which the Lenders may have against any other Borrower and any right to participate in, or benefit from, any security for the Notes or the other Loan Documents now or hereafter held by the Lenders; and (x) the benefit of any statute of limitations affecting the liability of each Borrower or the enforcement hereof. Each Borrower agrees that the payment of all sums payable under the Notes or any of the other Loan Documents or any part thereof or other act which tolls any statute of limitations applicable to the Notes or other Loan Documents shall similarly operate to toll the statute of limitations applicable to each Borrowers liability hereunder. Lenders may (A) apply security and direct the order or manner of sale thereof as the Lenders in their sole discretion may determine; (B) release, substitute or add any one or more endorsers of the Notes or guarantors of Borrowers obligations under the Note or the other Loan Documents; and (C) apply payments received by the Administrative Agent from Borrowers to any obligations of Borrowers to the
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Lenders, in such order as the Administrative Agent shall determine in its sole discretion. If all or any portion of the obligations of any Borrowers are paid or performed, the obligations of each other Borrower hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from the Lenders as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents. Each Borrower acknowledges that: (a) the obligations under the Loan Documents are complex in nature, (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of the Administrative Agents and Lenders consideration for entering into these transactions, the Administrative Agent and Lenders have specifically bargained for the waiver and relinquishment by each Borrower of all such defenses, and each Borrower has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, each Borrower does hereby represent and confirm to Administrative Agent and each Lender that each Borrower is fully informed regarding, and thoroughly understands: (i) the nature of all such possible defenses, (ii) the circumstances under which such defenses may arise, (iii) the benefits which such defenses might confer upon Borrower, and (iv) the legal consequences to Borrower of waiving such defenses. Each Borrower acknowledges that all of the informed waivers herein shall be fully enforceable by the Administrative Agent and Lenders, and that Administrative Agent and Lenders are induced to enter into this transaction in material reliance upon the presumed full enforceability thereof.
(c) Without limiting subsection (b) above, and except as otherwise provided in this Agreement, each Borrower hereby specifically waives presentment, demand, protest and notice of any kind and without limiting the generality of the foregoing or any provision of subsection (b) above, each Borrower further expressly waives to the extent permitted by law any and all rights and defenses, including, without limitation, any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to such Borrower
9.15 ENVIRONMENTAL INSURANCE PROCEEDS. Subject to the terms of the Security Documents, Borrowers shall apply any proceeds received on account of environmental insurance policies maintained by Borrowers which relate to one or more of the Properties for remediation of the environmentally impaired Property or Properties giving rise to the relevant insurance claim.
9.16 AMENDMENT OF CONSTITUENT DOCUMENTS. Except with Administrative Agents prior written consent, which shall not be unreasonably withheld, no Borrower shall amend its organizational documents (including, without limitation, as to the admission of any new equity owner, directly or indirectly).
9.17 OWNERSHIP OF BORROWER.
(a) Each Borrower shall be wholly owned, either directly or indirectly, by KBS REIT. Notwithstanding anything stated to the contrary in this Agreement, the Security Documents or in any of the other Loan Documents, any transfers of equity interests or other interests in KBS REIT Properties II, LLC or in any of the direct or indirect owners of KBS REIT Properties II, LLC shall not be prohibited (and shall be expressly permitted) provided that KBS REIT continues to own, either directly or indirectly, 100% of the ownership interests in each Borrower and KBS REIT Properties II, LLC, and provided further, that KBS REIT Properties II, LLC maintains a net worth (determined by subtracting Total Liabilities from Gross Asset Value, each as defined in Exhibit I) of at least $200,000,000 (excluding the Gross Asset Value and the Total Liabilities associated therewith of each of the Properties).
(b) At all times during the term of the Loan, Peter Bren or Charles Schreiber shall remain actively involved in the management of KBS REIT; provided, however, that either or both Peter Bren and Charles Schreiber may be replaced by a principal of any replacement asset manager approved pursuant to clause (c) below.
(c) At all times during the term of the Loan, Manager shall be the asset manager for KBS REIT pursuant to the Management Agreement. Subject to Administrative Agents prior written consent, which may be withheld in Administrative Agents sole discretion, Manager may be replaced by another asset manager; provided, if the replacement asset manager: (i) has financial capability and management
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experience at least comparable to Manager; (ii) has current assets under management of not less than 10,000,000 square feet of properties similar to the Properties; (iii) has current asset management agreements with at least five (5) other institutional investors; and (iv) is currently a customer of the Wells Fargo Wholesale Bank Commercial Real Estate Group in a borrowing capacity and in good standing, then Administrative Agents consent to the replacement of Manager with such substitute manager shall not be unreasonably withheld.
9.18 LIENS. Borrowers shall not directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any Collateral, except (A) Liens in favor of Administrative Agent securing the Obligations and (B) Permitted Liens. Nothing contained in this Agreement or in any of the other Loan Documents shall limit or impair the right of Borrowers constituent members or partners (direct or indirect) to directly or indirectly create, incur, assume or permit to exist any Indebtedness of, or any Lien upon any property of, such member or partner.
9.19 TRANSFERS OF COLLATERAL. Subject to Section 9.17, Borrowers shall not transfer, directly or indirectly, all or any interest in any Property or the Collateral.
9.20 ADDITIONAL REIT COVENANTS.
(a) At Administrative Agents request, KBS REIT shall provide a schedule of transactions entered into by KBS REIT (including any acquisition, disposition, merger or asset purchase by KBS REIT or its Subsidiaries), the value of which exceeds $100,000,000.
(b) KBS REIT shall at all times operate in conformity with the requirements for qualification as a real estate investment trust pursuant to Section 856 of the Internal Revenue Code.
9.21 TERMINATION PAYMENTS.
(a) If a Borrower receives a Termination Payment, then, provided a Default has not occurred which is continuing, if such Termination Payment is less than the lesser of $500,000 or 0.20% of the Aggregate Loan Commitment at such time (the Termination Payment Cap), then such Termination Payment may be retained by such Borrower (provided, in no event shall Borrowers be permitted to retain an aggregate amount (i.e., the sum of all Termination Payments being held by all Borrowers pursuant to the foregoing at any one time) in excess of the lesser of $2,000,000 or 0.65% of the Aggregate Loan Commitment at such time (the Maximum Termination Reserve Amount)). Any Termination Payments retained by a Borrower may be used by such Borrower only for costs incurred by such Borrower in re-tenanting the space on account of which the Termination Payment was made; provided, however, that so long as a Default has not occurred hereunder which is continuing, such Borrower shall also be permitted to distribute a portion of such Termination Payment to its members, on a monthly basis, equal to the monthly base rent that would have been paid by the tenant that made the Termination Payment.
(b) If a Borrower receives a Termination Payment in an amount which exceeds the Termination Payment Cap or if Borrowers would, collectively, then be holding an amount in excess of the Maximum Termination Reserve Amount in the aggregate, then (i) the entire amount of the Termination Payment which is greater than the Termination Payment Cap (i.e., not only the portion of such Termination Payment that exceeds the Termination Payment Cap) and (ii) the entire amount of any Termination Payment that would cause the sum of all Termination Payments being held by Borrowers collectively to exceed the Maximum Termination Reserve Amount (i.e., not only the portion of such Termination Payment that would cause the sum of all Termination Payments then held by Borrowers collectively to exceed the Maximum Termination Reserve Amount) shall, without duplication, be promptly delivered by such Borrower to Administrative Agent to be held in a blocked and pledged cash collateral account. Thereafter, provided (y) no Default has occurred and is continuing hereunder and (z) the Loan Constant is not less than the Loan Constant Requirement, Administrative Agent shall, at Borrowers request, (1) disburse funds from the cash collateral account to such Borrower to cover Administrative Agent-approved re-tenanting costs with respect to the Property, subject to such reasonable conditions on disbursement as Administrative Agent may impose and (2) disburse to such Borrower, from the cash collateral account, an amount equal to the monthly base rent that would have been paid by the tenant(s) that made the Termination Payment(s). If, however, at any time Borrowers are in compliance with clause
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(y) above, but not (z), then at such time, Borrowers shall continue to have the right to receive disbursements pursuant clause (1) above, but not pursuant to clause (2).
(c) Notwithstanding the foregoing subsection (b), the amount of any Termination Payment which exceeds $2,000,000 shall, without duplication, be promptly delivered by Borrowers to Administrative Agent to be held in a blocked and pledged cash collateral account. Thereafter, provided (i) no Default has occurred and is continuing hereunder and (ii) the Loan Constant is not less than the Loan Constant Requirement, Administrative Agent shall, at Borrowers request, disburse funds from the cash collateral account to the applicable Borrower to cover Administrative Agent-approved re-tenanting costs with respect to the premises on account of which the relevant Termination Payment was made.
(d) Notwithstanding anything to the contrary in this Section 9.21, after the affected space at the Property has been re-leased (which for purposes hereof shall mean the affected space is not less than 95% leased) and is occupied by tenants in possession and paying rent, and provided (i) no Default has occurred and is continuing and (ii) the Loan Constant is not less than the Loan Constant Requirement, any balance remaining in such cash collateral account which relates to such affected space shall, at Borrowers request, be disbursed to the applicable Borrower.
(e) Notwithstanding anything to the contrary in this Section 9.21, Borrowers may elect at any time to cause funds on deposit in the cash collateral account to be applied in reduction of the outstanding principal amount of the Loan; provided, any amounts repaid pursuant to the foregoing shall permanently reduce the Aggregate Loan Commitment by a like amount and may not be reborrowed, and Borrowers shall be required to pay any Exit Fee and/or Fixed Rate Price Adjustment with respect thereto (as applicable); provided, further, however, that no Exit Fee shall be payable to the extent that the principal amount of the Loan is paid down in order to satisfy any of the Loan Constant thresholds set forth in Section 8.1 hereof.
9.22 SWAP AGREEMENT. Prior to the earlier of (a) July 27, 2011 and (b) the date on which the Aggregate Holdback has been fully disbursed, Borrowers shall obtain and maintain in effect at all times an interest rate protection product in the form of a Swap Agreement reasonably acceptable to Administrative Agent, which product shall hedge (i) at least thirty-three percent (33%) of the Aggregate Loan Commitment for a period through at least the 53rd month of the Loan and (ii) at least an additional thirty-three percent (33%) of the Aggregate Loan Commitment for a period through at least the 36th month of the Loan and (iii) at least fifty percent (50%) of the outstanding principal amount of the Loan through at least the thirty-sixth month of the Loan. No such Swap Agreement shall be required during any extension period after the Initial Maturity Date. For avoidance of doubt, once an Administrative Agent has approved a Swap Agreement in accordance with the preceding sentence, such Swap Agreement shall be deemed acceptable to Administrative Agent and shall be deemed to satisfy the requirements of the preceding sentence so long as it remains in full force and effect. Notwithstanding the foregoing, if, following Borrowers timely request, Wells Fargo is unable to provide a Swap Agreement which satisfies the requirements of this Section 9.22, then Borrowers shall have no further obligation to enter into a Swap Agreement pursuant to the terms of this Section 9.22.
9.23 GRANITE TOWER PROPERTY. If at any time during the term of the Loan following the release of Guarantor from liability under clause (h) of Section 1 of the Limited Guaranty referenced in Exhibit B the Par Loan Value allocable to the Granite Tower Property exceeds fifty percent (50%) of the Par Loan Values, in the aggregate, of all Properties then remaining encumbered by Security Documents, then Borrowers, at their election, shall either (a) cause the Granite Tower Property to be released from the lien of the Security Documents in accordance with the terms and conditions of Section 2.10 above; provided, Borrowers shall have no obligation to pay an Exit Fee in connection with any amounts that Borrowers are required to repay in accordance with Section 2.10 or (b) elect to cause Guarantors liability under the above-referenced clause (h) of Section 1 of the Limited Guaranty to be reinstated.
ARTICLE 10. REPORTING COVENANTS
Borrowers covenant and agree that, on and after the date hereof, until payment in full of all of the Obligations, and termination of this Agreement:
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10.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION (BORROWERS). Borrowers shall maintain or cause to be maintained a system of accounting established and administered in accordance with sound business practices and consistent with past practice to permit preparation of quarterly and, to the extent applicable, annual financial statements, each in conformity with GAAP, and each of the financial statements described below shall be prepared for Borrowers from such system and records. Borrowers shall deliver or cause to be delivered to Administrative Agent:
(a) Operating Statements and Operating Results. As soon as practicable, and in any event within forty-five (45) days after the end of the each Fiscal Quarter commencing with the Fiscal Quarter ending June 30, 2011, quarterly operating statements, in such form as may be approved by Administrative Agent from time to time, which operating statements shall include actual quarterly and year-to-date net operating income and net cash flow results, rent rolls (on Borrowers detailed form of rent roll), current and prospective lease status reports and occupancy summaries in the form customarily generated by Borrowers for the Properties dated as of the last day of such Fiscal Quarter, in form and substance satisfactory to Administrative Agent, certified on behalf of the applicable Borrower by such Borrowers advisors portfolio account controller. In addition, as soon as practicable, and in any event within forty-five (45) days after the end of the fourth Fiscal Quarter, a year-end operating statement, in such form as may be approved by Administrative Agent from time to time (collectively with the quarterly statements, the Operating Statements).
(b) Quarterly Financial Statements. As soon as practicable, and in any event within forty-five (45) days after the end of each Fiscal Quarter, (i) balance sheets, statements of operations and statements of cash flow for Borrowers (collectively, Financial Statements), and (ii) a Borrowers Certificate in the form of Exhibit H or otherwise in form and substance satisfactory to Administrative Agent, in each case certified on behalf of the applicable Borrower by such Borrowers advisors portfolio account controller.
(c) Borrowers Certificate.
(i) Together with each delivery of any Operating Statement or Financial Statement pursuant to subsections (a) and (b) above, a Borrowers Certificate (the Borrowers Certificate), stating that the individual who is the signatory thereto (which individual shall be the account controller of KBS REIT) has reviewed, or caused under his or her supervision to be reviewed, the terms of this Agreement and the other principal Loan Documents, and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the applicable Borrower during the accounting period covered by such Operating Statements or Financial Statements, and that such review has not disclosed the existence during or at the end of such accounting period, and that the signer does not have knowledge of the existence as of the date of the applicable Borrowers Certificate, of any condition or event which constitutes a Default or Potential Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action has been taken, is being taken and is proposed to be taken with respect thereto.
(ii) Together with each delivery of any Operating Statement or Financial Statement pursuant to subsections (a) and (b) above with respect to the last Fiscal Quarter of any Fiscal Year, a Borrowers Certificate, stating that the individual who is the signatory thereto (which individual shall be the account controller of KBS REIT) has reviewed, or caused under his or her supervision to be reviewed, the terms of this Agreement and the other principal Loan Documents, and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the applicable Borrower during the Fiscal Year then most recently ended, and that such review has not disclosed the existence during or at the end of such Fiscal Year, and that the signer does not have knowledge of the existence as of the date of the applicable Borrowers Certificate, of any condition or event which constitutes a Default or Potential Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action has been taken, is being taken and is proposed to be taken with respect thereto.
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(iii) Each Borrowers Certificate referenced in subsections (i) and (ii) above shall also (A) contain a certification by the individual who is the signatory thereto that the applicable Borrower is in compliance with all covenants contained herein, (B) provide a schedule of contingent liabilities of Borrowers consisting of letters of credit and guaranties of debt, together with a listing of contingent liabilities arising from trade payables that have been outstanding for more than thirty (30) days and equipment leases if such contingent liabilities arising from trade payables outstanding for more than thirty (30) days and operating and equipment leases exceed, on a per Property basis, or in the aggregate, the amount permitted under Section 9.13, and (C) contain a calculation of the Loan Constant.
(d) Budgets. Not later than February 28 of each Fiscal Year, annual operating and capital budgets for the Property for such Fiscal Year, prepared on an fiscal basis, in such form as may be approved by Administrative Agent from time to time, together with all supporting details reasonably requested by Administrative Agent, and certified, under a Borrowers Certificate, as being based upon such Borrowers reasonable good faith estimates, upon information and assumptions at the time.
(e) Knowledge of Default. Promptly upon a Borrower obtaining knowledge (i) of any condition or event which constitutes a Default or Potential Default, or becoming aware that any Administrative Agent has given notice or taken any other action with respect to a claimed Default or Potential Default or (ii) of any condition or event which has a Material Adverse Effect, a Borrowers Certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by Administrative Agent and the nature of such claimed Default, Potential Default, event or condition, and what action the applicable Borrower has taken, is taking and proposes to take with respect thereto.
(f) Litigation, Arbitration or Government Investigation. Promptly upon a Borrower obtaining knowledge of (i) the institution of, or written threat of, any material Proceeding against or affecting such Borrower or the Property not previously disclosed in writing by such Borrower to Administrative Agent pursuant to this Section 10.1(f), including any eminent domain or other condemnation proceedings affecting the Property, or (ii) any material development in any Proceeding already disclosed, which, in either case, has a Material Adverse Effect, a notice thereof to Administrative Agent and such other information as may be reasonably available to it to enable Administrative Agent and its counsel to evaluate such matters.
(g) ERISA Matters. As soon as possible, and in any event within thirty (30) days after a Borrower knows or has reason to know that such Borrower or any of its ERISA Affiliates has or is likely to incur any liability with respect to any Benefit Plan, or any withdrawal liability with respect to any Multiemployer Plan, which would have a Material Adverse Effect, a written statement of the chief financial officer of the applicable Borrower describing such occurrence and the action, if any, which such Borrower or any ERISA Affiliate of such Borrower has taken, is taking or proposes to take, with respect thereto, and, when known, any action taken or threatened by the IRS, the DOL or the PBGC with respect thereto.
(h) Other Information. Such other information, reports, contracts, schedules, lists, documents, agreements and instruments in the possession or under the control of Borrowers with respect to (i) the Properties, (ii) any material change in any Borrowers investment, finance or operating policies, or (iii) any Borrowers business, condition (financial or otherwise), operations, performance, properties or prospects as Administrative Agent may from time to time reasonably request, including, without limitation, annual information with respect to cash flow projections, budgets, operating statements (current year and immediately preceding year), rent rolls, lease expiration reports and leasing status reports. Provided that Administrative Agent gives the applicable Borrower reasonable prior notice and an opportunity to participate, Borrowers hereby authorize Administrative Agent to communicate with the Accountants and authorizes the Accountants to disclose to Administrative Agent any and all financial statements and other information of any kind, including copies of any management letter or the substance of any oral information, that such accountants may have with respect to the Collateral or any Borrowers condition (financial or otherwise), operations, properties, performance and prospects. Concurrently therewith, Administrative Agent will notify the applicable Borrower of any such communication. At Administrative Agents request, the applicable Borrower shall deliver a letter addressed to the Accountants instructing them to disclose such information in compliance with this Section 10.1(h).
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(i) Accountant Reports. (1) If at any time any Borrower causes audited financial statements to be prepared with respect to any Fiscal Year, then, within ten (10) Business Days after receipt thereof from the Accountants: copies of such audited financial statements, together with all reports prepared by the Accountants and submitted to such Borrower in connection therewith, including the comment letter submitted by the Accountants in connection with such audit; and (2) copies of all reports prepared by the Accountants and submitted to such Borrower in connection with any other annual, interim or special audit or review of the financial statements or practices of such Borrower.
(j) Insurance Claims. Promptly following Administrative Agents request, Borrowers shall deliver written confirmation to Administrative Agent of any and all claims made under any policy of casualty insurance which insures any Property hereunder, whether or not such claim(s) relate to any of the Properties.
10.2 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION (KBS REIT). Borrowers shall deliver, or cause KBS REIT to deliver, to Administrative Agent, as soon as practicable, and in any event within forty-five (45) days after the end of each fiscal quarter (however, 90 days after the end of the fourth fiscal quarter), balance sheets, statements of operations and statements of cash flow and statements of retained earnings for KBS REIT (all on a consolidated basis), certified on behalf of KBS REIT by the controller of KBS REIT.
10.3 ENVIRONMENTAL NOTICES. Borrowers shall notify Administrative Agent, in writing, as soon as practicable, and in any event within ten (10) days after Borrowers learning thereof, of any: (a) written notice or claim to the effect that a Borrower is or may be liable to any Person as a result of any material Release or threatened Release of any Contaminant into the environment; (b) written notice that Borrower is subject to investigation by any Governmental Authority evaluating whether any Remedial Action is needed to respond to the Release or threatened Release of any Contaminant into the environment; (c) written notice that any Property is subject to an Environmental Lien; (d) written notice of violation to Borrower or awareness of a condition which might reasonably result in a notice of violation of any Environmental Laws by a Borrower; (e) commencement or written threat of any Proceeding alleging a violation of any Environmental Laws by a Borrower or with respect to a Property; or (f) written notice from a Governmental Authority of any changes to any existing Environmental Laws that will have a Material Adverse Effect.
10.4 CONFIDENTIALITY. Confidential information obtained by Administrative Agent pursuant to this Agreement or in connection with the Loan shall not be disseminated by Administrative Agent and shall not be disclosed to third parties except to regulators, taxing authorities and other governmental agencies having jurisdiction over Administrative Agent or otherwise in response to Requirements of Law, to Administrative Agents auditors and legal counsel and in connection with regulatory, administrative and judicial proceedings as necessary or relevant including enforcement proceedings relating to the Loan Documents, and to any prospective assignee of or participant in Administrative Agents interest under this Agreement or any prospective purchaser of the assets or a controlling interest in Administrative Agent, provided that such prospective assignee, participant or purchaser first agrees to be bound by the provisions of this Section 10.4. In connection with disclosures of confidential information to any non-governmental third-party, Administrative Agent shall, to the extent feasible and permitted, give prior notice of such request to the applicable Borrower; however, Administrative Agent shall incur no liability to Borrowers for failure to do so. For purposes hereof, confidential information shall mean all nonpublic information obtained by Administrative Agent, unless and until such information becomes publicly known, other than as a result of unauthorized disclosure by Administrative Agent of such information.
ARTICLE 11. DEFAULTS AND REMEDIES
11.1 DEFAULT. The occurrence of any one or more of the following shall constitute an event of default (Default) under this Agreement and the other Loan Documents:
(a) Failure to Make Payments When Due. Borrowers shall fail to pay (i) any amount due on the Maturity Date, (ii) any principal when due, or (iii) any interest on the Loan (or any fee or other amount payable under the Fee Letter or any Loan Documents) within five (5) days after the date such interest, fee or other amount first became due.
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(b) Distributions; Additional Indebtedness. Any Borrower shall breach either covenant set forth in Sections 9.12 and 9.13.
(c) Ground Lease. The occurrence of a default by KBSII 2500 Regent Boulevard, LLC, as lessee, under the Ground Lease and the continuation thereof beyond the later of (i) thirty (30) days beyond the expiration of any applicable notice and cure period (provided such default has not been cured by KBSII 2500 Regent Boulevard, LLC during such period) and (ii) ten (10) Business Day following the termination of the Ground Lease by Ground Lessor (such later date being referred to herein as the Ground Lease Cure Date); provided, however, that no Default shall be deemed to have occurred hereunder if Borrowers cause the Ground Leased Property to be released from the lien of the Security Documents in accordance with the provisions of Section 2.10 above on or before the Ground Lease Cure Date. If, however, (i) Ground Lessor has not terminated the Ground Lease as the result of an uncured default by KBSII Regent Boulevard, LLC, by the date which is six (6) months after the expiration of the cure period applicable to such default and (ii) the Ground Leased Property has not then been released from the lien of the Security Documents in accordance with Section 2.10 above, then Borrowers shall cause to be delivered to Administrative Agent confirmation from Ground Lessor, in the form of a writing acceptable to Administrative Agent, that the applicable default under the Ground Lease has been waived by Ground Lessor. Borrowers failure to deliver such confirmation shall constitute a Default hereunder. Notwithstanding anything to the contrary, the foregoing shall not in any way limit Administrative Agents right to cure any default by KBSII Regent Boulevard, LLC, under the Ground Lease during the cure period applicable thereto and Borrowers hereby specifically authorize Administrative Agent to effect such cure, as contemplated by the terms of the Ground Lease and the Estoppel Certificate Agreement executed by Ground Lessor for the benefit of Administrative Agent and Lenders, dated January 7, 2011
(d) Other Defaults. Borrowers shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on Borrowers under this Agreement or under any of the other Loan Documents (other than as described in any other provision of this Section 11.1), and (with respect to agreements, covenants or obligations for which no time period for performance is otherwise provided and for which cure is possible), such failure shall continue for fifteen (15) days after the earlier of (i) the date as of which the applicable Borrower had actual knowledge of such failure, and (ii) the date on which Administrative Agent gives the applicable Borrower notice of such failure (or, in either such case, such lesser period of time as is mandated by applicable Requirements of Law); provided, however, if such failure is not capable of cure within such fifteen (15) day period, but is capable of cure and the grant of additional time to cure would not result in a Material Adverse Effect, then if such Borrower promptly undertakes action to cure such failure and thereafter diligently prosecutes such cure to completion within ninety (90) days after the earlier of the two dates described in the preceding clauses (i) and (ii), then Borrowers shall not be in default hereunder.
(e) Breach of Representation or Warranty. Any representation or warranty made or deemed made by Borrowers to Administrative Agent or Lenders herein or in any of the other Loan Documents or in any statement, certificate or financial statements at any time given by Borrowers pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against any Borrower and the petition shall not be dismissed within sixty (60) days after commencement of the case, or a court having jurisdiction shall enter a decree or order for relief in respect of any such Person in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state or foreign law; or
(ii) A decree or order of a court (or courts) having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower, or over all or a substantial part of the property of any such Person, shall be entered; or an interim receiver, trustee or other custodian of any such Person or of all or a substantial part of the property of any such Person, shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of any such
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Person, shall be issued and any such event shall not be stayed, vacated, dismissed, bonded or discharged within sixty (60) days of entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Any Borrower shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking of possession by a receiver, trustee or other custodian for all or a substantial part of its property; any such Person shall make any assignment for the benefit of creditors or shall be unable or fail, or admit in writing its inability, to pay its debts as such debts become due; or any member, shareholder or manager of any Borrower adopts any resolution or otherwise authorizes any action to approve any of the foregoing.
(h) Judgments and Attachments. Any money judgment (other than a money judgment covered by insurance but only if the insurer has admitted liability with respect to such money judgment), writ or warrant of attachment, or similar process involving in any case an amount in excess of One Million Dollars ($1,000,000) shall be entered or filed against any Borrower or its assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days.
(i) Dissolution. Any order, judgment or decree shall be entered against any Borrower decreeing its involuntary dissolution or split up and such order shall remain undischarged and unstayed for a period in excess of thirty (30) days; or any Borrower shall otherwise dissolve or cease to exist.
(j) Loan Documents; Failure of Security. If for any reason any Loan Document shall cease to be in full force and effect or any Lien intended to be created thereby shall cease to be or is not valid or perfected; or any Lien in favor of Administrative Agent contemplated by this Agreement or any Loan Document shall, at any time, be invalidated or otherwise cease to be in full force and effect; or any such Lien or any Obligation shall be subordinated or shall not have the priority contemplated by this Agreement or the Loan Documents for any reason, and, in the case of any of the foregoing, such condition or event shall continue for fifteen (15) days after the applicable Borrower knew of such condition or event.
(k) ERISA Liabilities. Any Termination Event occurs which will or is reasonably likely to subject any Borrower to a liability which Administrative Agent reasonably determines will have a Material Adverse Effect, or the plan administrator of any Benefit Plan applies for approval under Section 412(d) of the Internal Revenue Code for a waiver of the minimum funding standards of Section 412(a) of the Internal Revenue Code and Lender reasonably determines that the business hardship upon which the Section 412(d) waiver was based will or would reasonably be anticipated to subject any Borrower to a liability which Administrative Agent determines will have a Material Adverse Effect. All capitalized terms used in this Section 11.1(k) and not otherwise defined herein shall have the meanings given to them in the Employee Retirement Security Act.
(l) Environmental Liabilities. Any Borrower becomes subject to any Liabilities and Costs, which Administrative Agent reasonably deems to have a Material Adverse Effect, arising out of or related to (i) the Release or threatened Release at the Property of any Contaminant into the environment, or any Remedial Action in response thereto, or (ii) any violation of any Environmental Laws.
(m) Solvency; Material Adverse Change. Any Borrower shall cease to be Solvent, or there shall have occurred any event or circumstance having a Material Adverse Effect.
(n) Interest Rate Management Agreement. Any Borrower shall default (beyond the expiration of any applicable notice and cure period) under any Swap Agreement entered into with Wells Fargo Bank, National Association.
(o) Obligations of Guarantor. A default by Guarantor beyond any applicable notice and cure period under the Amended and Restated and Consolidated Limited Guaranty executed by Guarantor in favor of Administrative Agent.
A Default shall be deemed continuing until cured or waived in writing in accordance with Section 13.12.
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11.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default specified in this Article 11, Requisite Lenders may, at their sole option, declare all sums owing to Lenders under the Notes, this Agreement and the other Loan Documents immediately due and payable. Upon such acceleration, Administrative Agent may, in addition to all other remedies permitted under this Agreement and the other Loan Documents and at law or equity, apply any sums in any account pledged by Borrowers as collateral for the Loan to the sums owing under the Loan Documents and any and all obligations of Lender to fund further disbursements under the Loan (if any) shall terminate.
11.3 DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence of a Default occasioned by Borrowers failure to pay money to a third party as required by this Agreement, Administrative Agent may but shall not be obligated to make such payment from the Loan proceeds or other funds of Lenders. If such payment is made from proceeds of the Loan, Borrowers shall immediately deposit with Administrative Agent, upon written demand, an amount equal to such payment. If such payment is made from funds of Lenders, Borrowers shall immediately repay such funds upon written demand of Administrative Agent. In either case, the Default with respect to which any such payment has been made by Administrative Agent or Lenders shall not be deemed cured until such deposit or repayment (as the case may be) has been made by Borrowers to Administrative Agent.
11.4 REPAYMENT OF FUNDS ADVANCED. Any funds expended by Administrative Agent or any Lender in the exercise of its rights or remedies under this Agreement and the other Loan Documents shall be payable to Administrative Agent upon demand, together with interest at the rate applicable to the principal balance of the Loan from the date the funds were expended.
11.5 RIGHTS CUMULATIVE, NO WAIVER. All Administrative Agents and Lenders rights and remedies provided in this Agreement and the other Loan Documents, together with those granted by law or at equity, are cumulative and may be exercised by Administrative Agent at any time. Administrative Agents exercise of any right or remedy shall not constitute a cure of any Default unless all sums then due and payable to Lenders under the Loan Documents are repaid and Borrowers have cured all other Defaults. No waiver shall be implied from any failure of Administrative Agent to take, or any delay by Administrative Agent in taking, action concerning any Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Default or failure of condition. Any waiver or approval under any of the Loan Documents must be in writing and shall be limited to its specific terms.
ARTICLE 12. THE ADMINISTRATIVE AGENT; INTERCREDITOR PROVISIONS
The following provisions of this Article 12 shall govern the relationship of the Administrative Agent and Lenders and Borrower shall have no obligations hereunder:
12.1 APPOINTMENT AND AUTHORIZATION.
(a) Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to take such action as contractual representative on such Lenders behalf and to exercise such powers under this Agreement, the other Loan Documents and Other Related Documents as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Not in limitation of the foregoing, each Lender authorizes and directs the Administrative Agent to enter into the Loan Documents and Other Related Documents for the benefit of the Lenders.
(b) Each Lender hereby agrees that, except as otherwise set forth herein, any action taken by the Requisite Lenders in accordance with the provisions of this Agreement, the Loan Documents or the Other Related Documents, and the exercise by the Requisite Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders.
(c) Nothing herein shall be construed to deem the Administrative Agent a trustee or fiduciary for any Lender or to impose on the Administrative Agent duties or obligations other than those expressly provided for herein. Without limiting the generality of the foregoing, the use of the terms Administrative Agent, Agent, agent and similar terms in the Loan Documents or Other Related Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or
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express) obligations arising under agency doctrine of any applicable law. Instead, use of such terms is merely a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(d) The Administrative Agent shall deliver to each Lender, promptly upon receipt thereof by the Administrative Agent, copies of each of the financial statements, certificates, notices and other documents delivered to the Administrative Agent pursuant to Article 10. The Administrative Agent will also furnish to any Lender, upon the request of such Lender, a copy (or, where appropriate, an original) of any document, instrument, agreement, certificate or notice furnished to the Administrative Agent by the Borrowers, any Loan Party or any other Affiliate of the Borrowers, pursuant to this Agreement or any other Loan Document not already delivered to such Lender pursuant to the terms of this Agreement or any such other Loan Document.
(e) As to any matters not expressly provided for by the Loan Documents and Other Related Documents (including, without limitation, enforcement or collection of any of Borrowers obligations hereunder), Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Requisite Lenders (or all of the Lenders if explicitly required under any other provision of this Agreement), and such instructions shall be binding upon all Lenders and all holders of any of the obligations of Borrowers; provided, however, that, notwithstanding anything in this Agreement to the contrary, the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or any other Loan Document or Requirements of Law. Not in limitation of the foregoing, the Administrative Agent may exercise any right or remedy it or the Lenders may have under any Loan Document upon the occurrence of a Potential Default or Default unless the Requisite Lenders have directed the Administrative Agent otherwise. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting under this Agreement, the other Loan Documents, or the Other Related Documents in accordance with the instructions of the Requisite Lenders, or where applicable, all the Lenders.
12.2 WELLS FARGO AS LENDER. Wells Fargo, as a Lender, shall have the same rights and powers under this Agreement and any other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term Lender or Lenders shall, unless otherwise expressly indicated, include Wells Fargo in each case in its individual capacity. Wells Fargo and its affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, serve as financial advisor to, and generally engage in any kind of business with the Borrowers, any other Loan Party or any other affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders. Further, the Administrative Agent and any affiliate may accept fees and other consideration from the Borrowers for services in connection with this Agreement and otherwise without having to account for the same to the other Lenders. The Lenders acknowledge that, pursuant to such activities, Wells Fargo or its affiliates may receive information regarding the Borrowers, other loan parties, other subsidiaries and other Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them.
12.3 LOAN DISBURSEMENTS.
(a) On the Effective Date, each Lender shall make available to Administrative Agent (or the funding bank or entity designated by Administrative Agent), the amount of such Lenders Pro Rata Share of the Loan in immediately available funds not later than the times designated in Section 12.3(b). Unless Administrative Agent shall have been notified by any Lender not later than the close of business (San Francisco time) on the Business Day immediately preceding the Effective Date in respect of any disbursement that such Lender does not intend to make available to Administrative Agent such Lenders Pro Rata Share of such disbursement, Administrative Agent may assume that such Lender shall make such amount available to Administrative Agent. If any Lender does not notify Administrative Agent of its intention not to make available its Pro Rata Share of such disbursement as described above, but does not for any reason make available to Administrative Agent such Lenders Pro Rata Share of such disbursement, such Lender shall pay to Administrative Agent forthwith on demand such amount, together with interest thereon at the Federal Funds Rate. In any case where a Lender does not for any reason
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make available to Administrative Agent such Lenders Pro Rata Share of such disbursement, Administrative Agent, in its sole discretion, may, but shall not be obligated to, fund to Borrowers such Lenders Pro Rata Share of such disbursement. If Administrative Agent funds to Borrowers such Lenders Pro Rata Share of such disbursement and if such Lender subsequently pays to Administrative Agent such corresponding amount, such amount so paid shall constitute such Lenders Pro Rata Share of such disbursement. Nothing in this Section 12.3(a) shall alter the respective rights and obligations of the parties hereunder in respect of a Defaulting Lender or a Non-Pro Rata Advance.
(b) Requests by Administrative Agent for funding by Lenders of disbursements will be made by telecopy. Each Lender shall make the amount of its disbursement available to Administrative Agent in Dollars and in immediately available funds, to such bank and account, in El Segundo, California (to such bank and account in such other place) as Administrative Agent may designate, not later than 9:00 A.M. (San Francisco time) on the date designated by Administrative Agent with respect to such disbursement, which date shall be not earlier than three (3) Business Days following Lenders receipt of Administrative Agents request.
(c) Nothing in this Section 12.3 shall be deemed to relieve any Lender of its obligation hereunder to make its Pro Rata Share of disbursements on the date designated by Administrative Agent, nor shall Administrative Agent or any Lender be responsible for the failure of any other Lender to perform its obligations to make any disbursement hereunder, and the Commitment of any Lender shall not be increased or decreased as a result of the failure by any other Lender to perform its obligation to make a disbursement.
12.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS; DEFAULTING LENDERS.
(a) Subject to Section 12.4(b) below, payments actually received by Administrative Agent for the account of Lenders shall be paid to them promptly after receipt thereof by Administrative Agent, but in any event within two (2) Business Days, provided that Administrative Agent shall pay to Lenders interest thereon, at the lesser of (i) the Federal Funds Rate and (ii) the rate of interest applicable to the Loan, from the Business Day following receipt of such funds by Administrative Agent until such funds are paid in immediately available funds to Lenders. All payments of principal, interest, and other payments under the Loan Documents or Other Related Documents shall be allocated among such of Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares in the Loan or otherwise as provided herein or as separately agreed by Administrative Agent and any Lender. Administrative Agent shall promptly distribute, but in any event within two (2) Business Days, to each Lender at its primary address set forth on the appropriate signature page hereof or on the Assignment and Assumption Agreement, or at such other address as a Lender may request in writing, such funds as it may be entitled to receive, provided that Administrative Agent shall in any event not be bound to inquire into or determine the validity, scope or priority of any interest or entitlement of any Lender and may suspend all payments and seek appropriate relief (including, without limitation, instructions from Requisite Lenders or all Lenders, as applicable, or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby. The order of priority herein is set forth solely to determine the rights and priorities of Lenders as among themselves and may at any time or from time to time be changed by Lenders as they may elect, in writing in accordance with this Agreement, without necessity of notice to or consent of or approval by Borrowers or any other Person. All payments or other sums received by Administrative Agent for the account of Lenders shall not constitute property or assets of the Administrative Agent and shall be held by Administrative Agent, solely in its capacity as agent for itself and the other Lenders, subject to the Loan Documents and the Other Related Documents.
(b) Notwithstanding any provision hereof to the contrary, until such time as a Defaulting Lender has funded its Pro Rata Share of a Protective Advance or prior Loan disbursements which was previously a Non-Pro Rata Advance, or all other Lenders have received payment in full (whether by repayment or prepayment) of the amounts due in respect of such Non-Pro Rata Advance, all of the indebtedness and obligations owing to such Defaulting Lender hereunder shall be subordinated in right of payment, as provided in the following sentence, to the prior payment in full of all principal, interest and fees in respect of all Non-Pro Rata Advances in which the Defaulting Lender has not funded its Pro Rata Share (such principal, interest and fees being referred to as Senior Loans). All amounts paid by Borrowers and otherwise due to be applied to the indebtedness and obligations owing to the Defaulting
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Lender pursuant to the terms hereof shall be distributed by Administrative Agent to the other Lenders in accordance with their respective Pro Rata Shares of the Loan (recalculated for purposes hereof to exclude the Defaulting Lenders Pro Rata Share of the Loan), until all Senior Loans have been paid in full. This provision governs only the relationship among Administrative Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall limit the obligations of Borrowers under this Agreement. The provisions of this section shall apply and be effective regardless of whether a Default occurs and is then continuing, and notwithstanding (a) any other provision of this Agreement to the contrary, (b) any instruction of Borrowers as to its desired application of payments or (c) the suspension of such Defaulting Lenders right to vote on matters which are subject to the consent or approval of Requisite Lenders or all Lenders. Administrative Agent shall be entitled to (i) withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to such Defaulting Lender under this Agreement, and (ii) bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. In addition, the Defaulting Lender shall indemnify, defend and hold Administrative Agent and each of the other Lenders harmless from and against any and all liabilities and costs, plus interest thereon at the Default Rate as set forth in the Notes, which they may sustain or incur by reason of or as a direct consequence of the Defaulting Lenders failure or refusal to perform its obligations under this Agreement.
12.5 PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a) each borrowing from Lenders shall be made from the Lenders, each payment of the fees shall be made for the account of the Lenders, and each termination or reduction of the amount of the Commitments pursuant to this Agreement shall be applied to the respective Commitments of the Lenders, pro rata according to the amounts of their respective Commitments; (b) each payment or prepayment of principal of the Loan by the Borrowers shall be made for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts of the Loan held by them, provided that if immediately prior to giving effect to any such payment in respect of the Loan the outstanding principal amount of the Loan shall not be held by the Lenders pro rata in accordance with their respective Commitments in effect at the time the Loan was made, then such payment shall be applied to the Loan in such manner as shall result, as nearly as is practicable, in the outstanding principal amount of the Loan being held by the Lenders pro rata in accordance with their respective Commitments; and (c) each payment of interest on the Loan by the Borrowers shall be made for the account of the Lenders pro rata in accordance with the amounts of interest on the Loan then due and payable to the respective Lenders.
12.6 SHARING OF PAYMENTS, ETC. Lenders agree among themselves that (i) with respect to all amounts received by them which are applicable to the payment of the obligations of Borrowers or Guarantor under the Loan, equitable adjustment will be made so that, in effect, all such amounts will be shared among them ratably in accordance with their Pro Rata Shares in the Loan, whether received by voluntary payment, by counterclaim or cross action or by the enforcement of any or all of such obligations, (ii) if any of them shall by voluntary payment or by the exercise of any right of counterclaim or otherwise, receive payment of a proportion of the aggregate amount of such obligations held by it which is greater than its Pro Rata Share in the Loan of the payments on account of such obligations, the one receiving such excess payment shall purchase, without recourse or warranty, an undivided interest and participation (which it shall be deemed to have done simultaneously upon the receipt of such payment) in such obligations owed to the others so that all such recoveries with respect to such obligations shall be applied ratably in accordance with such Pro Rata Shares; provided, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that party to the extent necessary to adjust for such recovery, but without interest except to the extent the purchasing party is required to pay interest in connection with such recovery. Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 12.6 may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation.
12.7 COLLATERAL MATTERS; PROTECTIVE ADVANCES.
(a) Each Lender hereby authorizes the Administrative Agent, without the necessity of any notice to or further consent from any Lender, from time to time prior to a Default, to take any action with respect to any Collateral, Loan Documents or Other Related Documents which may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to any of the Loan Documents or Other Related Documents.
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(b) The Lenders hereby authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral (i) upon termination of the Commitments and indefeasible payment and satisfaction in full of all of obligations of Borrowers hereunder; (ii) as expressly permitted by, but only in accordance with, the terms of the applicable Loan Document; and (iii) if approved, authorized or ratified in writing by the Requisite Lenders. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agents authority to release particular types or items of Collateral pursuant to this Section.
(c) Upon any sale and transfer of Collateral which is expressly permitted pursuant to the terms of this Agreement, and upon at least five (5) Business Days prior written request by the Borrower, the Administrative Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Administrative Agent for the benefit of the Lenders herein or pursuant hereto upon the Collateral that was sold or transferred; provided, however, that (i) the Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agents opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the obligations of Borrowers or any Liens upon (or obligations of the Borrowers or any other Loan Party in respect of) all interests retained by the Borrowers or any other Loan Party, including (without limitation) the proceeds of such sale or transfer, all of which shall continue to constitute part of the Collateral. In the event of any sale or transfer of Collateral, or any foreclosure with respect to any of the Collateral, the Administrative Agent shall be authorized to deduct all of the expenses reasonably incurred by the Administrative Agent from the proceeds of any such sale, transfer or foreclosure.
(d) The Administrative Agent shall have no obligation whatsoever to the Lenders or to any other Person to assure that the Collateral exists or is owned by the Borrowers or any other Loan Party or is cared for, protected or insured or that the Liens granted to the Administrative Agent herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise or to continue exercising at all or in any manner or under any duty of care, disclosure or fidelity any of the rights, authorities and powers granted or available to the Administrative Agent in this Section or in any of the Loan Documents or Other Related Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Administrative Agent may act in any manner it may deem appropriate, in its sole discretion, given the Administrative Agents own interest in the Collateral as one of the Lenders and that the Administrative Agent shall have no duty or liability whatsoever to the Lenders, except to the extent resulting from its gross negligence or willful misconduct.
(e) The Administrative Agent may make, and shall be reimbursed by the Lenders (in accordance with their Pro Rata Shares) to the extent not reimbursed by the Borrowers for, Protective Advances during any one calendar year with respect to any Property that is Collateral up to the sum of (i) amounts expended to pay real estate taxes, assessments and governmental charges or levies imposed upon such Property; (ii) amounts expended to pay insurance premiums for policies of insurance related to such Property; and (iii) $100,000 per Property. Protective Advances in excess of said sum during any calendar year for any Property that is Collateral shall require the consent of the Requisite Lenders. The Borrowers agree to pay on demand all Protective Advances.
(f) Each Lender agrees that it will not take any action, nor institute any actions or proceedings, against Borrowers or any other obligor hereunder under the Loan Documents or the Other Related Documents with respect to exercising claims against or rights in the Collateral without the written consent of Requisite Lenders.
12.8 POST-FORECLOSURE PLANS. If all or any portion of the Collateral is to be acquired by the Administrative Agent as a result of a foreclosure or the acceptance of a deed or assignment in lieu of foreclosure, or is retained in satisfaction of all or any part of the obligations of Borrowers hereunder, the title to any such Collateral, or any portion thereof, shall be held in the name of the Administrative Agent or a nominee or subsidiary of the Administrative Agent, as agent, for the ratable benefit of all Lenders. The Administrative Agent shall prepare a recommended course of action for such Collateral (a Post-Foreclosure Plan), which shall be subject to the approval of the Requisite Lenders. In accordance with the approved Post-Foreclosure Plan, the
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Administrative Agent shall manage, operate, repair, administer, complete, construct, restore or otherwise deal with the Collateral acquired, and shall administer all transactions relating thereto, including, without limitation, employing a management agent, leasing agent and other agents, contractors and employees, including agents for the sale of such Collateral, and the collecting of rents and other sums from such Collateral and paying the expenses of such Collateral. Actions taken by the Administrative Agent with respect to the Collateral, which are not specifically provided for in the approved Post-Foreclosure Plan or reasonably incidental thereto, shall require the written consent of the Requisite Lenders by way of supplement to such Post-Foreclosure Plan. Upon demand therefor from time to time, each Lender will contribute its share (based on its Pro Rata Share) of all reasonable costs and expenses incurred by the Administrative Agent pursuant to the approved Post-Foreclosure Plan in connection with the construction, operation, management, maintenance, leasing and sale of such Collateral. In addition, the Administrative Agent shall render or cause to be rendered to each Lender, on a monthly basis, an income and expense statement for such Collateral, and each Lender shall promptly contribute its Pro Rata Share of any operating loss for such Collateral, and such other expenses and operating reserves as the Administrative Agent shall deem reasonably necessary pursuant to and in accordance with the approved Post-Foreclosure Plan. To the extent there is net operating income from such Collateral, the Administrative Agent shall, in accordance with the approved Post-Foreclosure Plan, determine the amount and timing of distributions to the Lenders. All such distributions shall be made to the Lenders in accordance with their respective Pro Rata Shares. The Lenders acknowledge and agree that if title to any Collateral is obtained by the Administrative Agent or its nominee, such Collateral will not be held as a permanent investment but will be liquidated as soon as practicable. The Administrative Agent shall undertake to sell such Collateral, at such price and upon such terms and conditions as the Requisite Lenders reasonably shall determine to be most advantageous to the Lenders. Any purchase money mortgage or deed of trust taken in connection with the disposition of such Collateral in accordance with the immediately preceding sentence shall name the Administrative Agent, as agent for the Lenders, as the beneficiary or mortgagee. In such case, the Administrative Agent and the Lenders shall enter into an agreement with respect to such purchase money mortgage or deed of trust defining the rights of the Lenders in the same Pro Rata Shares as provided hereunder, which agreement shall be in all material respects similar to this Article insofar as the same is appropriate or applicable.
12.9 APPROVALS OF LENDERS. All communications from the Administrative Agent to any Lender requesting such Lenders determination, consent, approval or disapproval (a) shall be given in the form of a written notice to such Lender, (b) shall be accompanied by a description of the matter or issue as to which such determination, approval, consent or disapproval is requested, or shall advise such Lender where information, if any, regarding such matter or issue may be inspected, or shall otherwise describe the matter or issue to be resolved, (c) shall include, if reasonably requested by such Lender and to the extent not previously provided to such Lender, written materials and a summary of all oral information provided to the Administrative Agent by the Borrowers in respect of the matter or issue to be resolved, and (d) shall include the Administrative Agents recommended course of action or determination in respect thereof. Unless a Lender shall give written notice to the Administrative Agent that it specifically objects to the recommendation or determination of the Administrative Agent (together with a reasonable written explanation of the reasons behind such objection) within ten (10) Business Days (or such lesser or greater period as may be specifically required under the express terms of the Loan Documents or Other Related Documents) of receipt of such communication, such Lender shall be deemed to have conclusively approved of or consented to such recommendation or determination.
12.10 NOTICE OF DEFAULTS. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Potential Default unless the Administrative Agent has received notice from a Lender or the Borrowers referring to this Agreement, describing with reasonable specificity such Default or Potential Default and stating that such notice is a notice of default. If any Lender (excluding the Lender which is also serving as the Administrative Agent) becomes aware of any Default or Potential Default, it shall promptly send to the Administrative Agent such a notice of default. Further, if the Administrative Agent receives such a notice of default, the Administrative Agent shall give prompt notice thereof to the Lenders.
12.11 ADMINISTRATIVE AGENTS RELIANCE, ETC. Notwithstanding any other provisions of this Agreement, any other Loan Documents or the Other Related Documents, neither the Administrative Agent nor any of its directors, officers, agents, employees or counsel shall be liable for any action taken or not taken by it under or in connection with this Agreement or any other Loan Document, except for its or their own gross negligence or willful misconduct in connection with its duties expressly set forth herein or therein. Without limiting the generality of the foregoing, the Administrative Agent: may consult with legal counsel (including its own counsel or counsel for the Borrowers or any other Loan Party), independent public accountants and other experts selected
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by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. Neither the Administrative Agent nor any of its directors, officers, agents, employees or counsel: (a) makes any warranty or representation to any Lender or any other Person and shall be responsible to any Lender or any other Person for any statement, warranty or representation made or deemed made by the Borrowers, any other Loan Party or any other Person in or in connection with this Agreement or any other Loan Document; (b) shall have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any other Loan Document or the satisfaction of any conditions precedent under this Agreement or any Loan Document on the part of the Borrowers or other Persons or inspect the property, books or records of the Borrowers or any other Person; (c) shall be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document, any other instrument or document furnished pursuant thereto or any Collateral covered thereby or the perfection or priority of any Lien in favor of the Administrative Agent on behalf of the Lenders in any such Collateral; (d) shall have any liability in respect of any recitals, statements, certifications, representations or warranties contained in any of the Loan Documents or Other Related Documents or any other document, instrument, agreement, certificate or statement delivered in connection therewith; and (e) shall incur any liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telephone, telecopy or electronic mail) believed by it to be genuine and signed, sent or given by the proper party or parties. The Administrative Agent may execute any of its duties under the Loan Documents or Other Related Documents by or through agents, employees or attorneys-in-fact and shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.
12.12 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Regardless of whether the transactions contemplated by this Agreement, the other Loan Documents and Other Related Documents are consummated, each Lender agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so) pro rata in accordance with such Lenders respective Pro Rata Share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against the Administrative Agent (in its capacity as Administrative Agent but not as a Lender) in any way relating to or arising out of the Loan Documents or Other Related Documents, any transaction contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under the Loan Documents and Other Related Documents (collectively, Indemnifiable Amounts); provided, however, that no Lender shall be liable for any portion of such Indemnifiable Amounts to the extent resulting from the Administrative Agents gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, non-appealable judgment provided, however, that no action taken in accordance with the directions of the Requisite Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Administrative Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrowers to do so) promptly upon demand for its ratable share of any out-of-pocket expenses (including the reasonable fees and expenses of the counsel to the Administrative Agent) incurred by the Administrative Agent in connection with the preparation, negotiation, execution, administration, or enforcement (whether through negotiations, legal proceedings, or otherwise) of, or legal advice with respect to the rights or responsibilities of the parties under, the Loan Documents and Other Related Documents, any suit or action brought by the Administrative Agent to enforce the terms of the Loan Documents and Other Related Documents and/or collect any obligation of Borrower hereunder, any lender liability suit or claim brought against the Administrative Agent and/or the Lenders, and any claim or suit brought against the Administrative Agent and/or the Lenders arising under any Hazardous Materials Laws. Such out-of-pocket expenses (including counsel fees) shall be advanced by the Lenders on the request of the Administrative Agent notwithstanding any claim or assertion that the Administrative Agent is not entitled to indemnification hereunder upon receipt of an undertaking by the Administrative Agent that the Administrative Agent will reimburse the Lenders if it is actually and finally determined by a court of competent jurisdiction that the Administrative Agent is not so entitled to indemnification. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder or under the other Loan Documents or Other Related Documents and the termination of this Agreement. If the Borrowers shall reimburse the Administrative Agent for any Indemnifiable Amount following payment by any Lender to the Administrative Agent in respect of such Indemnifiable Amount pursuant to this Section, the Administrative Agent shall share such reimbursement on a ratable basis with each Lender making any such payment.
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12.13 LENDER CREDIT DECISION, ETC. Each Lender expressly acknowledges and agrees that neither the Administrative Agent nor any of its officers, directors, employees, agents, counsel, attorneys-in-fact or other affiliates has made any representations or warranties to such Lender and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrowers, any other Loan Party or Affiliate, shall be deemed to constitute any such representation or warranty by the Administrative Agent to any Lender. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent, or any of their respective officers, directors, employees, agents or counsel, and based on the financial statements of the Borrowers, the other Loan Parties or Affiliates, and inquiries of such Persons, its independent due diligence of the business and affairs of the Borrowers, the other Loan Parties and other Persons, its review of the Loan Documents and the Other Related Documents, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the transactions contemplated hereby. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent or any of their respective officers, directors, employees and agents, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under the Loan Documents or Other Related Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrowers or any other Loan Party of the Loan Documents or Other Related Documents or any other document referred to or provided for therein or to inspect the properties or books of, or make any other investigation of, the Borrowers, any other Loan Party. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent under this Agreement, any of the other Loan Documents or Other Related Documents, the Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrowers, any other Loan Party or any other Affiliate thereof which may come into possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates. Each Lender acknowledges that the Administrative Agents legal counsel in connection with the transactions contemplated by this Agreement is only acting as counsel to the Administrative Agent and is not acting as counsel to such Lender.
12.14 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at any time as Administrative Agent under the Loan Documents and Other Related Documents by giving written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Administrative Agent which appointment shall, provided no Default or Potential Default exists, be subject to the Borrowers approval, which approval shall not be unreasonably withheld or delayed (except that the Borrowers shall, in all events, be deemed to have approved each Lender and any of its Affiliates as a successor Administrative Agent). If no successor Administrative Agent shall have been so appointed in accordance with the immediately preceding sentence, and shall have accepted such appointment, within thirty (30) days after the current Administrative Agents giving of notice of resignation, then the current Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a Lender, if any Lender shall be willing to serve, and otherwise shall be an Eligible Assignee. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the current Administrative Agent, and the current Administrative Agent shall be discharged from its duties and obligations under the Loan Documents and the Other Related Documents. After any Administrative Agents resignation hereunder as Administrative Agent, the provisions of this Article 12 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Documents and the Other Related Documents. Notwithstanding anything contained herein to the contrary, the Administrative Agent may assign its rights and duties under the Loan Documents and the Other Related Documents to any of its Affiliates by giving the Borrower and each Lender prior written notice.
12.17 NO SET-OFFS. Each Lender hereby acknowledges that the exercise by any Lender of offset, set-off, bankers lien or similar rights against any deposit account or other property or asset of Borrowers, regardless of the state in which the property is located, could result under certain laws in significant impairment of the ability of all Lenders to recover any further amounts in respect of the Loan. Therefore, each Lender agrees not to charge or offset any amount owed to it by Borrowers against any of the accounts, property or assets of Borrowers or any of its affiliates held by such Lender without the prior written approval of Administrative Agent and Requisite Lenders.
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ARTICLE 13. MISCELLANEOUS PROVISIONS
13.1 INDEMNITY. BORROWERS HEREBY AGREE TO DEFEND, INDEMNIFY AND HOLD HARMLESS ADMINISTRATIVE AGENT AND EACH LENDER, THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS (COLLECTIVELY CALLED THE INDEMNITEES) FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS FEES AND EXPENSES (PROVIDED, BORROWERS SHALL HAVE NO OBLIGATION TO INDEMNIFY ANY LENDER FOR FEES OR COSTS, INCLUDING ATTORNEYS FEES INCURRED BY SUCH LENDER, UNLESS SUCH FEES OR COSTS ARE INCURRED FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF A DEFAULT) WHICH ANY INDEMNITEES MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWERS APPLY THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWERS TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER RELATED DOCUMENT; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWERS REPRESENTATIONS OR WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWERS, CONSTITUENT PARTNER OR MEMBER OF BORROWERS, ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO ANY OF THE PROPERTIES. BORROWERS SHALL IMMEDIATELY PAY TO INDEMNITEES UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE LOAN. BORROWERS DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS INDEMNITEES SHALL SURVIVE CANCELLATION OF THE NOTES AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE SECURITY DOCUMENTS; PROVIDED, HOWEVER, THAT BORROWERS SHALL NOT HAVE ANY OBLIGATION TO AN INDEMNITEE HEREUNDER WITH RESPECT TO (A) MATTERS FOR WHICH SUCH INDEMNITEE HAS BEEN COMPENSATED PURSUANT TO OR FOR WHICH AN EXEMPTION IS PROVIDED IN ANY PROVISION OF THIS AGREEMENT, AND (B) INDEMNIFIED MATTERS TO THE EXTENT CAUSED BY OR RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THAT INDEMNITEE, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION. TO THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THE PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY LAW OR PUBLIC POLICY, BORROWERS SHALL CONTRIBUTE THE MAXIMUM PORTION WHICH IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW, TO THE PAYMENT AND SATISFACTION OF ALL INDEMNIFIED MATTERS INCURRED BY THE INDEMNITEES.
13.2 FORM OF DOCUMENTS. The form and substance of all documents, instruments, and forms of evidence to be delivered to Administrative Agent under the terms of this Agreement, any of the other Loan Documents or Other Related Documents shall be subject to Administrative Agent s approval and shall not be modified, superseded or terminated in any respect without Administrative Agents prior written approval.
13.3 NO THIRD PARTIES BENEFITED. No person other than Administrative Agent, Lenders and Borrowers and their permitted successors and assigns shall have any right of action under any of the Loan Documents or Other Related Documents.
13.4 NOTICES. All notices, demands, or other communications under this Agreement, the other Loan Documents or the Other Related Documents shall be in writing and shall be delivered to the appropriate party at the address set forth on the signature page of this Agreement (subject to change from time to time by written notice to all other parties to this Agreement). All communications shall be deemed served upon delivery of, or if mailed, upon the first to occur of receipt or the expiration of three (3) days after the deposit in the United States Postal Service mail, postage prepaid and addressed to the address of Borrowers or Administrative Agent and Lenders at the address specified; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication.
13.5 ATTORNEY-IN-FACT. Borrowers hereby irrevocably appoint and authorize Administrative Agent, as each Borrowers attorney-in-fact, which agency is coupled with an interest, to execute and/or record in Administrative Agents or Borrowers name any notices, instruments or documents that Administrative Agent deems appropriate to protect Lenders interest under any of the Loan Documents or Other Related Documents.
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13.6 ACTIONS. Borrowers agree that Administrative Agent or any Lender, in exercising the rights, duties or liabilities of Administrative Agent, Lenders or Borrowers under the Loan Documents or Other Related Documents, may commence, appear in or defend any action or proceeding purporting to affect the Property, the Loan Documents or the Other Related Documents and Borrowers shall immediately reimburse Administrative Agent (or, following the occurrence and during the continuance of a Default, such Lender) upon demand for all such expenses so incurred or paid by Administrative Agent (or such Lender, as applicable) including, without limitation, attorneys fees and expenses and court costs.
13.7 RIGHT OF CONTEST. Borrowers may contest in good faith any claim, demand, levy or assessment (other than Liens and stop notices) by any person other than Administrative Agent or Lenders which would constitute a Default if: (a) Borrowers pursues the contest diligently, in a manner which Administrative Agent determines is not prejudicial to Administrative Agent or any Lender, and does not impair the rights of Administrative Agent or any Lender under any of the Loan Documents or Other Related Documents; and (b) Borrowers deposits with Administrative Agent any funds or other forms of assurance which Administrative Agent in good faith determines from time to time appropriate to protect Administrative Agent and each Lender from the consequences of the contest being unsuccessful. Borrowers compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default.
13.8 RELATIONSHIP OF PARTIES. The relationship of Borrowers, Administrative Agent and Lenders under the Loan Documents and Other Related Documents is, and shall at all times remain, solely that of borrower and lender, and Administrative Agent and Lenders neither undertake nor assumes any responsibility or duty to Borrowers or to any third party with respect to any Property, except as expressly provided in this Agreement, the other Loan Documents and the Other Related Documents.
13.9 DELAY OUTSIDE LENDERS CONTROL. No Lender or Administrative Agent shall be liable in any way to Borrower or any third party for Administrative Agents or such Lenders failure to perform or delay in performing under the Loan Documents (and Administrative Agent or any Lender may suspend or terminate all or any portion of Administrative Agents or such Lenders obligations under the Loan Documents) if such failure to perform or delay in performing results directly or indirectly from, or is based upon, the action, inaction, or purported action, of any governmental or local authority, or because of war, rebellion, insurrection, strike, lock-out, boycott or blockade (whether presently in effect, announced or in the sole judgment of Administrative Agent or such Lender deemed probable), or from any Act of God or other cause or event beyond Administrative Agents or such Lenders control.
13.10 ATTORNEYS FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged by Administrative Agent or, following the occurrence and during the continuance of a Default, any Lender, to enforce or defend any provision of this Agreement, any of the other Loan Documents or Other Related Documents, or as a consequence of any Default under the Loan Documents or Other Related Documents, with or without the filing of any legal action or proceeding, and including, without limitation, any fees and expenses incurred in any bankruptcy proceeding of the Borrowers, then Borrowers shall immediately pay to Administrative Agent or such Lender, upon demand, the amount of all attorneys fees and expenses and all costs incurred by Administrative Agent or such Lender in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Loan.
13.11 IMMEDIATELY AVAILABLE FUNDS. Unless otherwise expressly provided for in this Agreement, all amounts payable by Borrowers under the Loan Documents shall be payable only in United States Dollars, immediately available funds.
13.12 AMENDMENTS AND WAIVERS.
(a) Generally. Except as otherwise expressly provided in this Agreement, (i) any consent or approval required or permitted by this Agreement or in any Loan Document to be given by the Lenders may be given, (ii) any term of this Agreement or of any other Loan Document (other than any fee letter solely between the Borrower and the Administrative Agent) may be amended, (iii) the performance or observance by the Borrowers or any other Loan Party of any terms of this Agreement or such other Loan Document (other than any fee letter solely between the Borrower and the Administrative Agent) may be waived, and (iv) the continuance of any Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Requisite Lenders
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(or the Administrative Agent at the written direction of the Requisite Lenders), and, in the case of an amendment to any Loan Document, the written consent of each Loan Party which is party thereto. Notwithstanding the previous sentence, the Administrative Agent, shall be authorized on behalf of all the Lenders, without the necessity of any notice to, or further consent from, any Lender, to waive the imposition of the late fees provided in Section 2.7(c), up to a maximum of 3 times per calendar year.
(b) Unanimous Consent. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing, and signed by all of the Lenders (or the Administrative Agent at the written direction of the Lenders), do any of the following:
(i) increase the Commitments of the Lenders (excluding any increase (A) pursuant to Section 2.15 or (B) as a result of an assignment of Commitments permitted under Section 13.13) or subject the Lenders to any additional obligations;
(ii) reduce the principal of, or interest rates that have accrued or that will be charged on the outstanding principal amount of, the Loan;
(iii) reduce the amount of any fees payable to the Lenders hereunder;
(iv) postpone any date fixed for any payment of principal of, or interest on, the Loan (including, without limitation, the Maturity Date) or for the payment of fees or any other obligations of Borrowers or Guarantor;
(v) change the Pro Rata Shares (excluding any change as a result of (A) an increase in the Aggregate Loan Commitment pursuant to Section 2.15 or (B) an assignment of Commitments permitted under Section 13.13);
(vi) amend this Section or amend the definitions of the terms used in this Agreement or the other Loan Documents insofar as such definitions affect the substance of this Section;
(vii) modify the definition of the term Requisite Lenders or modify in any other manner the number or percentage of the Lenders required to make any determinations or waive any rights hereunder or to modify any provision hereof;
(viii) release any guarantor of the Loan (if any) from its obligations under its guaranty;
(ix) waive a Default under Section 11.1(a); or
(x) release or dispose of Collateral unless released or disposed of as permitted by, and in accordance with, Section 2.10 or Section 12.7.
(c) Amendment of Administrative Agents Duties, Etc. No amendment, waiver or consent unless in writing and signed by the Administrative Agent, in addition to the Lenders required hereinabove to take such action, shall affect the rights or duties of the Administrative Agent under this Agreement, any of the other Loan Documents or Other Related Documents. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon and any amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose set forth therein. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. Any Default occurring hereunder shall continue to exist until such time as such Default is waived in writing in accordance with the terms of this Section, notwithstanding any attempted cure or other action by the Borrowers, any other Loan Party or any other Person subsequent to the occurrence of such Default. Except as otherwise explicitly provided for herein or in any other Loan Document, no notice to or demand upon the Borrowers shall entitle the Borrower to other or further notice or demand in similar or other circumstances.
13.13 SUCCESSORS AND ASSIGNS.
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(a) Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all the Lenders (and any such assignment or transfer to which all of the Lenders have not consented shall be void).
(b) Participations. Any Lender may at any time grant to an affiliate of such Lender, or one or more banks or other financial institutions (each a Participant) participating interests in its Commitment or the obligations owing to such Lender hereunder. No Participant shall have any rights or benefits under this Agreement or any other Loan Document. In the event of any such grant by a Lender of a participating interest to a Participant, such Lender shall remain responsible for the performance of it obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided however, such Lender may agree with the Participant that it will not, without the consent of the Participant, agree to (i) increase such Lenders Commitment, (ii) extend the date fixed for the payment of principal on the Loan or a portion thereof owing to such Lender, (iii) reduce the rate at which interest is payable thereon, or (iv) release all or substantially all of the Collateral, unless replacement collateral is provided. An assignment or other transfer which is not permitted by subsection (c) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b)
(c) Assignments. Any Lender may with the prior written consent of the Administrative Agent and the Borrower (which consent, in each case, shall not be unreasonably withheld) at any time assign to one or more Eligible Assignees (each an Assignee) all or a portion of its rights and obligations under this Agreement and the Notes; provided, however, (i) no such consent by the Borrower shall be required (x) if a Default or Potential Default shall exist or (y) in the case of an assignment to another Lender or an affiliate of another Lender; (ii) any partial assignment shall be in an amount at least equal to $10,000,000 and after giving effect to such assignment the assigning Lender retains a Commitment, or if the Commitment has been terminated holds a Note having an outstanding principal balance, of at least $10,000,000, and (iii) each such assignment shall be effected by means of an Assignment and Assumption Agreement. Unless Borrower gives written notice to Lender that it objects to the proposed assignment (together with a written explanation of the reasons behind such objection) within ten (10) days following receipt of Lenders written request for approval of the proposed assignment, Borrower shall be deemed to have approved such assignment Upon execution and delivery of an Assignment and Assumption Agreement and payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be deemed to be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment as set forth in such Assignment and Assumption Agreement, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangement so the new Notes are issued to the Assignee and such transferor Lender, as appropriate. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $4,500. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to the Borrower, or any of its respective Affiliates or subsidiaries.
(d) Borrowers Cooperation. In the event of any such sale, assignment or participation, a Lender and the parties to such transaction shall share in the rights and obligations of Lender as set forth in the Loan Documents only as and to the extent they agree among themselves. Borrowers will use reasonable efforts to cooperate with Lender in connection with the assignment of interests under this Agreement or the sale of participations herein, and, upon written request by Lender, Borrowers shall enter into such amendments or modifications to the Loan Documents as may be reasonably required in order to evidence any such sale, assignment or participation, including separate Notes, so long as (i) Borrowers
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obligations are not increased thereunder in any material respect and (ii) Borrowers incur no additional costs or additional liabilities in connection therewith.
(e) Tax Withholding. At least five (5) Business Days prior to the first day on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, shall furnish the Administrative Agent and Borrower with a properly completed executed copy of either Internal Revenue Service Form W-8ECI or Internal Revenue Service Form W-8BEN and either Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form) as is necessary to claim complete exemption from United States withholding taxes on all payments hereunder. At all times each Lender shall own or beneficially own a Note, such Lender shall (i) promptly provide to the Administrative Agent and Borrower a new Internal Revenue Service Form W-8ECI or Internal Revenue Service Form W-8BEN and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form) (or any successor form or forms) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly executed and completed by such Lender, and (ii) comply at all times with all applicable United States laws and regulations, including all provisions of any applicable tax treaty, with regard to any withholding tax exemption claimed with respect to any payments on the Loan. If any Lender cannot deliver such form, then Borrower may withhold from payments due under the Loan Documents such amounts as Borrower is able to determine from accurate information provided by such Lender are required by the Internal Revenue Code.
(f) Federal Reserve Bank Assignments. In addition to the assignments and participations permitted under the foregoing provisions of the Section, and without the need to comply with any of the formal or procedural requirements of this Section, any Lender may at any time and from time to time, pledge and assign all or any portion of its rights under all or any of the Loan Documents and Other Related Documents to a Federal Reserve Bank; provided that no such pledge of assignment shall release such Lender from its obligation thereunder.
(g) Information to Assignee, Etc. A Lender may furnish any information concerning the Borrower, any subsidiary or any other Loan Party in the possession of such Lender from time to time to Assignees and Participants (including prospective Assignees and Participants). In connection with such negotiation, execution and delivery, Borrower authorizes Administrative Agent and Lenders to communicate all information and documentation related to the Loan (whether to Borrower or to any Participant, Assignee, legal counsel, appraiser or other necessary party) directly by e-mail, fax, or other electronic means used to transmit information.
13.14 CAPITAL ADEQUACY. If any Lender or any Participant in the Loan determines that compliance with any law or regulation or with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or such Participant, or any corporation controlling such Lender or such Participant, as a consequence of, or with reference to, such Lenders or such Participants or such corporations Commitments or its making or maintaining Loans below the rate which such Lender or such Participant or such corporation controlling such Lender or such Participant could have achieved but for such compliance (taking into account the policies of such Lender or such Participant or corporation with regard to capital), then the Borrower shall, from time to time, within thirty (30) calendar days after written demand by such Lender or such Participant, pay to such Lender or such Participant additional amounts sufficient to compensate such Lender or such Participant or such corporation controlling such Lender or such Participant to the extent that such Lender or such Participant determines such increase in capital is allocable to such Lenders or such Participants obligations hereunder.
13.15 LENDERS AGENTS. Administrative Agent and/or any Lender may designate an agent or independent contractor to exercise any of such Persons rights under this Agreement, any of the other Loan Documents and Other Related Documents. Any reference to Administrative Agent or any Lender in any of the Loan Documents or Other Related Documents shall include Administrative Agents and such Lenders agents, employees or independent contractors. Borrowers shall pay the costs of such agent or independent contractor either directly to such person or to Administrative Agent or such Lender in reimbursement of such costs, as applicable.
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13.16 TAX SERVICE. Administrative Agent, on behalf of Lenders, is authorized to secure, at Borrowers expense, a tax service contract with a third party vendor which shall provide tax information on the Property satisfactory to Administrative Agent.
13.17 WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
13.18 SEVERABILITY. If any provision or obligation under this Agreement, the other Loan Documents or Other Related Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that provision shall be deemed severed from the Loan Documents and the Other Related Documents and the validity, legality and enforceability of the remaining provisions or obligations shall remain in full force as though the invalid, illegal, or unenforceable provision had never been a part of the Loan Documents or Other Related Documents, provided, however, that if the rate of interest or any other amount payable under the Notes or this Agreement or any other Loan Document, or the right of collectibility therefor, are declared to be or become invalid, illegal or unenforceable, Lenders obligations to make advances under the Loan Documents shall not be enforceable by Borrowers.
13.19 TIME. Time is of the essence of each and every term of this Agreement.
13.20 HEADINGS. All article, section or other headings appearing in this Agreement, the other Loan Documents and Other Related Documents are for convenience of reference only and shall be disregarded in construing this Agreement, any of the other Loan Documents and Other Related Documents.
13.21 GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of California, except to the extent preempted by federal laws. Borrowers and all persons and entities in any manner obligated to Lender under the Loan Documents and Other Related Documents consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law.
13.22 USA PATRIOT ACT NOTICE. COMPLIANCE.
(a) The USA Patriot Act of 2001 (Public Law 107-56) and federal regulations issued with respect thereto require all financial institutions to obtain, verify and record certain information that identifies individuals or business entities which open an account with such financial institution. Consequently, Lender (for itself and/or as Agent for all Lenders hereunder) may from time-to-time request, and Borrowers shall provide to Lender, Borrowers names, addresses, tax identification numbers and/or such other identification information as shall be necessary for Lender to comply with federal law. An account for this purpose may include, without limitation, a deposit account, cash management service, a transaction or asset account, a credit account, a loan or other extension of credit, and/or other financial services product.
(b) In order for the Administrative Agent to comply with the USA Patriot Act of 2001 (Public Law 107-56), prior to any Lender or Participant that is organized under the laws of a jurisdiction outside of the United States of America becoming a party hereto, the Administrative Agent may request, and such Lender or Participant shall provide to the Administrative Agent, its name, address, tax identification
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number and/or such other identification information as shall be necessary for the Administrative Agent to comply with federal law.
13.23 ELECTRONIC DOCUMENT DELIVERIES. Documents required to be delivered pursuant to the Loan Documents shall be delivered by electronic communication and delivery, including, the Internet, e-mail or intranet websites to which the Administrative Agent and each Lender have access (including a commercial, third-party website such as www.Edgar.com <http://www.Edgar.com> or a website sponsored or hosted by the Administrative Agent or the Borrowers) provided that (A) the foregoing shall not apply to notices to any Lender pursuant to Article 12 and (B) a Lender has not notified the Administrative Agent or Borrowers that it cannot or does not want to receive electronic communications. The Administrative Agent or the Borrowers may, in their discretion, agree to accept notices and other communications to it hereunder by electronic delivery pursuant to procedures approved by it for all or particular notices or communications. Documents or notices delivered electronically shall be deemed to have been delivered twenty-four (24) hours after the date and time on which the Administrative Agent or Borrowers post such documents or the documents become available on a commercial website and the Administrative Agent or Borrowers notify each Lender of said posting and provides a link thereto provided if such notice or other communication is not sent or posted during the normal business hours of the recipient, said posting date and time shall be deemed to have commenced as of 9:00 a.m. on the opening of business on the next business day for the recipient. Notwithstanding anything contained herein, in every instance the Borrowers shall be required to provide paper copies of the certificates required by Section 10.1(c) to the Administrative Agent and shall deliver paper copies of any documents to the Administrative Agent or to any Lender that requests such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender. Except for the certificates required by Section 10.1(c), the Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents delivered electronically, and in any event shall have no responsibility to monitor compliance by the Borrowers with any such request for delivery. Each Lender shall be solely responsible for requesting delivery to it of paper copies and maintaining its paper or electronic documents.
13.24 INTEGRATION; INTERPRETATION. The Loan Documents and Other Related Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents and Other Related Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents or Other Related Documents includes any amendments, renewals or extensions now or hereafter approved by Administrative Agent in writing.
13.25 JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated in any manner under this Agreement, any of the Loan Documents or Other Related Documents, other than Administrative Agent and/or Lenders, shall be joint and several.
13.26 COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.
13.27 LIMITATION ON PERSONAL LIABILITY OF SHAREHOLDERS, PARTNERS AND MEMBERS. Notwithstanding anything to the contrary contained in any Loan Document, none of the constituent shareholders, partners or members (direct or indirect) in any Borrower shall have any liability whatsoever for the payment or performance of any of the Obligations. Without limiting in any manner the generality of the foregoing, Administrative Agent shall have no right to recover from any constituent shareholder, partner or member (direct or indirect) in any Borrower any Distribution from such Borrower; provided, however, that nothing in this Section 13.27 is intended, or shall be deemed, to constitute a waiver of any rights Administrative Agent may have under the United States Bankruptcy Code or other applicable law with respect to fraudulent transfers or conveyances.
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IN WITNESS WHEREOF, Borrowers, Administrative Agent and Lenders have executed this Agreement as of the date appearing on the first page of this Agreement.
ADMINISTRATIVE AGENT | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
Administrative Agents Address: | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
Real Estate Group | ||
Orange County | ||
2030 Main Street, Suite 800 | ||
Irvine, CA 92614 | ||
Attn: Bryan Stevens, Senior Vice President | ||
Tel: (949) 251-4125 | ||
Fax: (949) 851-9728 |
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LENDERS | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
Lenders Address: | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
Real Estate Group | ||
Orange County | ||
2030 Main Street, Suite 800 | ||
Irvine, CA 92614 | ||
Attn: Bryan Stevens, Senior Vice President | ||
Tel: (949) 251-4125 | ||
Fax: (949) 851-9728 |
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BORROWER
KBSII HORIZON TECH CENTER, LLC, | ||||||||||||
a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION XII, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Brent Carroll, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 417-6566 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: bcarroll@kbsrealty.com |
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BORROWER
KBSII CRESCENT VIII, LLC, | ||||||||||||||||||
a Delaware limited liability company | ||||||||||||||||||
By: | KBSII REIT ACQUISITION XI, LLC, | |||||||||||||||||
|
a Delaware limited liability company, its sole member | |||||||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||||||||
|
a Delaware limited liability company, its sole member | |||||||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||||||||
|
a Delaware limited partnership, its sole member | |||||||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||||||||
a Maryland corporation, general partner | ||||||||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||||||||
Charles J. Schreiber, Jr. | ||||||||||||||||||
Chief Executive Officer |
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Mark Brecheen, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 417-6535 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: mbrecheen@kbsrealty.com |
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BORROWER
KBSII HARTMAN BUSINESS CENTER, LLC, | ||||||||||||
a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION IX, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Allen Aldridge, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 3348 Peachtree Road, NE., Suite 1030 | |
Newport Beach, CA 92660 | Atlanta, GA 30326 | |
Tel: (949) 797-0338 | Tel: (678) 784-0585 | |
Fax: (949) 417-6520 | Fax: (770) 952-4611 | |
Email: tsmith@kbsrealty.com | Email: aaldridge@kbsrealty.com |
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BORROWER
KBSII 2500 REGENT BOULEVARD, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Ken Robertson, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 417-6502 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: krobertson@kbsrealty.com |
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BORROWER
KBSII PLANO BUSINESS PARK, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION VIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Ken Robertson, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 417-6502 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: krobertson@kbsrealty.com |
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BORROWER
KBSII NATIONAL CITY TOWER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XVI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Giovanni Cordoves, Asst. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 797-0324 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: gcordoves@kbsrealty.com |
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BORROWER
KBSII GRANITE TOWER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XVIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Mark Brecheen, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 620 Newport Center Drive, Suite 1300 | |
Newport Beach, CA 92660 | Newport Beach, CA 92660 | |
Tel: (949) 797-0338 | Tel: (949) 417-6535 | |
Fax: (949) 417-6520 | Fax: (949) 417-6518 | |
Email: tsmith@kbsrealty.com | Email: mbrecheen@kbsrealty.com |
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BORROWER
KBSII GATEWAY CORPORATE CENTER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XIX, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Borrowers Address:
Accounting Matters: | Property Matters: | |
c/o KBS Capital Advisors LLC | c/o KBS Capital Advisors LLC | |
Todd Smith, VP Controller, Corporate | Steve Silva, Sr. Vice President | |
620 Newport Center Drive, Suite 1300 | 201 California Street, Suite 470 | |
Newport Beach, CA 92660 | San Francisco, CA 94111 | |
Tel: (949) 797-0338 | Tel: (415) 962-0191 | |
Fax: (949) 417-6520 | Fax: (415) 962-0188 | |
Email: tsmith@kbsrealty.com | Email: ssilva@kbsrealty.com |
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Schedule 1.1(A) Pro Rata Shares
Schedule 1.1(A) to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
Lender | Commitment | Pro Rata Share | ||||
WELLS FARGO BANK, NATIONAL ASSOCIATION |
$ | 360,000,000 | 100% | |||
TOTALS |
$ | 360,000,000 | 100% |
Schedule 1.1(A)
Schedule 1.1(B) Par Loan Values
Schedule 1.1(B) to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
Property Name | Type | Address | City, State | Loan Par | ||||
Hartman II Business Center | Industrial | 555 Hartman Road SW | Austell, GA | $6,141,479 | ||||
Dallas Cowboys Distribution Center | Industrial | 2500 Regent Boulevard | Irving, TX | $10,721,016 | ||||
Horizon Tech Center | Office | 10301, 10325, 10343 Meanley Drive | San Diego, CA | $22,570,560 | ||||
Plano Business Park | Industrial | 3801, 3901, 4001 East Plano Parkway | Plano, TX | $9,333,607 | ||||
Crescent VIII | Office | 8350 East Crescent Parkway | Greenwood Village, CO | $7,166,153 | ||||
National City Tower | Office | 101 South Fifth Street | Louisville, KY | $69,000,000 | ||||
Gateway Corporate Center | Office | 160 & 180 Promenade Circle | Sacramento, CA | $26,277,000 | ||||
Granite Tower | Office | 1099 18th Street | Denver, CO | $82,406,678 | ||||
325 Centerpoint (I-81) | Industrial | 325 Centerpoint | Jenkins Township, PA |
$22,663,157* | ||||
550 Oak Ridge (I-81) | Industrial | 550 Oak Ridge | Hazleton, PA | $18,305,102* | ||||
125 Capital (I-81) | Industrial | 125 Capital | Jenkins Township, PA |
$4,750,187* | ||||
14-46 Alberigi (I-81) | Industrial | 14-46 Alberigi | Jessup Borough, PA |
$5,366,929* | ||||
Torrey Reserve West | Office | 3390, 3394, 3398 Carmel Mountain | San Diego, CA | $15,298,132** | ||||
Two Westlake Property | Office | 580 Westlake Park Blvd. | Houston, TX | $48,300,000 | ||||
$348,300,000 |
* or such amount as is determined by Administrative Agent at the time the I-81 Holdback Amount is disbursed
** or such lesser amount as is actually disbursed in accordance with Section 3.4(b)(viii)
*** this schedule shall be updated from time to time to allocate par values for additional identified properties
Schedule 1.1(B)
Schedule 1.1(C) Initial Properties
Schedule 1.1(C) to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
Property Name | Address | City, State | ||
|
||||
Hartman II Business Center |
555 Hartman Road SW | Austell, GA | ||
Dallas Cowboys Distribution Center |
2500 Regent Boulevard | Irving, TX | ||
Horizon Tech Center |
10301, 10325, 10343 Meanley Drive | San Diego, CA | ||
Plano Business Park |
3801, 3901, 4001 East Plano Parkway | Plano, TX | ||
Crescent VIII |
8350 East Crescent Parkway | Greenwood Village, CO | ||
National City Tower |
101 South Fifth Street | Louisville, KY | ||
Gateway Corporate Center |
160 & 180 Promenade Circle | Sacramento, CA | ||
Granite Tower |
1099 18th Street | Denver, CO |
Schedule 1.1(C)
Schedule 6.3 Ownership of Borrowers
Schedule 6.3 to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
OWNERSHIP STRUCTURE OF KBSII PLANO BUSINESS PARK, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII HORIZON TECH CENTER, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII 2500 REGENT BOULEVARD, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII CRESCENT VIII, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII HARTMAN BUSINESS CENTER, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII NATIONAL CITY TOWER, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII GRANITE TOWER, LLC
Schedule 6.3
OWNERSHIP STRUCTURE OF KBSII GATEWAY CORPORATE CENTER, LLC
Schedule 6.3
Schedule 6.11 Litigation Disclosure
Schedule 6.11 to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
NONE
Schedule 6.11
Schedule 6.24 Property Management Agreements
Schedule 6.24 to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
1. | Property Management Agreement dated July 6, 2010 by and between KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company acting through KBS Capital Advisors, LLC, a Delaware limited liability company and PM Realty Group, L.P., a Delaware limited partnership. |
2. | Property Management Agreement dated May 20, 2010 by and between KBSII Hartman Business Center, LLC, a Delaware limited liability company and Jones Lang LaSalle Americas, Inc., a Maryland corporation. |
3. | Property Management Agreement dated June 17, 2010 by and between KBSII Horizon Tech Center, LLC, a Delaware limited liability company and PM Realty Group, L.P., a Delaware limited partnership. |
4. | Property Management Agreement dated May 19, 2010 by and between KBSII Crescent VIII, LLC, a Delaware limited liability company acting through KBS Realty Advisors, LLC, a Delaware limited liability company and Transwestern Property Company SW GP, L.L.C. d/b/a Transwestern. |
5. | Property Management Agreement dated March 11, 2010 by and between KBSII Plano Business Park, LLC, a Delaware limited liability company acting through KBS Capital Advisors, LLC, a Delaware limited liability company and PM Realty Group, L.P., a Delaware limited partnership. |
6. | Real Estate Property Management Agreement, dated December 17, 2010, executed by KBSII National City Tower, LLC, a Delaware limited liability company, and Cassidy Turley Midwest, Inc., a Missouri corporation. |
7. | Real Estate Property Management Agreement, dated December 23, 2010, executed by KBSII Granite Tower, LLC, a Delaware limited liability company, acting through KBS Capital Advisors, LLC, a Delaware limited liability company and Transwestern Property Company SW GP, LLC, a Delaware limited liability company. |
Schedule 6.24
Schedule 7.1 Environmental Reports
Schedule 7.1 to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
1. | Phase I Environmental Site Assessment prepared by Environ International Corporation dated June 11, 2010 (2500 Regent). |
2. | Phase I Environmental Site Assessment prepared by Property Solutions Incorporated dated April 26, 2010 (Horizon). |
3. | Phase I Environmental Site Assessment prepared by Environ International Corporation dated June 16, 2010 (Crescent). |
4. | Phase I Environmental Site Assessment prepared by Environ International Corporation dated April 5, 2010 (Hartman). |
5. | Phase I Environmental Site Assessment prepared by Environ International Corporation dated March 17, 2010 (Plano). |
6. | Phase I Environmental Site Assessment, dated November 2010, prepared by Environ International Corporation (National City). |
7. | Asbestos Survey Report, dated November 2010, prepared by Environ International Corporation (National City). |
8. | Phase 1 Environmental Site Assessment, dated December 2010, prepared by Environ International Corporation (Gateway) |
9. | Phase 1 Environmental Site Assessment, dated November 2010, prepared by Environ International Corporation (Granite Tower) |
Schedule 7.1
EXHIBIT A DESCRIPTION OF PROPERTIES
Exhibit A to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
Hartman Business Center
All the certain real property located in the County of Cobb, State of Georgia, described as follows:
Parcel I
All that tract or parcel of land lying and being in Land Lots 606, 607, 686 and 687 of the 18th District and Second Section, Cobb County, Georgia, which is more particularly described as follows:
To find the true point of beginning, commence at a 5/8 inch rebar found lying at the intersection of the southern right-of-way of Hartman Road (80-foot right-of-way) and the land lot line common to Land Lots 608 and 609; thence proceed along said right-of-way line of Hartman Road 1758.52 feet to a 5/8 inch rebar found; said 5/8 inch rebar found being the true point of beginning.
From the true point of beginning as thus established, proceed along said right-of-way line of Hartman Road South 88 degrees 51 minutes 19 seconds East a distance of 1,062.53 feet to an iron pin set; thence proceed along a 1,105.00 foot radius curve turning to the right an arc length of 716.38 feet (said curve being subtended by a chord having a bearing of South 70 degrees 16 minutes 56 seconds East a distance of 703.90 feet) to a 5/8 inch rebar found; thence leaving said right-of-way line proceed South 01 degrees 00 minutes 40 seconds West for a distance of 391.57 feet to a 5/8 inch rebar found; thence proceed North 88 degrees 59 minutes 41 seconds West a distance of 838.97 feet to a 5/8 inch rebar found; thence proceed South 00 degrees 07 minutes 13 seconds East for a distance of 100.04 feet to a 5/8 inch rebar found; thence proceed South 53 degrees 52 minutes 03 seconds West for a distance of 314.14 feet to a 5/8 inch rebar found; thence proceed North 44 degrees 05 minutes 22 seconds West for a distance of 538.36 feet to an iron pin set; thence proceed North 25 degrees 10 minutes 51 seconds West for a distance of 590.19 feet to a 5/8 inch rebar found lying on the Southerly right-of-way line of Hartman Road Said 5/8 inch rebar being the true point of beginning; said tract containing 23.30 acres of land, more or less.
Parcel II
Together with beneficial rights and easements of Declaration of Covenants, Conditions and Restrictions for Hartman Road Business Park, dated September 20, 2002, filed September 24, 2002, by Hartman Road, LLC, recorded in Deed Book 13596, Page 6275, records of the Clerk of the Superior Court, Cobb County, Georgia, as amended by that certain First Amendment to Declaration of Covenants, Conditions and Restriction for Hartman Road Business Park, dated June 27, 2003, filed July 1, 2003, and recorded in Deed Book 13782, Page 441, aforesaid records.
Parcel III
Perpetual, non-exclusive grading easement over, across and through that certain portion of the Hartman Parcel (as defined in the Easement Agreement, as hereinafter defined), and a perpetual, non-exclusive easement to discharge storm water from Pond #1 (as defined in the Easement Agreement) onto and
EXHIBIT A
through the Hartman Parcel through ditches, pipes, and related facilities in the Drainage Easement Area (as defined in the Easement Agreement), contained in that certain Grading and Drainage Easement Agreement between Hartman Road, LLC and Opus South Corporation, dated June 30, 2003, filed July 1, 2003 and recorded in Deed Book 13782, page 458, aforesaid records, as amended by First Amendment to Grading and Drainage Easement Agreement, dated October 24, 2008, filed December 4, 2008 and recorded in Deed Book 14652, page 1584, as re-recorded in Deed Book 14731, page 2954, aforesaid records (as amended, the Easement Agreement).
Plano Business Park
Real property in the County of Collin, State of Texas, described as follows:
TRACT 1:
PARCEL A:
LOT 5, BLOCK 1 OF PLANO BUSINESS PARK PHASE II, an addition to the City of Plano, Collin County, Texas, according to the plat thereof recorded in Volume N, Page 161, Map Records, Collin County, Texas.
PARCEL B: (EASEMENT ESTATE)
BEING the West one-half (1/2) of the following tract:
BEING a tract of land situated in the J.T. McCullough Survey, Abstract No. 633, City of Plano, Collin County, Texas, and being a portion of that same tract of land (Tract No. 2) as described in Deed to ASG Plano Industrial, Ltd. recorded in County Clerks File No. 95-0060322 of the Real Property Records of Collin County, Texas, and being more particularly described as follows:
COMMENCING at a 5/8 inch iron rod found at the intersection of the North line of Plano Parkway (variable width right-of-way), with the East line of Shiloh Road (140 foot right-of-way per Plat recorded in Cabinet F, Slide 18, Plat Records of Collin County, Texas), same being the Southwest corner of said ASG Plano Industrial Ltd. Tract No. 2;
THENCE North 89 degrees 47 minutes 30 seconds East, along the North line of said Plano Parkway and for the South line of said ASG Plano Industrial Ltd. Tract No. 2, a distance of 1475.95 feet to the POINT OF BEGINNING of the herein described tract of land;
THENCE North 00 degrees 12 minutes 30 seconds West departing the North line of said Plano Parkway and the South line of said ASG Plano Industrial, Ltd. Tract No. 2, a distance of 120.00 feet;
THENCE North 89 degrees 47 minutes 30 seconds East 40.00 feet;
THENCE South 00 degrees 12 minutes 30 seconds East, 120.00 feet to the North line of said Plano Parkway and the South line of said ASG Plano Industrial, Ltd. Tract No. 2;
THENCE South 89 degrees 47 minutes 30 seconds West along the North line of said Plano Parkway and the South line of said ASG Plano Industrial, Ltd. Tract No. 2, a distance of 40.00 feet to the POINT OF BEGINNING and containing 4,800 square feet or 0.110 acre of land. NOTE: THE COMPANY DOES NOT REPRESENT THAT THE ACREAGE AND/OR SQUARE FOOTAGE CALCULATIONS ARE CORRECT.
TRACT 2:
LOT 6, BLOCK 1 OF PLANO BUSINESS PARK PHASE II, an addition to the City of Plano, Collin County, Texas, according to the plat thereof recorded in Volume N, Page 483, Map Records, Collin County, Texas.
EXHIBIT A
TRACT 3:
LOT 7, BLOCK 1 OF PLANO BUSINESS PARK PHASE II, an addition to the City of Plano, Collin County, Texas, according to the plat thereof recorded in Volume N, Page 590, Map Records, Collin County, Texas.
Horizon Tech Center
All the certain real property located in the County of San Diego, State of California, described as follows:
Parcel I:
Lot 4 of Scripps Ranch Business Park Phase III, in the City of San Diego, County of San Diego, State of California, according to Map thereof No. 12130 filed in the Office of the County Recorder of San Diego County, July 27, 1988; and as further defined in that certain Certificate of Correction recorded August 23, 1989 as Instrument No. 89-452514, of Official Records.
Parcel II:
An easement for ingress, egress, construction, operation and maintenance of a monument sign as contained in that certain Grant of Easement recorded November 5, 1999 as Instrument No. 1999-0740198, of Official Records.
Regent Boulevard
All rights, title and interest in and to the certain real property located in the Counties of Dallas and Tarrant, State of Texas, described as follows and arising under that certain Ground Lease Agreement dated May 29, 2009 by and between Dallas/Fort Worth International Airport Board, as lessor, and BVDC, LP (BVDC), as lessee, as evidenced by Memorandum of Lease recorded June 1, 2009 under Clerks File No. D209143392, Real Property Records, Tarrant County, Texas; and filed for record on May 29, 2009 under Clerks File No. 200900153683, Real Property Records, Dallas County, Texas, as amended by that certain Lease Amendment (Roof-Top Sign) dated July 6, 2010, by and between Ground Lessor and BVDC, as assigned to Grantor, as evidenced by that certain Assignment and Assumption of Ground Lease dated July 8, 2010, filed for record on July 8, 2010 and recorded under Document No. 201000173571, Official Public Records, Dallas County, Texas; and filed for record on July 8, 2010 under Document No. D210164479, Official Public Records, Tarrant County, Texas:
BEING A 21.220 ACRE TRACT OF LAND SITUATED IN THE WILLIAM RUSSELL SURVEY, ABSTRACT NO. 1320, TARRANT COUNTY, TEXAS, AND THE WILLIAM RUSSELL SURVEY, ABSTRACT NO. 1728, DALLAS COUNTY, TEXAS, SAID 21.220 ACRE TRACT OF LAND BEING A PORTION OF THAT CERTAIN TRACT OF LAND KNOWN AS DALLAS FORT WORTH INTERNATIONAL AIRPORT, COMPRISED IN PART BY THE FOLLOWING TRACTS: A 21.88 ACRE TRACT OF LAND, DESCRIBED IN A DEED FROM LUCILLE PRICE JONES, A WIDOW, INDIVIDUALLY AND AS INDEPENDENT EXECUTRIX OF WILBUR S. JONES, DECEASED; ROBERT J. SHOEMAKER AND WIFE, MARY JONES SHOEMAKER AND PHILLIP M. JONES AND WIFE BETTYE GRUBBS JONES TO THE CITY OF DALLAS, AS RECORDED IN VOL 4792 PAGE 15, DEED RECORDS OF TARRANT COUNTY, TEXAS (DRTCT); A
EXHIBIT A
9.94 ACRE TRACT OF LAND, DESCRIBED IN DEED FROM P.T. TAYLOR AND WIFE, TOMMIE TAYLOR TO THE CITY OF DALLAS, AS RECORDED IN VOL 69154 PAGE 1521, OF THE DEED RECORDS OF DALLAS COUNTY, TEXAS (DRDCT); A 14.2479 ACRE TRACT OF LAND, DESCRIBED IN DEED FROM R. D. HARRINGTON, INDIVIDUALLY, AND AS ATTORNEY-IN-FACT FOR JACK D. EDMONDS TO THE CITY OF FORT WORTH, AS RECORDED IN VOL 4520 PAGE 354, DRTCT; AN 8.08 ACRE TRACT OF LAND, DESCRIBED IN DEED FROM BRYAN THOMAS SNOWDEN AND WIFE, MARGIE LOUISE SNOWDEN, TO THE CITY OF DALLAS, AS RECORDED IN VOL 69092 PAGE 1614, DRDCT; A 15.5983 ACRE TRACT OF LAND, DESCRIBED IN DEED FROM WILLIAM CLYDE SANDERS AND WIFE, CLARA E. SANDERS, TO THE CITY OF DALLAS, AS RECORDED IN VOL 69159 PAGE 1580, DRDCT; AND A 6.06 ACRE TRACT OF LAND DESCRIBED AS TRACT 2 IN DEED FROM CORBETT F. EMERY AND LOUISE K. EMERY, HUSBAND AND WIFE TO THE CITY OF FORT WORTH, AS RECORDED IN VOL 5506 PAGE 294, DRTCT; A 5 ACRE TRACT OF LAND, DESCRIBED AS TRACT ONE IN DEED FROM GLYNN S. BUTLER AND WIFE, M. JANICE BUTLER TO THE CITY OF DALLAS, AS RECORDED IN VOL 69153, PAGE 1879, DRDCT; A PORTION OF SAID 21.220 ACRE TRACT OF LAND ALSO BEING SITUATED IN THAT CERTAIN 744.10 ACRE TRACT OF LAND DESIGNATED AS NORTH TRACT, FOREIGN TRADE ZONE #39, SITUATED IN THE DALLAS/FORT WORTH INTERNATIONAL AIRPORT, DALLAS COUNTY, TEXAS AND TARRANT COUNTY, TEXAS, BEING A PART OF FOREIGN TRADE ZONE NUMBER 39 AS CREATED ON AUGUST 11, 1978, MODIFIED ON DECEMBER 14, 1999, MODIFIED NOVEMBER 21, 2005, MODIFIED AUGUST 27, 2007, MODIFIED APRIL 15, 2008, AND MODIFIED DECEMBER 31, 2008, BY THE FOREIGN TRADE ZONE BOARD, WASHINGTON, D.C., SAID 21.220 ACRE TRACT BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS;
BEGINNING AT A 1/2 INCH IRON ROD CAPPED HALFF ASSOC INC. FOUND (DFW SURFACE 88 COORDINATE - NORTHING 1,030,302.3952, EASTING 419,561.6606) FOR THE NORTH CORNER OF A 23.000 ACRE TRACT OF LAND DESCRIBED IN A LEASE AGREEMENT IN AND BETWEEN THE DALLAS FORT WORTH INTERNATIONAL AIRPORT BOARD AND PEROT DEVELOPMENT DFW # 1, L.P., AS RECORDED IN THE DALLAS FORT WORTH INTERNATIONAL AIRPORT COMMERCIAL DEVELOPMENT DEPARTMENT, SAID CORNER BEING IN THE SOUTHERLY RIGHT-OF-WAY LINE OF REGENT BOULEVARD, A 120.00 FOOT RIGHT OF WAY AS DEFINED BY THE DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD;
THENCE SOUTH 34° 13 40 WEST, ALONG AND WITH THE WEST LINE OF SAID 23.000 ACRE TRACT OF LAND, AT A DISTANCE OF 1193.10 FEET PASSING A 5/8 INCH IRON ROD CAPPED DFW BOUNDARY SET FOR THE WEST CORNER OF SAID 23.000 ACRE TRACT, THE SAME BEING THE NORTH CORNER OF A 27.553 ACRE TRACT OF LAND, (HEREAFTER REFERRED TO AS TRADE CENTER IV OPTION AREA), DESCRIBED AS THE OPTION AREA IN A LEASE BETWEEN THE DALLAS FORT WORTH INTERNATIONAL AIRPORT BOARD AND DPF TRADE CENTER IV, L.L.C., DATED OCTOBER 25, 2006 AND RECORDED IN THE DALLAS/FORT WORTH INTERNATIONAL AIRPORT COMMERCIAL DEVELOPMENT DEPARTMENT, AND CONTINUING ON FOR A TOTAL DISTANCE OF 1384.64 FEET TO A 5/8 INCH IRON ROD CAPPED DFW BOUNDARY SET (DFW SURFACE 88 COORDINATE NORTHING 1,029,157.5659, EASTING 418,782.8219) FOR THE SOUTH CORNER OF THE HEREIN DESCRIBED TRACT, FROM WHICH SAID POINT A 5/8 INCH IRON ROD FOUND BEARS SOUTH 38 DEGREES 19 MINUTES 10 SECONDS EAST, 0.30 FEET;
THENCE, NORTH 55° 46 20 WEST, LEAVING THE WEST LINE OF SAID TRADE CENTER IV OPTION AREA, A DISTANCE OF 714.50 FEET TO A 5/8 INCH IRON ROD CAPPED DFW BOUNDARY SET (DFW SURFACE 88 COORDINATE - NORTHING 1,029,559.4630, EASTING 418,192.0660) FOR THE WEST CORNER OF THE HEREIN DESCRIBED TRACT, BEING IN THE SOUTHEASTERLY RIGHT OF WAY LINE OF REGENT BOULEVARD, A 120.00 FOOT RIGHT OF WAY AS DEFINED BY THE DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD;
THENCE ALONG AND WITH THE SOUTHEASTERLY RIGHT OF WAY LINE OF SAID REGENT BOULEVARD THE FOLLOWING COURSES:
EXHIBIT A
NORTH 34° 13 40 EAST, A DISTANCE OF 998.21 FEET TO A 5/8 INCH IRON ROD CAPPED DFW BOUNDARY SET (DFW SURFACE 88 COORDINATE - NORTHING 1,030,384.7887, EASTING 418,753.5432)
FOR THE POINT OF CURVATURE OF A CURVE TO THE RIGHT;
NORTHEASTERLY ALONG AND WITH SAID CURVE TO THE RIGHT, HAVING A RADIUS OF 290.00 FEET, A CENTRAL ANGLE OF 78° 01 54, AND A LONG CHORD WHICH BEARS NORTH 73° 14 37 EAST, 365.13 FEET, AN ARC DISTANCE OF 394.95 FEET TO A 5/8 INCH IRON ROD CAPPED DFW BOUNDARY SET (DFW SURFACE 88 COORDINATES: NORTHING 1,030,490.0567, EASTING 419,103.1695) FOR POINT OF TANGENCY;
SOUTH 67° 44 26 EAST A DISTANCE OF 495.41 FEET TO THE POINT OF BEGINNING, CONTAINING 21.220 ACRES OF LAND, MORE OR LESS.
Crescent
All the certain real property located in the County of Arapahoe, State of Colorado, described as follows:
PARCEL ONE:
A parcel of land in the Northeast quarter of Section 16, Township 5 South, Range 67 West of the 6th P.M., Denver Technological Center, County of Arapahoe, State of Colorado, being more particularly described as follows:
Commencing at the North quarter corner of Section 16, Township 5 South, Range 67 West of the 6th P.M.;
Thence along the North line of the Northeast quarter of said Section 16 North 89°5259 East, a distance of 557.09 feet;
Thence leaving said North line South 00°0701 East a distance of 50.00 feet to a point on the Southerly right-of-way line of East Belleview Avenue;
Thence departing said right-of-way line and continuing South 00°0701 East a distance of 251.46 feet to a point of curvature;
Thence along a curve to the right having a radius of 224.00 feet, an arc length of 128.91 feet, a central angle of 32°5825 and a chord which bears South 16°2210 West, a distance of 127.14 feet to the TRUE POINT OF BEGINNING;
Thence South 57°5440 East, a distance of 72.86 feet;
Thence North 57°2000 East, a distance of 326.52 feet;
Thence along a non-tangent curve to the left having a radius of 450.00 feet, an arc length of 170.12 feet, a central angle of 21°3936, and a chord which bears South 43°2948 East, a distance of 169.11 feet to a point of compound curvature;
Thence along a curve to the left having a radius of 590.00 feet, an arc length of 50.78 feet, a central angle of 04°5552, and a chord which bears South 56°4733 East, a distance of 50.76 feet;
Thence South 00°3641 West, a distance of 107.62 feet;
Thence South 29°0622 West, a distance of 114.44 feet;
Thence South 74°0622 West, a distance of 33.94 feet;
Thence South 29°0622 West, a distance of 177.64 feet;
Thence South 74°0622 West, a distance of 26.00 feet;
Thence South 30°0824 West, a distance of 213.47 feet;
Thence South 89°5315 West, a distance of 81.34 feet;
Thence North 00°3724 East, a distance of 395.82 feet;
Thence along a non-tangent curve to the right having a radius of 825.50 feet, an arc length of 156.89 feet,
a central angle of 10°5322, and a chord which bears North 372514 West, a distance of 156.66 feet;
Thence North 57°5440 West, a distance of 47.14 feet;
EXHIBIT A
Thence along a non-tangent curve to the left having a radius of 224.00 feet, an arc length of 40.27 feet, a central angle of 10°1800, and a chord which bears North 38°0023 East, a distance of 40.21 feet to the TRUE POINT OF BEGINNING,
County of Arapahoe,
State of Colorado.
PARCEL TWO:
Non-exclusive easements for vehicular and pedestrian access as more particularly defined in that certain reciprocal access and utility agreement recorded October 25, 1995 in Book 8159 at Page 518, County of Arapahoe, State of Colorado.
PARCEL THREE:
Non-exclusive easement for vehicular and pedestrian access as more particularly defined in that certain access easements agreement recorded November 27, 1996 at Reception No. A6150967, County of Arapahoe, State of Colorado.
PARCEL FOUR:
Non-exclusive easement for ingress and egress over that private drive known as Crescent Drive as more particularly described in that certain access easement recorded July 16, 1997 at Reception No. A7086276, County of Arapahoe, State of Colorado.
National City Tower
All the certain real property located in the County of Jefferson, State of Kentucky, described as follows:
Parcel I (Fee Parcel):
Beginning at the Northeast corner of Fifth and Market Streets; thence along the Northerly line of Market Street South 81 degrees 12 minutes 52 seconds East 105 feet; thence North 8 degrees 46 minutes 38 seconds East 161.03 feet; thence South 81 degrees 08 minutes 37 seconds East 11.05 feet; thence North 8 degrees 51 minutes 23 seconds East 44 feet; thence South 81 degrees 08 minutes 37 seconds East 93.95 feet to the center line of an alley closed in Action No. CR-143,089, Jefferson Circuit Court; thence Northwardly with the center line of said closed alley 216 feet to its intersection with the Southerly line of Main Street; thence along the Southerly line of Main Street North 81 degrees 08 minutes 37 seconds West 210 feet to the Southeast corner of Fifth and Main Streets; thence along the Easterly line of Fifth Street South 8 degrees 46 minutes 38 seconds West 421.16 feet to the beginning.
Tax ID: 03-014E-0261-0000
Parcel II (Fee Parcel):
BEGINNING in the Southerly line of Main Street at its intersection with the center line of an alley running between Market and Main Streets in the block bounded on the West by Fifth Street and on the East by Fourth Street, said alley having been closed in Action No. CR-143,089, Jefferson Circuit Court; thence along the center line of said closed alley South 8 degrees 53 minutes 6 seconds West 235.41 feet, more or less, to its intersection with the Northerly line extended of the property conveyed to Greater Louisville First Federal Savings and Loan Association by deed of record in Deed Book 3745, Page 522 in the Office of the Clerk of Jefferson County, Kentucky; thence with the Northerly line of the property conveyed to Greater Louisville First Federal Savings and Loan Association, and same extended, South 81 degrees 12 minutes 22 seconds East 189.82 feet, more or less, to a point 20 feet West of Fourth Street; thence along
EXHIBIT A
a line 20 feet West of Fourth Street North 8 degrees 56 minutes 13 seconds East 235.20 feet, more or less, to the Southerly line of Main Street, thence with the Southerly line of Main Street North 81 degrees 08 minutes 37 seconds West 190.03 feet, more or less, to the beginning; together with the unlimited right of ingress and egress across any and all portions of the 20 foot wide tract of real estate lying between the Easternmost line of the above described tract and Fourth Street, which 20 foot tract is to be dedicated to public use as a part of Fourth Street.
Tax ID: 03-014E-0259-0000
Parcel III (Appurtenant Easement Parcel):
Easement for foundation and support as set forth in that certain Deed recorded February 26, 1971 in Deed Book 4405, Page 109 in the Office of the Clerk of Jefferson County, Kentucky.
Parcels I, II and III being the same property conveyed to TIC NCT FARE FAMILY TRUST LLC, a Delaware limited liability company, TIC NCT LYNCH LLC, a Delaware limited liability company, TIC NCT VAUGHAN LLC, a Delaware limited liability company, TIC NCT BIRCHER LLC, a Delaware limited liability company, TIC NCT STAUFFER LLC, a Delaware limited liability company, TIC NCT HUBBARD TRUST LLC, a Delaware limited liability company, TIC NCT VINCENTI LLC, a Delaware limited liability company, TIC NCT B JONES LLC, a Delaware limited liability company, TIC NCT R JONES LLC, a Delaware limited liability company, TIC NCT HATAMIYA BROTHERS LLC, a Delaware limited liability company, TIC NCT DEY LLC, a Delaware limited liability company, TIC NCT RUTKOWSKI LLC, a Delaware limited liability company, TIC NCT KIHAPAI LLC, a Delaware limited liability company, TIC NCT READ LLC, a Delaware limited liability company, TIC NCT KIM LLC, a Delaware limited liability company, TIC NCT GOLOMB LLC, a Delaware limited liability company, TIC NCT RUNES LLC, a Delaware limited liability company, TIC NCT HOYLES LLC (aka TIC NCT #45, LLC according to Amended Certificate of Authority recorded in CB 666, Page 680), a Delaware limited liability company, TIC NCT DELAND LLC, a Delaware limited liability company, TIC NCT LAI LLC, a Delaware limited liability company, and TIC NCT GILL LLC, a Delaware limited liability company, by Deed dated August 30, 2005, of record in Deed Book 8688, Page 620, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT VILLA SANGRIA LLC, a Delaware limited liability company, TIC NCT BERKOVICH LLC, a Delaware limited liability company, TIC NCT POSIK LLC, a Delaware limited liability company, TIC NCT HOWE LLC, a Delaware limited liability company, and TIC NCT WALSH LLC, a Delaware limited liability company, by Deed dated September 23, 2005, of record in Deed Book 8701, Page 833, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT LYNCH LLC, a Delaware limited liability company, by Deed dated September 30, 2005, of record in Deed Book 8708, Page 271, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT MATHWIG LLC, a Delaware limited liability company, and TIC NCT HANLY LLC, a Delaware limited liability company, by Deed dated November 15, 2005, of record in Deed Book 8736, Page 90, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT GILBERT LLC, a Delaware limited liability company, by Deed dated January 1, 2006, of record in Deed Book 8759, Page 565, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
EXHIBIT A
Granite Tower
All the certain real property located in the County of Denver, State of Colorado, described as follows
Parcel 1 - Fee Title
Units 1, 1A, 1B, 1C and 5, Block 95 Condominiums,
According to the Amended and Restated Master Declaration of Block 95 Condominiums recorded December 19, 2005 under Reception No. 2005215222, as amended by Amended and Restated First Amendment to Amended and Restated Master Declaration of Block 95 Condominiums recorded October 7, 2010 at Reception No. 2010115794, and the Amended and Restated Condominium Map thereof recorded December 19, 2005 under Reception No. 2005215223, as amended by First Amendment to the Amended and Restated Condominium Map for Block 95 Condominiums recorded February 12, 2008 under Reception No. 2008017796, in the records of the Clerk and Recorder of the City and County of Denver, State of Colorado.
Parcel 2
Nonexclusive easements: (a) to use each Common Element (as defined in the Declaration, as hereinafter defined), (b) over and across all Common Elements for the use and enjoyment of Units 1, 1A, 1B, 1C and 5, Block 95 Condominiums, the Parking Rights and the Limited Common Elements (as such terms are defined in the Declaration, as hereinafter defined), (b) over and across all Common Elements and the other Units (as defined in the Declaration, as hereinafter defined) for horizontal, vertical, and lateral support, (c) over and across all stairs, hallways, lobbies, drive lanes, walkways and other access-ways designated as Common Elements to gain pedestrian and vehicular access, (d) over and across all stairs, hallways, lobbies, drive lanes, walkways and other access-ways for emergency egress, (e) for ingress and egress to and from the Loading Dock (as defined in the Declaration, as hereinafter defined) for the use of the Loading Dock, (f) for encroachments, (g) for repair, maintenance, restoration and reconstruction, (h) to enter upon, across, over, in, and under any portion of the Condominium Project (as defined in the Declaration, as hereinafter defined) for the purpose of changing, correcting, or otherwise modifying the grade or drainage channels to improve the drainage of water, (i) for the purpose of maintaining, repairing and replacing the existing drainage of water from, over, and across the Condominium Project, (j) for the use of all shafts, chutes, flues, ducts, vents, chases, pipes, wires, conduits, and utility lines for utilities, and (k) for access to and operation, maintenance, repair and replacement of the Central Plant (as defined in the Declaration, as hereinafter defined), including the Plate Heat Exchanger and the Plate Heat Distribution Lines (as such terms are defined in the Declaration, as hereinafter defined), contained in that Amended and Restated Master Declaration of Block 96 Condominiums, recorded December 19, 2005 at Reception No. 2005215222, and Amended and Restated First Amendment to Amended and Restated Master Declaration of Block 95 Condominiums recorded October 7, 2010 at Reception No. 2010115794 (as amended, the Declaration).
Parcel 3
Revocable permit or license to encroach with an underground parking structure, contained in that Ordinance No. 3, Series of 1981 recorded July 11, 1985 at Reception No. 037798, in the following described areas in the City and County of Denver and State of Colorado, to wit:
Those parts of 18th Street, 19th Street, Curtis Street and Arapahoe Street adjacent to Block 95, East Denver, described as follows:
EXHIBIT A
Beginning at the most northerly corner of Block 95, East Denver; Thence westerly to a point that is 9.50 feet southwesterly of and 9.5 feet northwesterly of said northerly corner; Thence southwesterly and parallel with the northwesterly line of said Block 95, 382.41 feet; Thence southerly to a point that is 9.50 feet southeasterly of and 9.50 feet southwesterly of the most westerly corner of said Block 95; Thence southeasterly and parallel with the southwesterly line of said Block 95, 247.50 feet; Thence easterly to a point that is 9.50 feet northeasterly of and 9.50 feet southeasterly of the most southerly corner of said Block 95; Thence northeasterly and parallel with the southeasterly line of said Block 95, 382.41 feet; Thence northerly to a point that is 9.50 feet northeasterly of and 9.50 feet northwesterly of the most easterly corner of said Block 95; Thence northwesterly and parallel with the northeasterly line of said Block 95, 247.50 feet; thence westerly to the point of beginning.
Gateway Center
All that certain real property situated in the County of Sacramento, State of California, described as follows:
PARCEL A:
PARCEL 4, AS SHOWN ON THAT CERTAIN CERTIFICATE OF COMPLIANCE OF LOT LINE ADJUSTMENT RECORDED NOVEMBER 24, 2008 IN BOOK 20081124 PAGE 897, OFFICIAL RECORDS OF THE COUNTY OF SACRAMENTO, STATE OF CALIFORNIA, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
ALL THAT PORTION OF PARCEL 3 AS RECORDED IN THE LOT LINE ADJUSTMENT RECORDED IN BOOK 20070103, PAGE 1164, AND PARCEL 1 AS RECORDED IN THE LOT LINE ADJUSTMENT RECORDED IN BOOK 20070404, PAGE 0157, OFFICIAL RECORDS OF THE COUNTY OF SACRAMENTO, STATE OF CALIFORNIA, AND DESCRIBED AS FOLLOWS: COMMENCING AT A FOUND COTTON SPINDLE WITH WASHER STAMPED LS 6947 MARKING THE CENTERLINE INTERSECTION OF NORTH FREEWAY BOULEVARD AND PROMENADE CIRCLE AS SHOWN ON THE FINAL MAP OF PROMENADE AT NATOMAS FILED IN BOOK 341, MAPS PAGE 12 OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG THE CENTERLINE OF SAID PROMENADE CIRCLE SOUTH 00° 37. 56 EAST, 684.32 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE EASTERLY HAVING A RADIUS OF 600.00 FEET; THENCE SOUTHERLY 178.02 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 00. 00; THENCE SOUTH 17° 37. 56 EAST, 20.67 FEET; THENCE SOUTH 00° 37. 56 EAST, 113.97 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 00° 37. 56 EAST 450.12 FEET TO THE BEGINNING OF A NON-TANGENT CURVE CONCAVE NORTHERLY HAVING A RADIUS OF 625.00 FEET TO WHICH A RADIAL BEARS SOUTH 06° 29. 39 WEST; THENCE WESTERLY 80.59 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 07° 23. 16; THENCE TANGENT TO SAID CURVE NORTH 76° 07. 05 WEST, 584.14 FEET; THENCE NORTH 35° 20. 14 WEST, 309.84 FEET; THENCE NORTH 55° 50. 17 WEST, 32.59 FEET; THENCE NORTH 31° 29. 02 WEST, 30.13 FEET; THENCE NORTH 00° 21. 59 WEST, 45.64 FEET; THENCE NORTH 89° 22. 19 EAST, 12.67 FEET; THENCE NORTH 54° 41. 02 EAST 43.16 FEET; THENCE SOUTH 35° 18. 50 EAST, 294.27 FEET; THENCE NORTH 33° 43. 16 EAST, 233.70 FEET; THENCE NORTH 40° 19. 00 WEST, 106.41 FEET; THENCE NORTH 49° 41. 02 EAST, 62.00 FEET; THENCE NORTH 40° 19. 00 WEST, 25.88 FEET; THENCE NORTH 49° 41. 00 EAST, 30.09 FEET; THENCE NORTH 00° 37. 26 WEST, 155.40 FEET; THENCE NORTH 89° 22. 34 EAST, 66.88 FEET; THENCE SOUTH 00° 37. 26 EAST 310.00 FEET; THENCE NORTH 89° 22. 34 EAST, 67.19 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE NORTHERLY HAVING A RADIUS OF 600.00 FEET; THENCE EASTERLY 178.02 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 00. 00; THENCE TANGENT TO SAID CURVE NORTH 72° 22. 34 EAST, 58.16 FEET; THENCE SOUTH 17° 37. 26 EAST, 27.67 FEET; THENCE NORTH 72° 22. 34 EAST 26.29 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 42.33 FEET; THENCE EASTERLY 33.05 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 44° 44. 06 TO THE BEGINNING OF A COMPOUND CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 19.33 FEET; THENCE SOUTHEASTERLY 5.91 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 31. 48 TO THE BEGINNING OF A COMPOUND CURVE CONCAVE
EXHIBIT A
SOUTHWESTERLY HAVING A RADIUS OF 42.33 FEET; THENCE SOUTHERLY 33.05 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 44° 44. 06; THENCE TANGENT TO SAID CURVE SOUTH 00° 37. 26 EAST, 25.22 FEET; THENCE NORTH 89° 22. 34 EAST, 27.80 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL B:
EASEMENTS FOR INGRESS AND EGRESS, PARKING, UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF GATEWAY CORPORATE CENTER, RECORDED JUNE 28, 2005 IN BOOK 20050628 PAGE 2298, OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN.
Assessors Parcel Number : 225-2110-060-0000
PARCEL C
LOT 20 AS SHOWN ON THE MAP ENTITLED PROMENADE AT NATOMAS, RECORDED JUNE 16, 2005, IN BOOK 341 OF MAPS, AT PAGE 12, AND AS AMENDED BY THAT CERTAIN CERTIFICATE OF CORRECTION RECORDED AUGUST 21, 2008 AS BOOK 20080821 AT PAGE 1336, OF OFFICIAL RECORDS.
PARCEL D
A NON-EXCLUSIVE EASEMENT OVER THE REAL PROPERTY SHOWN ON THE FINAL MAP ENTITLED PROMENADE AT NATOMAS, RECORDED IN BOOK 341 OF MAPS AT PAGE 12, RECORDS OF SACRAMENTO COUNTY, CALIFORNIA FOR (1) THE FLOW OF STORM WATER DRAINAGE, (2) SANITARY SEWER FACILITIES NECESSARY TO SERVE PARCEL ONE AND (3) WATER FACILITIES NECESSARY TO SERVE PARCEL ONE TO THE EXTENT PROVIDED UNDER THE MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF SACRAMENTO GATEWAY (MASTER DECLARATION) RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2296, OFFICIAL RECORDS.
PARCEL E
EASEMENT FOR DRAINAGE AND UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF SACRAMENTO GATEWAY RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2296, OFFICIAL RECORDS.
PARCEL F
EASEMENTS FOR INGRESS AND EGRESS, PARKING, UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF GATEWAY CORPORATE CENTER RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2298, OFFICIAL RECORDS.
Assessors Parcel Number: 225-2110-020-0000
EXHIBIT A
EXHIBIT B - DOCUMENTS
Exhibit B to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
1. Loan Documents. The documents listed below, numbered 1.1 through 1.9, inclusive, and amendments, modifications and supplements thereto which have received the prior written consent of Administrative Agent, together with any documents executed in the future that are approved by Lender and that recite that they are Loan Documents for purposes of this Agreement are collectively referred to herein as the Loan Documents.
1.1 This Agreement
1.2 The Amended and Restated and Consolidated Secured Promissory Note, dated January 27, 2011
1.3 Amended and Restated and Consolidated Hazardous Materials Indemnity executed by Borrowers, dated January 27, 2011
1.4 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by KBSII Plano Business Park, LLC, in favor of Administrative Agent, for the benefit of Lenders, as amended by that certain First Modification of Deed of Trust dated January 27, 2011
1.5 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by KBSII Horizon Tech Center, LLC, in favor of Administrative Agent, for the benefit of Lenders, as amended by that certain First Modification of Deed of Trust dated January 27, 2011
1.6 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by KBSII 2500 Regent Boulevard, LLC, in favor of Administrative Agent, for the benefit of Lenders, as amended by that certain First Modification of Deed of Trust dated January 27, 2011
1.7 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by KBSII Crescent VIII, LLC, in favor of Administrative Agent, for the benefit of Lenders, as amended by that certain First Modification of Deed of Trust dated January 27, 2011
1.8 Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated September 30, 2010, executed by KBSII Hartman Business Center, LLC, in favor of Administrative Agent, for the benefit of Lenders, as amended by that certain First Modification of Deed to Secure Debt dated January 27, 2011
1.9 Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated January 27, 2011, executed by KBSII National City Tower, LLC, in favor of Administrative Agent, for the benefit of Lenders
EXHIBIT B
1.10 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated January 27, executed by KBSII Gateway Corporate Center, LLC, in favor of Administrative Agent, for the benefit of Lenders
1.11 Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated January 27, executed by KBSII Granite Tower, LLC, in favor of Administrative Agent, for the benefit of Lenders
1.12 Deeds of Trust and Mortgages encumbering I-81 Properties, Torrey Reserve Property, Two Westlake Property and any Future Property, when executed and delivered
2. Other Related Documents.
2.1 | Amended and Restated and Consolidated Limited Guaranty |
2.2 | Legal opinion issued by Greenberg Traurig, LLP to Administrative Agent, for the benefit of Lenders, dated January 28, 2011 (Authority and CA Opinion) |
2.3 | Legal opinion issued by Greenberg Traurig, LLP to Administrative Agent, for the benefit of Lenders, dated January 28, 2011 (CO Opinion) |
EXHIBIT B
EXHIBIT C FORM OF SUBORDINATION NON-DISTURBANCE AND ATTORNMENT AGREEMENT
Exhibit C to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #2955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT
(Lease To Mortgage)
NOTICE: | THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. |
THIS SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (Agreement) is made by and between (Owner), (Lessee) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (Administrative Agent) for itself and certain additional lenders (Lenders).
R E C I T A L S
A. | Pursuant to the terms and provisions of a lease dated (Lease), Owner, as Lessor, granted to Lessee a leasehold estate in and to the property described on Exhibit A attached hereto and incorporated herein by this reference (which property, together with all improvements now or hereafter located on the property, is defined as the Property). |
B. | Owner has executed, or proposes to execute, a (the Mortgage) securing, among other things, one or more promissory notes (collectively, as the same may be amended, restated or replaced, or the principal amount thereof increased, the Note) in the aggregate principal sum of up to $372,000,000 in favor of one or more Lenders, which Note is payable with interest and upon the terms and conditions described therein (Loan). |
C. | As a condition to making the Loan secured by the Mortgage, Administrative Agent requires that the Mortgage be unconditionally and at all times remain a lien on the Property, prior and superior to all the rights of Lessee under the Lease and that the Lessee specifically and unconditionally subordinate the Lease to the lien of the Mortgage. |
D. | Owner and Lessee have agreed to the subordination, attornment and other agreements herein in favor of Administrative Agent. |
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NOW THEREFORE, for valuable consideration and to induce Administrative Agent to make the Loan, Owner and Lessee hereby agree for the benefit of Administrative Agent as follows:
1. | SUBORDINATION. Owner and Lessee hereby agree that: |
1.1 | Prior Lien. The Mortgage securing the Note, and any modifications, renewals or extensions thereof, and additional advances, shall unconditionally be and at all times remain a lien on the Property prior and superior to the Lease; |
1.2 | Subordination. Administrative Agent would not make the Loan without this agreement to subordinate; and |
1.3 | Whole Agreement. This Agreement shall be the whole agreement and only agreement with regard to the subordination of the Lease to the lien of the Mortgage and shall supersede and cancel, but only insofar as would affect the priority between the Mortgage and the Lease, any prior agreements as to such subordination, including, without limitation, those provisions, if any, contained in the Lease which provide for the subordination of the Lease to a deed or deeds of trust or to a mortgage or mortgages. |
AND FURTHER, Lessee individually declares, agrees and acknowledges for the benefit of Lender, that:
1.4 | Use of Proceeds. Administrative Agent, in making disbursements pursuant to the Note, the Mortgage or any loan agreements with respect to the Property, is under no obligation or duty to, nor has Administrative Agent represented that it will, see to the application of such proceeds by the person or persons to whom Administrative Agent disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat this agreement to subordinate in whole or in part; |
1.5 | Waiver, Relinquishment and Subordination. Lessee intentionally and unconditionally waives, relinquishes and subordinates all of Lessees right, title and interest in and to the Property to the lien of the Mortgage and understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances are being and will be made by Administrative Agent and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination. |
2. | ASSIGNMENT. Lessee acknowledges and consents to the assignment of the Lease by Lessor in favor of Lender. |
3. | ADDITIONAL AGREEMENTS. Lessee covenants and agrees that, during all such times as Administrative Agent is the beneficiary under the Mortgage: |
3.1 | Modification, Termination and Cancellation. Lessee will not consent to any modification, amendment, termination or cancellation of the Lease (in whole or in part) without giving Administrative Agent prior written notice thereof and will not make any payment to Lessor in consideration of any modification, termination or cancellation of the Lease (in whole or in part) without giving Administrative Agent prior written notice thereof; |
3.2 | Notice of Default. Lessee will notify Administrative Agent in writing concurrently with any notice given to Lessor of any default by Lessor under the Lease, and Lessee agrees that Administrative Agent has the right (but not the obligation) to cure any breach or default specified in such notice within the time periods set forth below and Lessee will not declare a default of the Lease, as to Administrative Agent, if Administrative Agent cures such default within fifteen (15) days from and after the expiration of the time period provided in the Lease for the cure thereof by Lessor; provided, however, that if such default cannot with diligence be cured by Administrative Agent within such fifteen (15) day period, the commencement of action by Administrative Agent within such fifteen (15) day period to remedy the same shall be deemed sufficient so long as Administrative Agent pursues such cure with diligence; |
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3.3 | No Advance Rents. Lessee will make no payments or prepayments of rent more than one (1) month in advance of the time when the same become due under the Lease; and |
3.4 | Assignment of Rents. Upon receipt by Lessee of written notice from Administrative Agent that Administrative Agent has elected to terminate the license granted to Lessor to collect rents, as provided in the Mortgage, and directing the payment of rents by Lessee to Administrative Agent, Lessee shall comply with such direction to pay and shall not be required to determine whether Lessor is in default under the Loan and/or the Mortgage. |
4. | ATTORNMENT. In the event of a foreclosure under the Mortgage (or acceptance of a deed in lieu thereof), Lessee agrees for the benefit of Administrative Agent and Lenders (including for this purpose any transferee of Administrative Agent or any transferee of Lessors title in and to the Property by Administrative Agents exercise of the remedy of sale by foreclosure under the Mortgage or acceptance of a deed in lieu thereof (any of the foregoing, including, without limitation, Administrative Agent, its designee or assignee that holds title to the Property being referred to herein as a Successor Owner)) as follows: |
4.1 | Payment of Rent. Lessee shall pay to Successor Owner all rental payments required to be made by Lessee pursuant to the terms of the Lease for the duration of the term of the Lease; |
4.2 | Continuation of Performance. Lessee shall be bound to Successor Owner in accordance with all of the provisions of the Lease for the balance of the term thereof, and Lessee hereby attorns to Successor Owner as its landlord, such attornment to be effective and self operative without the execution of any further instrument immediately upon Lender succeeding to Lessors interest in the Lease and giving written notice thereof to Lessee; |
4.3 | No Offset. Successor Owner shall not be liable for, nor subject to, any offsets or defenses which Lessee may have by reason of any act or omission of Lessor under the Lease, nor for the return of any sums which Lessee may have paid to Lessor under the Lease as and for security deposits, advance rentals or otherwise, except to the extent that such sums are actually delivered by Lessor to Successor Owner; and |
4.4 | Subsequent Transfer. If Successor Owner, by succeeding to the interest of Lessor under the Lease, should become obligated to perform the covenants of Lessor thereunder, then, upon any further transfer of Lessors interest by Successor Owner, all of such obligations shall terminate as to Successor Owner. |
5. | NON-DISTURBANCE. In the event of a foreclosure under the Mortgage, so long as there shall then exist no breach, default, or event of default on the part of Lessee under the Lease, Administrative Agent agrees for itself and its successors and assigns that the leasehold interest of Lessee under the Lease shall not be extinguished or terminated by reason of such foreclosure, but rather the Lease shall continue in full force and effect and Administrative Agent shall recognize and accept Lessee as tenant under the Lease subject to the terms and provisions of the Lease except as modified by this Agreement; provided, however, that Lessee and Administrative Agent agree that the following provisions of the Lease (if any) shall not be binding on Administrative Agent or any designee of Administrative Agent that takes title to the Property: any option to purchase with respect to the Property; any right of first refusal with respect to the Property; any provision regarding the use of insurance proceeds or condemnation proceeds with respect to the Property which is inconsistent with the terms of the Mortgage. |
6. | MISCELLANEOUS. |
6.1 | Heirs, Successors, Assigns and Transferees. The covenants herein shall be binding upon, and inure to the benefit of, the heirs, successors and assigns of the parties hereto; and |
6.2 | Notices. All notices or other communications required or permitted to be given pursuant to the provisions hereof shall be deemed served upon delivery or, if mailed, upon the first to occur of receipt or the expiration of three (3) days after deposit in United States Postal Service, certified mail, postage prepaid and addressed to the address of Lessee or Administrative Agent appearing below: |
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OWNER | ADMINISTRATIVE AGENT | |||
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WELLS FARGO BANK, NATIONAL | |||
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ASSOCIATION | |||
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Real Estate Group (AU #2955) | |||
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2030 Main Street, Suite 800 | |||
Irvine, CA 92614 |
Attention: |
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Attn: Bryan Stevens |
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Loan No. 1002835 | ||||
Fax: |
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With a copy to: |
With a copy to: | |||
Greenberg Traurig 3161 Michelson Drive, Suite 1000 Irvine, California 92612 Attention: L. Bruce Fischer, Esq. Tel: 949.732.6670 |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #2955) 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Office Manager Loan No. 1002835 | |||
LESSEE | ||||
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provided, however, any party shall have the right to change its address for notice hereunder by the giving of written notice thereof to the other party in the manner set forth in this Agreement; and
6.3 | Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute and be construed as one and the same instrument; and |
6.4 | Remedies Cumulative. All rights of Administrative Agent herein to collect rents on behalf of Lessor under the Lease are cumulative and shall be in addition to any and all other rights and remedies provided by law and by other agreements between Administrative Agent and Lessor or others; and |
6.5 | Paragraph Headings. Paragraph headings in this Agreement are for convenience only and are not to be construed as part of this Agreement or in any way limiting or applying the provisions hereof. |
7. | INCORPORATION. Exhibit A attached hereto and incorporated herein by this reference. |
(SIGNATURES ON FOLLOWING PAGE)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
NOTICE: | THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. |
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.
OWNER
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ADMINISTRATIVE AGENT | ||
WELLS FARGO BANK, | ||
NATIONAL ASSOCIATION | ||
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LESSEE | ||
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LEASE GUARANTORS CONSENT
The undersigned (Lease Guarantor) consents to the foregoing Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement and the transactions contemplated thereby and reaffirms its obligations under the lease guaranty (Lease Guaranty) dated . Lease Guarantor further reaffirms that its obligations under the Lease Guaranty are separate and distinct from Lessees obligations.
AGREED:
Dated as of: , 20 | LEASE GUARANTOR | |||||
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EXHIBIT A
DESCRIPTION OF PROPERTY
EXHIBIT A to Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement dated as of , executed by , as Owner, , as Lessee, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent.
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EXHIBIT D FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
Exhibit D to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this Agreement) is dated as of , , between (Assignor) and (Assignee).
RECITALS:
A. Assignor is a Lender under the Amended and Restated and Consolidated Loan Agreement dated as of , 2011 (as from time to time amended, supplemented or restated, the Loan Agreement), by and among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) (Borrowers), the persons named therein as Lenders and such other Persons as may become Lenders in accordance with the terms of the Loan Agreement, and Wells Fargo Bank, National Association, as Administrative Agent (Administrative Agent). (Capitalized terms used in this Agreement without definition have the same meanings as in the Loan Agreement.)
B. Currently, Assignors Percentage Share of the Loan is equal to % and Assignees Percentage Share of the Loan is equal to %.
C. Assignor desires to assign to Assignee, and Assignee desires to accept and assume, [all/a portion of] the rights and obligations of Assignor under the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
1. | Assignment. |
(a) Effective on the Assignment Effective Date (as defined in Section 3 below), Assignor hereby assigns to Assignee the Assigned Share (as defined below) of [all/a portion of] of Assignors rights, title, interest and obligations under the Loan Agreement and other Loan Documents, including without limitation those relating to Assignors Pro Rata Share of the Loan. The Assigned Share of all such rights, title, interest and obligations is referred to collectively as the Assigned Rights and Obligations.
(b) The Assigned Share means the portion of Assignors Percentage Share in the Loan being assigned hereby, such portion being equal to % of the Loan (or $ of Commitment). The new Percentage Share of Loan being held by Assignee
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(after giving effect to the assignment hereunder), and the Percentage Share in the Loan retained by Assignor, shall be as specified on the signature pages of this Agreement
2. Assumption. Effective on the Assignment Effective Date, Assignee hereby accepts the foregoing assignment of, and hereby assumes from Assignor, the Assigned Rights and Obligations.
3. Effectiveness. This Agreement shall become effective on a date (the Assignment Effective Date) selected by Assignor, which shall be on or as soon as practicable after the execution and delivery of counterparts of this Agreement by Assignor, Assignee, Administrative Agent and Borrower. Assignor shall promptly notify Assignee, Administrative Agent and Borrowers in writing of the Assignment Effective Date.
4. Payments on Assignment Effective Date. In consideration of the assignment by Assignor to Assignee, and the assumption by Assignee, of the Assigned Rights and Obligations, on the Assignment Effective Date Assignee shall pay to Assignor such amounts as are specified in any written agreement or exchange of letters between them and additionally shall pay to Administrative Agent a assignment processing fee of $4,500.
5. Allocation and Payment of Interest and Fees.
(a) Administrative Agent shall pay to Assignee all interest and other amounts (including Fees, except as otherwise provided in the written agreement referred to in Section 4 above) not constituting principal that are paid by or on behalf of Borrowers pursuant to the Loan Documents and are attributable to the Assigned Rights and Obligations (Borrower Amounts), that accrue on and after the Assignment Effective Date. If Assignor receives or collects any such Borrower Amounts, Assignor shall promptly pay them to Assignee.
(b) Administrative Agent shall pay to Assignor all Borrower Amounts that accrue before the Assignment Effective Date (or otherwise pursuant to the written agreement referred to in Section 4 above) when and as the same are paid by Administrative Agent to the other Lenders. If Assignee receives or collects any such Borrower Amounts, Assignee shall promptly pay such amounts to Assignor.
(c) Unless specifically assumed by Assignee, Assignor shall be responsible and liable for all reimbursable liabilities and costs and indemnification obligations which accrue under Section 12.12 of the Loan Agreement prior to the Assignment Effective Date, and such liability shall survive the Assignment Effective Date.
6. Administrative Agent Liability. Administrative Agent shall not be liable for any allocation or payment to either Assignor or Assignee subsequently determined to be erroneous, unless resulting from Administrative Agents willful misconduct or gross negligence.
7. Representations and Warranties.
(a) Each of Assignor and Assignee represents and warrants to the other and to Administrative Agent as follows:
(i) It has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Agreement;
(ii) The making and performance of this Agreement and all documents required to be executed and delivered by it hereunder do not and will not violate any law or regulation applicable to it;
(iii) This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms; and
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(iv) All approvals, authorizations or other actions by, or filings with, any Governmental Authority necessary for the validity or enforceability of its obligations under this Agreement have been made or obtained.
(b) Assignor represents and warrants to Assignee that Assignor owns the Assigned Rights and Obligations free and clear of any Lien or other encumbrance.
(c) Assignee represents and warrants to Assignor as follows:
(i) Assignee is and shall continue to be an Eligible Assignee as defined in the Loan Agreement;
(ii) Assignee has made and shall continue to make its own independent investigation of the financial condition, affairs and creditworthiness of Borrower and any other Loan Party; and
(iii) Assignee has received copies of the Loan Documents and such other documents, financial statements and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement.
8. No Assignor Responsibility. Assignor makes no representation or warranty regarding, and assumes no responsibility to Assignee for:
(a) the execution (by any party other than Assignor), effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of the Loan Documents or any representations, warranties, recitals or statements made in the Loan Documents or in any financial or other written or oral statement, instrument, report, certificate or any other document made or furnished or made available by Assignor to Assignee or by or on behalf of any Loan Party to Assignor or Assignee in connection with the Loan Documents and the transactions contemplated thereby;
(b) the performance or observance of any of the terms, covenants or agreements contained in any of the Loan Documents or as to the existence or possible existence of any Default or Potential Default under the Loan Documents; or
(c) the accuracy or completeness of any information provided to Assignee, whether by Assignor or by or on behalf of any Loan Party.
Assignor shall have no initial or continuing duty or responsibility to make any investigation of the financial condition, affairs or creditworthiness of any of the Loan Parties, in connection with the assignment of the Assigned Rights and Obligations or to provide Assignee with any credit or other information with respect thereto, whether coming into its possession before the date hereof or at any time or times thereafter.
9. Assignee Bound by Loan Agreement. Effective on the Assignment Effective Date, Assignee (a) shall be deemed to be a party to the Loan Agreement and as such, shall be directly liable to Borrower for any failure by Assignee to comply with Assignees assumed obligations thereunder, including, without limitation, Assignees obligation to fund its Pro Rata Share of the Loan in accordance with provisions of the Loan Agreement, (b) agrees to be bound by the Loan Agreement to the same extent as it would have been if it had been an original Lender thereunder, (c) agrees to perform in accordance with their respective terms all of the obligations which are required under the Loan Documents to be performed by it as a Lender, and (d) agrees to maintain its status as an Eligible Assignee. Assignee appoints and authorizes Administrative Agent to take such actions as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto.
10. Assignor Released From Loan Agreement. Effective on the Assignment Effective Date, Assignor shall be released from the Assigned Rights and Obligations; provided, however, that Assignor
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shall retain all of its rights to indemnification under the Loan Agreement and the other Loan Documents for any events, acts or omissions occurring before the Assignment Effective Date, and, to the extent not assumed by Assignee, Assignor shall continue to be responsible for the liabilities and obligations described in Section 5(c) of this Agreement.
11. New Notes. On or promptly after the Assignment Effective Date, Borrower, Administrative Agent, Assignor and Assignee shall make appropriate arrangements so that new Notes executed by Borrower, dated the Assignment Effective Date and in the amount of the respective Pro Rata Shares of Assignor and Assignee in the original Loan amount, after giving effect to this Agreement, are issued to Assignor and Assignee, in exchange for the surrender by Assignor and Assignee to Borrower of any applicable outstanding Notes, marked Exchanged.
12. General.
(a) No term or provision of this Agreement may be amended, waived or terminated orally, but only by an instrument signed by the parties hereto.
(b) This Agreement may be executed in one or more counterparts. Each set of executed counterparts shall be an original. Executed counterparts may be delivered by facsimile transmission.
(c) If Assignor has not assigned its entire remaining Pro Rata Share of the Loan to Assignee, Assignor may at any time and from time to time grant to others, subject to applicable provisions in the Loan Agreement, assignments of or participation in all of Assignors remaining Pro Rata Share of the Loan.
(d) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither Assignor nor Assignee may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other and Administrative Agent. The preceding sentence shall not limit the right of Assignee to grant to others a participation in all or part of the Assigned Rights and Obligations subject to the terms of the Loan Agreement.
(e) All payments to Assignor or Assignee hereunder shall, unless otherwise specified by the party entitled thereto, be made in United States dollars, in immediately available funds, and to the address or account specified on the signature pages of this Agreement. The address of Assignee for notice purposes under the Loan Agreement shall be as specified on the signature pages of this Agreement.
(f) If any provision of this Agreement is held invalid, illegal or unenforceable, the remaining provisions hereof will not be affected or impaired in any way.
(g) Each party shall bear its own expenses in connection with the preparation and execution of this Agreement.
(h) This Agreement shall be governed by and construed in accordance with the laws of the State of California.
(i) Foreign Withholding. On or before the Assignment Effective Date, Assignee shall comply with the provisions of Section 13.13(e) of the Loan Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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ACKNOWLEDGED AND AGREED; Borrowers are executing in the signature block below solely for the purpose of acknowledging receipt of the Assignment and Assumption Agreement to which this acknowledgement is attached and by signing below Borrowers shall not be incurring any additional obligations or additional liability except as contemplated by the Loan Documents:
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ADMINISTRATIVE AGENT: | WELLS FARGO BANK, NATIONAL ASSOCIATION |
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EXHIBIT E - FORM OF NOTE
Exhibit E to AMENDED AND RESTATED AND CONSOLIDATED Loan Agreement among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
SECURED PROMISSORY NOTE
$ | , 20 |
FOR VALUE RECEIVED, KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company (Borrowers), HEREBY PROMISE TO PAY to the order of (Lender) the principal sum of Dollars ($ ), or if less, the aggregate unpaid principal amount of all disbursements disbursed by Lender pursuant to the requirements set forth in the Loan Agreement dated as of , 2011 (as amended, supplemented or restated from time to time the Loan Agreement), among Borrowers, Lender, certain other Lenders named therein or made parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, together with interest on the unpaid principal balance hereof at the rate (or rates) determined in accordance with Section 2.7 of the Loan Agreement from the date such principal is advanced until it is paid in full. It is contemplated that there will be advances and payments under this Note from time to time, but no advances or payments under this Note (including payment in full of the unpaid balance of principal hereof prior to maturity) shall affect or impair the validity or enforceability of this Note as to future advances hereunder.
This Note is one of the Notes referred to in and governed by the Loan Agreement, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity hereof and for the payment of certain additional sums to Lender upon the happening of certain stated events. Capitalized terms used in this Note without definition have the same meanings as in the Loan Agreement.
The principal amount of this Note, unless accelerated in accordance with Loan Agreement as described below, if not sooner paid, will be due and payable, together with all accrued and unpaid interest and other amounts due and unpaid under the Loan Agreement, on the Maturity Date.
This Note is secured by, among other things, the Security Documents referred to in the Loan Agreement.
Interest on the Loans is payable in arrears on the first Business Day of each month during the term of the Loan Agreement, commencing with the first Business Day of the first calendar month to begin after the date of this Note. Interest will be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of three hundred sixty (360) days. The Loan Agreement provides for the payment by Borrower of various other charges and fees, in addition to the interest charges described in the Loan Agreement, as set forth more fully in the Loan Agreement.
All payments of any amount becoming due under this Note shall be made in the manner provided in the Loan Agreement, in Dollars.
EXHIBIT E - Page 1
Upon and after the occurrence of a Default, unless such Default is waived as provided in the Loan Agreement, this Note may, at the option of Requisite Lenders and without further demand, notice or legal process of any kind, be declared by Administrative Agent, and in such case immediately shall become, due and payable. Upon and after the occurrence of certain Defaults, this Note shall, without any action by Lenders and without demand, notice or legal process of any kind, automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by Borrower. Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon or agree to any subordination of Borrowers obligations hereunder without affecting or diminishing Lenders right of recourse against Borrower, which right is hereby expressly reserved.
This Note has been delivered and accepted at . This Note shall be interpreted in accordance with, and the rights and liabilities of the parties hereto shall be determined and governed by, the laws of the State of California.
All notices or other communications required or permitted to be given pursuant to this Note shall be given to the Borrowers or Lender at the address and in the manner provided for in the Loan Agreement.
In no contingency or event whatsoever shall interest charged in respect of the Loan evidenced hereby, however such interest may be characterized or computed, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall, at Lenders election, either (a) promptly refund such excess interest to Borrower or (b) credit such excess to the principal balance hereof. This provision shall control over every other provision of all agreements between Borrower and Lender.
Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
The limitations on personal liability of the shareholders, partners and members of Borrowers contained in Section 13.27 of the Loan Agreement shall apply to this Note.
[This Note is issued in replacement of a Note dated in the amount of $ , previously issued by Borrower to pursuant to the Loan Agreement and shall evidence a Loan made by that is outstanding as of the date hereof, together with accrued and unpaid interest thereon and other amounts payable with respect thereto, as well as future advances hereunder.]
EXHIBIT E - Page 2
EXHIBIT F FIXED RATE NOTICE
Exhibit F to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
TODAYS DATE: |
LOAN MATURITY DATE: |
January 27, 2016 | ||||
TO: | WELLS FARGO BANK, N.A. |
LOAN ADMINISTRATOR: |
Jeri Gehrer | |||
DISBURSEMENT AND OPERATIONS CENTER |
||||||
FAX # (310) 615-1014 or (310) 615-1016 ATTENTION: RATE OPTION DESK |
RELATIONSHIP MANAGER: | Bryan Stevens |
BORROWER INTEREST RATE OPTION REQUEST
Rate Quote Line (888) 293-2362 x:472 Use One Form Per Transaction
LOAN #: | 1002835 |
BORROWER NAME: | KBSII Horizon Tech Center, LLC, et. al. |
RATE SET DATE: |
|
FIXED RATE COMMENCEMENT DATE: |
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(1350) |
FIXED RATE PERIOD (TERM): |
|
(i.e. 1 month, etc. as allowed per Note) |
INDEX: |
LIBO |
RATE: |
% |
+ | Applicable Spread |
= | #s% |
(1350) | ||||||||||||||
Quote | Spread | Applicable Rate |
FIXED RATE PORTION EXPIRING ON: |
|
$ |
1. | AMOUNT ROLLING OVER |
$ |
FROM OBLGN#: |
|
||||||||
2. | ADD: AMT TRANSFERRED FROM VARIABLE RATE PORTION |
$ |
FROM OBLGN#: |
|
TO OBLGN# : |
| ||||||
(5522) | (5020) | |||||||||||
3. | ADD: AMT TRANSFERRED FROM OTHER FIXED RATE PORTION |
$ |
FROM OBLGN#: |
|
TO OBLGN# : |
| ||||||
(5522) | (5020) | |||||||||||
ADD: AMT TRANSFERRED FROM OTHER FIXED RATE PORTION |
$ |
FROM OBLGN#: |
|
TO OBLGN# : |
| |||||||
(5522) | (5020) | |||||||||||
4. | LESS: AMT TRANSFERRED TO VARIABLE RATE PORTION | $ |
FROM OBLGN#: |
|
TO OBLGN# : |
| ||||||
(5522) | (5020) | |||||||||||
TOTAL FIXED RATE PORTION: | $ |
ADMINISTRATION FEE DUE: | $0.00 |
|||||||||
CHARGE FEES TO DDA#: |
|
YES, charge DDA | DDA#: |
| ||||||
|
NO, to be remitted |
PLEASE REMIT FEE TO: 2120 E. Park Place, Suite 100 El Segundo, CA 90245 |
Borrower confirms, represents and warrants to Administrative Agent and each Lender, (a) that this selection of a Fixed Rate is subject to the terms and conditions of the Loan Agreement between Borrowers, Wells Fargo Bank, National Association, as Administrative Agent, and various Lenders, dated as of January 27, 2011 (the Loan Agreement) and the other Loan Documents defined therein, and (b) that terms, words and phrases used but not defined in this Notice have the meanings attributed thereto in the Loan Agreement, and (c) that no Default or Potential Default has occurred or exists under the Loan Agreement or any other Loan Document.
REQUESTED BY (as allowed per documents): |
|
TELEPHONE #: |
( ) | |||||
PRINT NAME: |
|
FAX #: | ( ) | |||||
EXHIBIT F
EXHIBIT G TRANSFER AUTHORIZER
Exhibit G to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
TRANSFER AUTHORIZER DESIGNATION
(For Disbursement of Loan Proceeds by Funds Transfer)
¨ NEW ¨ REPLACE PREVIOUS DESIGNATION ¨ ADD ¨ CHANGE ¨ DELETE LINE NUMBER
The following representatives of KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company (Borrowers) are authorized to request the disbursement of Loan Proceeds and initiate funds transfers for Loan Number 1002835 dated January 27, 2011 among Wells Fargo Bank, National Association (Administrative Agent), various lenders and Borrowers. Administrative Agent is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrowers, even in the event that any or all of the foregoing information may have changed.
Name
|
Title |
Maximum Wire Amount1
| ||||
1.
|
Lori Lewis
|
Executive Vice President
|
$360,000,000
| |||
2.
|
Robert M. Durand
|
Senior Vice President, Financing
|
$360,000,000
| |||
3.
|
David Snyder
|
CFO, Capital Advisors
|
$360,000,000
| |||
4.
|
Kim W. Westerbeck
|
Senior Vice President, Financing
|
$360,000,000
| |||
5.
|
Stacie Yamane
|
Senior Vice President/Controller
|
$360,000,000
| |||
6.
|
Ann Marie Waters
|
Vice President, Portfolio Accounting
|
$360,000,000
|
Beneficiary Bank and Account Holder Information |
1.
Transfer Funds to (Receiving Party Account Name):
| ||||
Receiving Party Account Number:
| ||||
Receiving Bank Name, City and State: |
Receiving Bank Routing (ABA) Number
| |||
Maximum Transfer Amount:
|
EXHIBIT G Page 1
Further Credit Information/Instructions:
|
2.
Transfer Funds to (Receiving Party Account Name):
| ||||
Receiving Party Account Number:
| ||||
Receiving Bank Name, City and State:
|
Receiving Bank Routing (ABA) Number | |||
Maximum Transfer Amount:
|
||||
Further Credit Information/Instructions:
|
3.
Transfer Funds to (Receiving Party Account Name):
| ||||
Receiving Party Account Number:
| ||||
Receiving Bank Name, City and State:
|
Receiving Bank Routing (ABA) Number | |||
Maximum Transfer Amount:
|
||||
Further Credit Information/Instructions:
|
1 | Maximum Wire Amount may not exceed the Loan Amount. |
Date:
BORROWER
By: |
|
EXHIBIT G Page 2
Exhibit H - FORM OF BORROWERS CERTIFICATE
Exhibit H to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
$360,000,000 Credit Facility Covenant Calculations | ||||||||
XX/XX/XXXX |
DOC. REF. |
ACTUAL |
REQUIRED |
COMPLY |
BACKUP |
||||||||||||
Sec. 9.13 Clauses (ii) and (v)
|
||||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
$ | <$1,000,000 | Sch. A | ||||||||||||||
|
||||||||||||||||
Total |
$ | <$ | * | Sch. A | ||||||||||||
|
||||||||||||||||
Loan Constant
|
$ | Sch. B | ||||||||||||||
Certified By: [ ] |
|
Date: , 20 |
*The lesser of $3,500,000 or one and one-half percent (1.5%) of the outstanding principal amount of the Loan in the aggregate for all Properties.
Borrowers hereby certify that they are OR are not in compliance with the covenant contained in Section 9.13 of the Loan Agreement.
EXHIBIT H Page 1
Schedule A - Detail of Certain Indebtedness |
|
|||||||||||
Amount | Comments | |||||||||||
Operating and Equipment Lease Expense | $ | | ||||||||||
Other Trade Payables (other than non-delinquent real estate taxes) |
$ | | ||||||||||
Total | $ | | ||||||||||
Schedule B - Detail of Loan Constant |
|
|||||||||||
Amount | Comments | |||||||||||
Net Operating Income | $ | | ||||||||||
Outstanding Principal Amount of the Loan | $ | | ||||||||||
Less Termination Payments (held in a blocked and pledged cash collateral account pursuant to Section 9.21) |
<$ | > | ||||||||||
Adjusted Outstanding Principal Amount of the Loan | $ | | ||||||||||
Loan Constant | $ | |
EXHIBIT H Page 2
EXHIBIT I ADDITIONAL DEFINITIONS
Notwithstanding anything to the contrary contained herein, the definitions set forth on this Exhibit I are only applicable to the calculation of Net Worth under Section 9.17 of the Amended and Restated and Consolidated Loan Agreement.
Exhibit I to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
Capitalized Lease Obligation means Indebtedness represented by obligations under a capital lease, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP.
Contingent Obligation means, for any Person, any commitment, undertaking, Guarantee or other obligation constituting a contingent liability that must be accrued under GAAP.
Derivatives Contract means any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement. Not in limitation of the foregoing, the term Derivatives Contract includes any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement, including any such obligations or liabilities under any such master agreement.
Derivatives Termination Value means, in respect of any one or more Derivatives Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Derivatives Contracts, (a) for any date on or after the date such Derivatives Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Derivatives Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Derivatives Contracts (which may include a Lender).
Gross Asset Value means, at a given time for a Person, the sum (without duplication) of (a) the sum of the Operating Property Values of such Person at such time, plus (b) all cash and cash equivalents (excluding tenant deposits) of Person such time provided, however, that restricted cash and cash equivalents, including, without limitation, cash deposited in escrow accounts for taxes and insurance, shall only be included in Gross Asset Value to the extent a liability corresponding thereto is included in the determination of Total Liabilities, plus (c) the book value of construction in progress, plus (d) the book value of land held for development (giving no value to land which is acquired and subsequently designated as expansion land for an existing tenant), together with such Persons pro rata share of the foregoing items for each Unconsolidated Affiliate. Notwithstanding anything to the contrary, investments in mezzanine debt, Mortgages, stockholdings and other investments not constituting direct (or indirect) equity investments in real estate assets shall be excluded for purposes of determining Gross Asset Value.
Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
EXHIBIT I
or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning.
Indebtedness means, with respect to a Person, at the time of computation thereof, all of the following (without duplication): (a) all obligations of such Person in respect of money borrowed; (b) all obligations of such Person (other than trade debt incurred in the ordinary course of business), whether or not for money borrowed (i) represented by notes payable, or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) constituting purchase money indebtedness, conditional sales contracts, title retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property; (c) Capitalized Lease Obligations of such Person; (d) all Letter of Credit Liabilities of such Person; (e) all Off Balance Sheet Liabilities of such Person; (f) net obligations under any Derivative Contract in an amount equal to the Derivatives Termination Value thereof; and (g) all Indebtedness of other Persons to the extent (i) such Person has Guaranteed or is otherwise recourse to such Person or (ii) is secured by a Lien on any property of such Person, together with such Persons pro rata share of each of the foregoing items for each Unconsolidated Affiliate.
Letter of Credit Liabilities means, without duplication, at any time and in respect of any Person, the sum of (a) the stated amount of all letters of credit as to which such Person is the applicant plus (b) the aggregate unpaid principal amount of all reimbursement obligations of such Person at such time due and payable in respect of all drawings made under such letters of credit, together with such Persons pro rata share of each of the foregoing items for each Unconsolidated Affiliate.
Mortgage means a mortgage, deed of trust or deed to secure debt or similar security instrument made by a Person owning an interest in real estate granting a Lien or such interest in real estate as security for the payment of Indebtedness.
Net Operating Income means, for any Property for the quarter in question, but without duplication, the sum of (a) rents and other revenues received or accrued (excluding base rent amounts more than sixty (60) days delinquent) in the ordinary course from such Property (including amounts received from tenants as reimbursements for common area maintenance, taxes and insurance and proceeds of rent loss insurance but excluding pre-paid rents and revenues and security deposits except to the extent applied in satisfaction of tenants obligations for rent during such quarter) minus (b) all expenses paid or accrued related to the ownership, operation or maintenance of such Property, including but not limited to taxes, assessments and the like, insurance, utilities, payroll costs, maintenance, repair and landscaping expenses, marketing expenses, and general and administrative expenses (including an appropriate allocation for legal, accounting, advertising, marketing and other expenses incurred in connection with such property, but specifically excluding general overhead expenses of KBS REIT and any property management fees), but excluding acquisition-related expenses, accrued or paid during such quarter, minus (c) the actual property management fee paid during such quarter, in each case determined in accordance with GAAP. Notwithstanding the foregoing, in calculating Gross Asset Value, Net Operating Income may, at the Lenders election, be determined using either actual management fees or an imputed management fee of two percent (2%) of gross revenues for any applicable Property. For purposes of determining the Net Operating Income for a Property owned for less than a full quarter, the average daily Net Operating Income for such Property shall be multiplied by the number of days in such quarter; provided, however, that (i) if the per diem expenses incurred during such partial quarter (i.e., the items referred to in clauses (a) and (b) above) are not indicative of the per diem expenses that would have been incurred over the course a full quarter, in Lenders sole judgment, then for purposes of determining Net Operating Income, expenses shall be adjusted by Lender in its discretion and (ii) if a tenant has not been in occupancy for the entire partial calendar quarter during which the Property has been owned by KBS REIT, then for purposes of determining gross income (i.e., those items referred to in clause (a) above), the per diem contracted rate for each such item shall be multiplied by the number of days in such quarter for purposes of determining the gross income.
Off Balance Sheet Liabilities means, with respect to any Person, any obligation or liability that does not appear as a liability on the balance sheet of such Person and that constitutes (a) any repurchase obligation or liability, contingent or otherwise, of such Person with respect to any accounts or notes receivable sold, transferred or otherwise disposed of by such Person, (b) any repurchase obligation or liability, contingent or otherwise, of such Person with respect to property or assets leased by such Person as lessee and (c) all obligations, contingent or otherwise, of such Person under any synthetic lease, tax retention operating lease, off balance sheet loan or similar off balance sheet financing if the transaction giving rise to such obligation (i) is considered indebtedness for borrowed money for tax purposes but is classified as an operating lease or (ii) does not (and is not required pursuant to GAAP to) appear as a liability on the
EXHIBIT I Page 2
balance sheet of such Person, together with such Persons pro rata share of each of the foregoing items for each Unconsolidated Affiliate.
Operating Property Value means, as of a given date and with respect to any Person, such Persons Net Operating Income for the fiscal quarter most recently ended multiplied by 4 and divided by (i) seven and one-half percent (7.50%).
Subsidiary means, for any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (without regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. Wholly Owned Subsidiary means any such corporation, partnership or other entity of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors qualifying shares) are so owned or controlled.
Total Liabilities means, as to any Person as of a given date, all liabilities which would, in conformity with GAAP, be properly classified as a liability on a consolidated balance sheet of such Person as of such date, and in any event shall include (without duplication): (a) all Indebtedness of such Person, including without limitation, Capitalized Lease Obligations and Letter of Credit Liabilities, (b) all accounts payable and accrued expenses of such Person (except to the extent included in the definition of Net Operating Income); (c) all purchase and repurchase obligations and forward commitments of such Person (forward commitments shall include without limitation (i) forward equity commitments and (ii) commitments to purchase any real property; (d) all lease obligations of such Person (including ground leases) to the extent required under GAAP to be classified as a liability on a balance sheet of such Person; (f) all Contingent Obligations of such Person including, without limitation, all Guarantees of Indebtedness by such Person; (g) all Unfunded Commitments of such Person; and (h) such Persons pro rata share of each of the foregoing items for each Unconsolidated Affiliate. For purposes of clause (c) of this definition, the amount of Total Liabilities of a Person at any given time in respect of (x) a contract to purchase or otherwise acquire unimproved or fully developed real property shall be equal to (i) the total purchase price payable by such Person under such contract if, at such time, the seller of such real property would be entitled to specifically enforce such contract against such Person, otherwise, (ii) the aggregate amount of due diligence deposits, earnest money payments and other similar payments made by such Person under such contract which, at such time, would be subject to forfeiture upon termination of the contract and (y) a contract relating to the acquisition of real property which the seller is required to develop or renovate prior to, and as a condition precedent to, such acquisition, shall be equal to (i) the maximum amount reasonably estimated to be payable by such Person under such contract assuming performance by the seller of its obligations under such contract, which amount shall include, without limitation, any amounts payable after consummation of such acquisition which may be based on certain performance levels or other related criteria if, at such time, the seller of such real property would be entitled to specifically enforce such contract against such Person, otherwise (ii) the aggregate amount of due diligence deposits, earnest money payments and other similar payments made by such Person under such contract which, at such time, would be subject to forfeiture upon termination of the contract.
Unconsolidated Affiliate means, in respect of any Person, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such Person on the consolidated financial statements of such Person.
Unfunded Commitments means (i) the amount of any commitments, whether contingent or non-contingent, to disburse funds in accordance with the terms of any debt investments made by KBS REIT or any Subsidiary, (ii) the total purchase price payable by KBS REIT or a Subsidiary under a purchase agreement for the acquisition of real property if the seller of such real property would be entitled to specifically enforce such agreement and (iii) the amount of any other obligations of either KBS REIT or any Subsidiary to make equity investments.
EXHIBIT I Page 3
EXHIBIT J FORM OF JOINDER
Exhibit J to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this Agreement), dated as of , , is entered into by (the New Borrower), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent under that certain Amended and Restated and Consolidated Loan Agreement, dated as of January [ ], 2011 (as the same may be amended, supplemented or otherwise modified from time to time, the Loan Agreement), among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company (the Borrowers, each, a Borrower), the Lenders from time to time party thereto and the Administrative Agent. All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Loan Agreement.
New Borrower and the Administrative Agent, for the benefit of the Lenders, hereby agree as follows:
Section 1. Assumption and Joinder.
(a) The New Borrower hereby expressly assumes, and hereby agrees to perform and observe, each and every one of the covenants, rights, promises, agreements, terms, conditions, obligations, appointments, duties and liabilities of a Borrower under the Loan Agreement and all of the other Loan Documents applicable to it as a Borrower under the Loan Agreement. By virtue of the foregoing, the New Borrower hereby accepts and assumes any liability of a Borrower related to each representation, warranty, covenant or obligation made by a Borrower in the Loan Agreement, and hereby expressly affirms, as of the date hereof, each of such representations, warranties, covenants and obligations.
(b) All references to the term Borrower in the Loan Agreement or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be a reference to, and shall include, the New Borrower.
Section 2. Representations and Warranties. The New Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:
(a) The New Borrower has the requisite limited liability company power and authority to enter into this Agreement and to perform its obligations hereunder and under the
EXHIBIT J Page 1
Loan Agreement and any other Loan Document to which it is a party. The execution, delivery and performance of this Agreement by the New Borrower and the performance of its obligations under this Agreement, the Loan Agreement, and any other Loan Document have been duly authorized by the members of the New Borrower and no other limited liability company proceedings on the part of the New Borrower are necessary to authorize the execution, delivery or performance of this Agreement, the transactions contemplated hereby or the performance of its obligations under this Agreement, the Loan Agreement or any other Loan Document. This Agreement has been duly executed and delivered by the New Borrower. This Agreement, the Loan Agreement and each Loan Document constitutes the legal, valid and binding obligation of the New Borrower enforceable against it in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally and by general principles of equity, whether such enforceability is considered in a proceeding at law or in equity.
(b) The representations and warranties set forth in the Loan Agreement are true and correct in all material respects on and as of the date hereof as such representations and warranties apply to the New Borrower (except to the extent that any such representations and warranties expressly relate to an earlier date) with the same force and effect as if made on the date hereof.
Section 3. Security Document. New Borrower is, simultaneously with the execution of this Agreement, executing and delivering (i) a Security Document which encumbers certain real property owned by New Borrower and (ii) such other documents and instruments as requested by the Administrative Agent in accordance with the Loan Agreement. New Borrower acknowledges and agrees that from and after the date of this Agreement, such real property referred to in item (i) of the immediately preceding sentence shall be a Property under the Loan Agreement.
Section 4. Further Assurances. At any time and from time to time, upon the Administrative Agents request and at the sole expense of the New Borrower, the New Borrower will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Agreement.
Section 5. Binding Effect. This Agreement shall be binding upon the New Borrower and shall inure to the benefit of the Administrative Agent and the other Lenders and their respective successors and assigns.
Section 6. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.
Section 7. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of California, except to the extent preempted by federal laws.
Section 8. JURY TRIAL WAIVER. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN
EXHIBIT J Page 2
EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
[Remainder of page intentionally left blank]
EXHIBIT J Page 3
IN WITNESS WHEREOF, New Borrower has caused this Agreement to be duly executed by its respective authorized officer, and the Administrative Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written.
[ ] | ||
By: | ||
Name: | ||
Title: | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent | ||
By: |
| |
Name: | ||
Its: |
EXHIBIT J Page 4
EXHIBIT K ADJUSTED LOAN CONSTANT CALCULATION
Exhibit K to AMENDED AND RESTATED AND CONSOLIDATED LOAN AGREEMENT among KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and each other Person that may from time to time become liable for the Obligations (as defined therein) as Borrowers, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, and various Lenders, dated as of January 27, 2011.
For purposes of calculating the Loan Constant pursuant to Section 2.10(a)(v), the following terms shall have the following meanings:
Actual Expiration Percentage means the ratio (expressed as a percentage) of (a) all Gross Rents derived from Leases expiring during the relevant Reference Period to (b) all Gross Rents derived from the Leases of all remaining Properties.
Adjusted Loan Constant means an amount equal to the Loan Constant; however, for purposes of calculating Net Operating Income, and in turn Loan Constant, a portion of Gross Rents, in an amount equal to the product of (a) Gross Rents derived from any Lease (i) expiring within the relevant Reference Period or (ii) which has a termination option permitting the tenant thereunder to terminate the Lease within the relevant Reference Period (without duplication or redundancy due to such Gross Rents having been previously excluded under the definition of Net Operating Income) multiplied by (b) the Applicable Reduction Percentage, shall be excluded.
Applicable Reduction Percentage means, as of the date of determination, the maximum Reduction Percentage yielded from the calculation of the Reduction Percentages for each of the three Reference Periods.
Reduction Percentage means a percentage equal to an amount determined by dividing (a) the difference between the Actual Expiration Percentage and the relevant Reference Percentage for the applicable Reference Period, by (b) the Actual Expiration Percentage.
Reference Percentage means, with respect to the Reference Period described in clause (a) of the definition of Reference Period, 35%; and (b) with respect to the Reference Period described in clause (b) of the definition of Reference Period, 45%; and (c) with respect to the Reference Period described in clause (c) of the definition of Reference Period, 55%.
Reference Period means, with respect to Lease expiration, (a) the period between the Property Release and the date which is twelve months after the Property Release, (b) the period between the Property Release and the date which is twenty-four months after the Property Release and (c) the period between the Property Release and the date which is thirty-six months after the Property Release, as applicable.
Example. Assuming that as of the date of the Property Release (i) $4,000,000, which is equal to 40% of Gross Rents from all Properties remaining encumbered by the Security Documents (i.e., all such Properties are yielding $10,000,000 of Gross Rents), is derived from Leases expiring on or before the date which is twelve months after the Property Release, (ii) $5,000,000, which is 50% of the Gross Rents from all Properties remaining encumbered by the Security Documents, is to be derived from Leases expiring between the date of the Property Release and the date which is twenty-four (24) months after the Property Release and (iii) $7,500,000, or 75% of the Gross Rents from all Properties remaining encumbered by the Security Documents, is to be derived from Leases expiring between the date of the Property Release and the date which thirty-six (36) months after the Property Release, then the amount of Gross Rents included in the calculation of Net Operating Income for the purposes of determining the Loan Constant shall be the least of the following:
A. $10,000,000 (((40%-35%)/40%)*4,000,000) = $9,500,000
B. $10,000,000 - (((50%-45%)/50%)*5,000,000) = $9,500,000
C. $10,000,000 - (((75%-55%)/75%)*7,500,000) = $8,000,000
EXHIBIT K Page 1
Exhibit 10.24
AMENDED AND RESTATED AND CONSOLIDATED SECURED PROMISSORY NOTE
$360,000,000 | January 27, 2011 |
FOR VALUE RECEIVED, KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company (collectively, the Original Horizon Borrowers), KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company (the Original National City Borrower), KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company (collectively, the Borrowers), HEREBY PROMISE TO PAY to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (Lender) the principal sum of Three Hundred and Sixty Million Dollars ($360,000,000), or if less, the aggregate unpaid principal amount of all disbursements disbursed by Lender pursuant to the requirements set forth in the Amended and Restated and Consolidated Loan Agreement dated as of January 27, 2011 (as amended, supplemented or restated from time to time the Loan Agreement), among Borrowers, Lender, certain other Lenders named therein or made parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, together with interest on the unpaid principal balance hereof at the rate (or rates) determined in accordance with Section 2.7 of the Loan Agreement from the date such principal is advanced until it is paid in full. It is contemplated that there will be advances and payments under this Note from time to time, but no advances or payments under this Note (including payment in full of the unpaid balance of principal hereof prior to maturity) shall affect or impair the validity or enforceability of this Note as to future advances hereunder.
This Note is one of the Notes referred to in and governed by the Loan Agreement, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity hereof and for the payment of certain additional sums to Lender upon the happening of certain stated events. Capitalized terms used in this Note without definition have the same meanings as in the Loan Agreement.
The principal amount of this Note, unless accelerated in accordance with Loan Agreement as described below, if not sooner paid, will be due and payable, together with all accrued and unpaid interest and other amounts due and unpaid under the Loan Agreement, on the Maturity Date.
This Note is secured by, among other things, the Security Documents referred to in the Loan Agreement.
Interest on the Loans is payable in arrears on the first Business Day of each month during the term of the Loan Agreement, commencing with the first Business Day of the first calendar month to begin after the date of this Note. Interest will be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of three hundred sixty (360) days. The Loan Agreement provides for the payment by Borrower of various other charges and fees, in addition to the interest charges described in the Loan Agreement, as set forth more fully in the Loan Agreement.
All payments of any amount becoming due under this Note shall be made in the manner provided in the Loan Agreement, in Dollars.
Upon and after the occurrence of a Default, unless such Default is waived as provided in the Loan Agreement, this Note may, at the option of Requisite Lenders and without further demand, notice or legal process of any kind, be declared by Administrative Agent, and in such case immediately shall become, due and payable. Upon and after the occurrence of certain Defaults, this Note shall, without any action by Lenders and without demand, notice or legal process of any kind, automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by Borrower. Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this
Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon or agree to any subordination of Borrowers obligations hereunder without affecting or diminishing Lenders right of recourse against Borrower, which right is hereby expressly reserved.
This Note has been delivered and accepted at Irvine, California. This Note shall be interpreted in accordance with, and the rights and liabilities of the parties hereto shall be determined and governed by, the laws of the State of California.
All notices or other communications required or permitted to be given pursuant to this Note shall be given to the Borrowers or Lender at the address and in the manner provided for in the Loan Agreement.
In no contingency or event whatsoever shall interest charged in respect of the Loan evidenced hereby, however such interest may be characterized or computed, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall, at Lenders election, either (a) promptly refund such excess interest to Borrower or (b) credit such excess to the principal balance hereof. This provision shall control over every other provision of all agreements between Borrower and Lender.
Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
The limitations on personal liability of the shareholders, partners and members of Borrowers contained in Section 13.27 of the Loan Agreement shall apply to this Note.
This Note is issued in replacement of a Secured Promissory Note, dated September 30, 2010, in the amount of $50,000,000, previously issued by the Original Horizon Borrowers to Lender pursuant to the Horizon Loan Agreement (as defined in the Loan Agreement) (the Horizon Note), and a Secured Promissory Note, dated December 16, 2010, in the amount of $69,000,000, previously issued by Original National City Borrower to Lender pursuant to the National City Loan Agreement (as defined in the Loan Agreement) (the National City Note and together with the Horizon Note, the Previous Notes), and shall not be construed as a novation of the Previous Notes. Aggregate amounts outstanding under the Previous Notes shall be deemed outstanding under this Note.
[Signatures on Following Pages]
- 2 -
BORROWER
KBSII HARTMAN BUSINESS CENTER, LLC, | ||||||||||||
a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION IX, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner |
By: | /s/ Charles J. Schreiber, Jr. | |||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII 2500 REGENT BOULEVARD, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII PLANO BUSINESS PARK, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION VIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII NATIONAL CITY TOWER, LLC, | ||||||||||||
a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION XVI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII GATEWAY CORPORATE CENTER, LLC, | ||||||||||||||
a Delaware limited liability company | ||||||||||||||
By: | KBSII REIT ACQUISITION XIX, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||||
a Maryland corporation, general partner | ||||||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||||
Charles J. Schreiber, Jr. | ||||||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII GRANITE TOWER, LLC, | ||||||||||||
a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION XVIII, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII HORIZON TECH CENTER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on the Next Page]
BORROWER
KBSII CRESCENT VIII, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Exhibit 10.25
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Wells Fargo Bank, National Association
Real Estate Group (AU# 02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS MORTGAGE SECURES A NOTE WHICH PROVIDES FOR A VARIABLE INTEREST RATE
AMENDED AND RESTATED MORTGAGE
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THE PARTIES TO THIS AMENDED AND RESTATED MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Mortgage), made as of January 27, 2011, are KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, having an address at c/o KBS Capital Advisors, 620 Newport Center Drive, Suite 1300, Newport Beach, CA 92660 (Mortgagor) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent for itself and certain additional lenders (Mortgagee), having an address and principal place of business in the county of Orange, State of California, located at Wells Fargo Bank, National Association, 2030 Main Street, Irvine, California 92614.
RECITALS
A. | Administrative Agent and Lenders (as defined in the Original Loan Agreement referenced below) previously made a loan to Mortgagor in the original principal amount of Sixty-Nine Million Dollars ($69,000,000) (the Original National City Loan). |
B. | The Original National City Loan is evidenced by (i) a Secured Promissory Note, dated December 16, 2010, executed by Mortgagor for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated December 16, 2010, executed by Mortgagor, Mortgagee and Lenders (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Original Loan Agreement), and secured by, among other things, a Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated December 16, 2010, executed by Mortgagor for the benefit of Mortgagee, and recorded December 21, 2010, in Mortgage Book 12264 Page 0293 of the Office of the Clerk of Jefferson County, Kentucky, and in Fixture Filing Book 00082, Page 0843 of the aforesaid office (the Original Mortgage). |
C. | Mortgagor, certain additional borrowers, each of which is an affiliate of the Mortgagor (New Borrowers, and together with Mortgagor, the Borrowers), Mortgagee and Lenders, have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Loan Agreement), whereby (i) the principal amounts of the Original National City Loan and the Original Horizon Loan (as defined in the Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and |
Page 1
Loan No. 1002835
conditions of the Loan Agreement, increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
D. | In connection with the Loan Agreement, Mortgagor and Mortgagee now wish to enter into this Mortgage, which amends, restates and replaces the Original Mortgage. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Mortgagor and Mortgagee hereby agree as follows:
ARTICLE 1. GRANT
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Mortgage and to secure the full and timely payment, performance and discharge of the Secured Obligations (as herein defined), Mortgagor irrevocably GRANTS, CONVEYS, MORTGAGES, ASSIGNS, BARGAINS and SELLS and has by these presents GRANTED, CONVEYED, ASSIGNED, BARGAINED and SOLD, to Mortgagee and its successors and assigns, with power of sale and right of entry and possession, all of that real property located in the City of Louisville, County of Jefferson, Commonwealth of Kentucky, described on Exhibit A attached hereto and fully incorporated herein for all purposes, together with the Collateral (as defined in Section 4.1 below) together with all right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to such real property or the improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; any and all rights of Mortgagor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Mortgagee shall have no liability under such covenants, conditions, and restrictions unless and until Mortgagee forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms; TO HAVE AND TO HOLD the Subject Property and every privilege, hereditament and appurtenance belonging or appertaining to it unto Mortgagee, its successors, substitutes in trust and its assignees, forever, and Mortgagor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND the title to the Subject Property unto Mortgagee against every person whomsoever lawfully claiming or to claim the same or any part thereof; provided, however, that if Mortgagor shall pay (or cause to be paid) and shall perform and discharge (or cause to be performed and discharged) the Secured Obligations on or before the date same are to be paid, performed and discharged, then the liens, security interests, estates, rights and titles granted by this Mortgage shall terminate in accordance with the provisions hereof, otherwise same shall remain in full force and effect. |
1.2 | ADDRESS. The address of the Subject Property is: 101 South Fifth St., Louisville, Kentucky. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. |
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Loan No. 1002835
ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (Secured Obligations): |
a. | Payment to Lenders (as defined in the Loan Agreement (as defined below) and as identified on Exhibit B attached hereto) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) evidencing the Loan executed by Mortgagor and certain other parties, as Borrowers, from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
b. | Payment and performance of all covenants and obligations of Mortgagor under this Mortgage; and |
c. | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Mortgagee, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
d. | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Mortgage; and |
e. | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Mortgage up to a maximum additional indebtedness of $372,000,000.00; and |
f. | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Mortgage; and |
g. | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
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2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagees right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
3.2 | GRANT OF LICENSE. Mortgagee confers upon Mortgagor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee. Furthermore, upon any Default and revocation of the License as aforesaid, Mortgagee shall be entitled to receive and Mortgagor covenants to deliver immediately to Mortgagee, upon demand, any and all Payments theretofore collected by Mortgagor which remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and to the extent such Payments have not been delivered, the Payments shall be held in trust for Mortgagee. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise by Mortgagee, or any of its employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases. |
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3.4 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that, to the best of Mortgagors knowledge: (a) Mortgagor has delivered to Mortgagee a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Mortgagor covenants and agrees at Mortgagors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Mortgagee prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Mortgagors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Mortgagee fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without Mortgagees prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Mortgagees consent hereunder, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter has any interest (collectively, the Collateral): |
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All goods, building and other materials, supplies, inventory, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein and supporting information, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Mortgagors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing, or operation of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Subject Property; all advance payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Mortgage constitutes a fixture filing under the Uniform Commercial Code as in effect in the Commonwealth of Kentucky, as amended or recodified from time to time (the UCC), and is acknowledged and agreed to be a mortgage under the UCC. The name, address and organizational number of the debtor (Mortgagor) are KBSII National City Tower, LLC, c/o KBS Capital Advisors, 620 Newport Center Drive, Suite 1300, Newport Beach, CA 92660, Delaware ID# 4893582, and the name and address of the secured party (Mortgagee) are Wells Fargo Bank, National Association, as Administrative Agent, 2030 Main Street, Suite 800, Irvine, California 92614.
The filing of a financing statement covering the Collateral shall not be construed to derogate from or impair the lien or provisions of this Mortgage with respect to any property described herein which is real property or which the parties have agreed to treat as real property. Similarly, nothing in such financing statement shall be construed to alter any of the rights of Mortgagee under this Mortgage or the priority of the Mortgagees lien created hereby, and such financing statement is declared to be for the protection of Mortgagee in the event any court shall at any time hold that notice of Mortgagees priority of interest in any property or interests described in this Mortgage must, in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivision, agency or entity of the federal government, be filed in the Uniform Commercial Code records.
4.2 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has, as of the date of recordation of this Mortgage, and will have, good title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and no |
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financing statement covering any of the Collateral has been delivered to any other person or entity, except for the Permitted Liens; (c) Mortgagors principal place of business is located at the address shown in Section 7.10; and (d) Mortgagors legal name is exactly as set forth on the first page of this Mortgage and all of Mortgagors organizational documents or agreements delivered to Mortgagee are complete and accurate in every respect. |
4.3 | COVENANTS. Mortgagor agrees: (a) to execute and deliver such documents as Mortgagee deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee 30 days prior written notice thereof; (c) to cooperate with Mortgagee in perfecting all security interests granted herein, and in obtaining such agreements from third parties as Mortgagee deems necessary, proper or convenient in connection with the creation, preservation, perfection, priority or enforcement of any of its rights hereunder; and (d) that Mortgagee is authorized to file financing statements in the name of Mortgagor to perfect Mortgagees security interest in Collateral. |
4.4 | RIGHTS OF MORTGAGEE. In addition to Mortgagees rights as a Secured Party under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagees rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under the UCC, or other applicable law. |
4.5 | RIGHTS OF MORTGAGEE ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Mortgage, then in addition to all of Mortgagees rights as a Secured Party under the UCC or otherwise at law, and subject to applicable law: |
a. | Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
b. | Mortgagee may, for the account of Mortgagor and at Mortgagors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and |
c. | In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee may from time to time elect. |
Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless
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Mortgagor shall make an express written election of said remedy under UCC §9.621, or other applicable law, and the provisions of UCC §9.620 have been satisfied. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagees name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagees security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Mortgagor; provided, however, that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Mortgagors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Mortgagor represents and warrants that, except as disclosed to Mortgagee in a writing which refers to this warranty and the Permitted Liens, Mortgagor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Mortgage is a first and prior lien on the Subject Property. Mortgagor hereby represents and warrants that all of the Subject Property is one or more tax parcels and there are no properties included in such tax parcels other than the Subject Property. Mortgagor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
a. | Subject to Mortgagors rights to contest in good faith payment of taxes as provided in Section 5.2(c) below, Mortgagor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property, or any interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any of the Secured Obligations or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to any of the Secured Obligations; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagees net income. |
b. | Mortgagor will not, without the prior written consent of Mortgagee, which may be withheld in Mortgagees reasonable discretion, consent to or allow the creation of any so-called special districts, special improvement districts, benefit assessment districts or similar districts of any nature, or any other body or entity of any type, or allow to occur any other event, that would or might result in the imposition of any additional taxes, assessments or other monetary obligations or burdens on the Subject Property, and this provision shall serve as RECORD NOTICE to any such district or districts or any governmental entity under whose authority such district or districts or any governmental entity under whose authority such district or |
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districts exist or are being formed that, should Mortgagor or any other person or entity include all or any portion of the Subject Property in such district or districts, whether formed or in the process of formation, without first obtaining Mortgagees express written consent, then the lien of this Mortgage and the rights and interests in the Subject Property arising by virtue of this Mortgage in favor of Mortgagee or its successors in interest (which term shall include, without limitation, any foreclosure purchaser or purchaser acquiring by deed of lieu of foreclosure, and any transferee of the Subject Property following completion of foreclosure or deed in lieu thereof) shall be senior and superior to any taxes, assessments or impositions of any nature, or any liens (whether statutory, contractual or otherwise) levied or imposed upon the Subject Property or any portion thereof as a result of the inclusion of the Subject Property in such district or districts. |
c. | Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor pursues the contest diligently and in compliance with applicable laws, in a manner which Mortgagee determines is not prejudicial to Mortgagee, and does not impair the rights of Mortgagee under any of the Loan Documents; and (b) Mortgagor deposits with Mortgagee any funds or other forms of assurance which Mortgagee in good faith determines from time to time appropriate to protect Mortgagee from the consequences of the contest being unsuccessful. Mortgagors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Mortgagees option and upon its demand, Mortgagor shall, until all Secured Obligations have been paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and insurance required or requested pursuant to the Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased amounts required to pay all amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30) days thereafter the additional amount as stated in Mortgagees notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Mortgagee shall, unless Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor hereunder or under any Loan Document, Mortgagee may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Mortgagee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts collected and in Mortgagees possession shall be paid to Mortgagor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Mortgagor shall immediately discharge any lien not permitted under the Loan Documents or approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject to the following sentence, Mortgagor shall pay when due all |
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obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Mortgagee, Mortgagor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Mortgagees demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Mortgagee a surety bond in sufficient form and amount; or (c) provide Mortgagee with other assurances which Mortgagee deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Mortgagee from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
a. | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Beneficiary to be maintained by Trustor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Mortgagee, and/or Mortgagee may release all or any part of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents. |
b. | Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Mortgagee of such additional funds which Mortgagee determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Mortgagee; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Mortgagee of such insurance or condemnation proceeds, |
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then Mortgagee may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole discretion may choose. |
c. | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such proceeds to Mortgagor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject Property and Collateral against such risks as Mortgagee may require pursuant to the Loan Agreement and, at Mortgagees request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Mortgagees prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Mortgagee elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagors sole expense, Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | POWERS OF MORTGAGEE. Mortgagee may, without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby and without liability therefor and without notice: (a) release all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Mortgage. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
a. | Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning this Mortgage, including without limit any statement of amounts owing under any Secured Obligation. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Subject Property or Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagees failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or |
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omission (regardless of whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor. |
b. | Mortgagor indemnifies Mortgagee against, and holds Mortgagee harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the execution of this Mortgage or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Mortgagor to perform Mortgagors obligations; or (iv) by reason of any alleged obligation or undertaking on Mortgagees part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee shall survive the release and cancellation of the Secured Obligations and the release of this Mortgage. |
c. | Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. Mortgagor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Mortgagee in approving loan applications. |
(b) | Mortgagor has represented to Mortgagee, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Mortgagee making the Loan, certain facts concerning Mortgagors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Mortgagee has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Mortgagee in the absence of these representations and warranties. |
(d) | Mortgagee would not have made this Loan if Mortgagee did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Mortgagors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Mortgagor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Mortgagor. |
(f) | Mortgagee has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Mortgagor breaches its covenants contained below regarding Transfers. |
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(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Mortgagees security for the Note. |
(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Mortgagors right, title and/or interest in the Loan Documents and any subsequent documents executed by Mortgagor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial ownership of any membership interest in Mortgagor if Mortgagor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Mortgagor; or (vii) legal or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a corporation or in any general partner, venturer or member in Mortgagor that is a corporation. |
(i) | Mortgagor shall not make or commit to make any Transfer without Mortgagees prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Mortgagee may predicate Mortgagees decision to grant consent to a Transfer on such terms and conditions as Mortgagee may require, in Mortgagees sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Mortgagees ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee for all costs and expenses incurred by Mortgagee in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Mortgagees security will be impaired by the proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Mortgagees reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Mortgagees liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Mortgagees consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Mortgagors interest shall: (i) assume all of Mortgagors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Mortgagor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Mortgagee. In the event of any Transfer without the prior written consent of Mortgagee, whether or not Mortgagee elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Mortgagee, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Mortgagee relied upon in making the Loan may no longer be relied upon. A consent by Mortgagee to one or more Transfers shall not be construed as a |
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consent to further Transfers or as a waiver of Mortgagees consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligations, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligations, or accept additional security or all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests granted under this Mortgage upon the Subject Property and the Collateral. |
5.13 | RELEASES. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Mortgage, the Note, and the other Loan Documents, then this conveyance shall become null and void and be released by Mortgagee at Mortgagors request and expense. Notwithstanding anything contained herein to the contrary, Mortgagee hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Mortgage notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Mortgagee shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan Documents or by the proceeds of any loan secured by this Mortgage. |
5.15 | RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagors compliance with the terms hereof. |
5.16 | CONTRACTS. Mortgagor will deliver to Mortgagee a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Mortgagee required by any of the Loan Documents. Within twenty (20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to Mortgagee a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Mortgagee, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Mortgagee). Mortgagor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property or Collateral, but are personal with Mortgagor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
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ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Mortgagees option, the failure of Mortgagor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Mortgagor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure, or (d) if Mortgagor or any other Person shall make a Transfer without the prior written consent of Mortgagee (which consent may be withheld in Mortgagees sole discretion (except for those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Mortgagee shall have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable. |
(b) | With or without notice, and without releasing Mortgagor from any Secured Obligations, and without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons. |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations. |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Mortgagor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Mortgagor and Mortgagors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for |
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insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Mortgagor could legally do if Mortgagor were in possession of the Subject Property. All expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Mortgagee, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the property has passed after foreclosure sale and all applicable periods of redemption have expired. |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Mortgagees sole judgment, to protect or enhance the security hereof. Mortgagee may also take possession of any and all Payments that may previously have been collected by or on behalf of Mortgagor and that remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and together with any bank or similar accounts in which such Payments may be deposited or held. |
(f) | Notwithstanding the availability of legal remedies, the right to obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Mortgagor to cure or refrain from repeating any default. |
(g) | With or without accelerating the maturity of the Secured Obligations, sue from time to time for any payment due under any of the Loan Documents or for money damages resulting from Mortgagors default under any of the Loan Documents. |
(h) | Foreclose this Mortgage in any other manner then permitted by law. If this Mortgage encumbers more than one parcel of real estate, foreclosure may be by separate parcel or en masse, as Mortgagee may elect in its sole discretion. All fees, costs and expenses of any kind incurred by Mortgagee in connection with foreclosure of this Mortgage, including, without limitation, the costs of any appraisals of the Subject Property obtained by Mortgagee, all costs of any receivership for the Subject Property advanced by Mortgagee, and all attorneys and consultants fees incurred by Mortgagee, shall constitute a part of the Secured Obligations and may be included as part of the amount owing from Mortgagor to Mortgagee at any foreclosure sale. |
(i) | To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion. |
(j) | Upon sale of the Subject Property at foreclosure, Mortgagee may bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such bid, to the extent permitted by law, Mortgagee may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, |
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including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the bid is made; (y) the amount of Mortgagees bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Mortgagor and Mortgagee; and (z) Mortgagees bid may be (at Mortgagees sole and absolute discretion) higher or lower than any appraised value of the Subject Property. |
6.3 | MORTGAGEES JUDICIAL REMEDIES. Mortgagee may proceed by suit or suits, at law or in equity, to enforce the payment, performance and discharge of the Secured Obligations in accordance with the terms hereof, of the Note, and the other Loan Documents, to foreclose the liens and security interests of this Mortgage as against all or any part of the Subject Property and Collateral, and to have all or any part of the Subject Property and Collateral sold under the judgment or decree of a court of competent jurisdiction. This remedy shall be cumulative of any other nonjudicial remedies available to the Mortgagee with respect to the Loan Documents. Proceeding with a request or receiving a judgment for legal relief shall not be or be deemed to be an election of remedies or bar any available nonjudicial remedy of the Mortgagee. |
6.4 | Mortgagees UCC Remedies. The Mortgagee may exercise its rights of enforcement with respect to the Collateral under the UCC, and in conjunction with, in addition to or in substitution for the rights and remedies under the UCC the Mortgagee may, and Mortgagor agrees, as follows: (i) without demand or notice to Mortgagor, enter upon the Subject Property to take possession of, assemble, receive, and collect the Collateral, or any part thereof, or to render it unusable; (ii) require Mortgagor to assemble the Collateral and make it available at a place Mortgagee designates which is mutually convenient to allow Mortgagee to take possession or dispose of the Collateral; (iii) written notice mailed to Mortgagor as provided herein at least ten (10) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; (iv) any sale made pursuant to the provisions of this subsection shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Subject Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Collateral hereunder as is required for such sale of the Subject Property under power of sale, and such sale shall be deemed to be pursuant to a security agreement covering both real and personal property under Section 9.604 of the UCC; (v) in the event of a foreclosure sale, whether made by the Mortgagee under the terms hereof, or under judgment of a court, the Collateral and the Subject Property may, at the option of the Mortgagee, be sold as a whole; (vi) it shall not be necessary that the Mortgagee take possession of the Collateral, or any part thereof, prior to the time that any sale pursuant to the provisions of this subsection is conducted, and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; (vii) prior to application of proceeds of disposition of the Collateral to the Secured Obligations, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like, and the reasonable attorneys fees and legal expenses incurred by the Mortgagee; (viii) after notification, if any, hereafter provided in this subsection, Mortgagee may sell, lease, or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at Mortgagees offices or elsewhere, for cash, on |
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credit, or for future delivery. Upon the request of Mortgagee, Mortgagor shall assemble the Collateral and make it available to Mortgagee at any place designated by Mortgagee that is reasonably convenient to Mortgagor and Mortgagee. Mortgagor agrees that Mortgagee shall not be obligated to give more than ten (10) days written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters. Mortgagor shall be liable for all expenses of retaking, holding, preparing for sale, or the like, and all attorneys fees, legal expenses, and all other costs and expenses incurred by Mortgagee in connection with the collection of the Secured Obligations and the enforcement of Mortgagees rights under the Loan Documents. Mortgagee shall apply the proceeds of the sale of the Collateral against the Secured Obligations in accordance with the requirements of this Mortgage. Mortgagor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay, perform and discharge the Secured Obligations in full. Mortgagor waives all rights of marshalling in respect of the Collateral; (ix) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder, the nonpayment of the Secured Obligations, the occurrence of any Default, the Mortgagee having declared all or a portion of such Secured Obligations to be due and payable, the notice of time, place, and terms of sale and of the properties to be sold having been duly given, or any other act or thing having been duly done by Mortgagee, shall be taken as prima facie evidence of the truth of the facts so stated and recited; and (x) Mortgagee may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Mortgagee, including the sending of notices and the conduct of the sale, but in the name and on behalf of Mortgagee. |
6.5 | Rights Relating to Leases and Rents. Mortgagor has, pursuant to Article 3 of this Mortgage, assigned to Mortgagee all Payments under each of the Leases covering all or any portion of the Subject Property. Mortgagee may at any time, and without notice, either in person, by agent, or by receiver to be appointed by a court, enter and take possession of the Subject Property or any part thereof, and in its own name, sue for or otherwise collect the Payments. All Payments collected by Mortgagee shall be applied as provided for in this Mortgage; provided, however, that if the costs, expenses, and attorneys fees shall exceed the amount of Payments collected, the excess shall be added to the Secured Obligations, shall bear interest at the rate of interest then applicable on the outstanding principal balance of the Note, and shall be immediately due and payable. The entering upon and taking possession of the Subject Property, the collection of Payments, and the application thereof as aforesaid shall not cure or waive any Default or notice of default, if any, hereunder nor invalidate any act done pursuant to such notice, except to the extent any such Default is fully cured. Failure or discontinuance by Mortgagee at any time or from time to time, to collect said Payments shall not in any manner impair the subsequent enforcement by Mortgagee of the right, power and authority herein conferred upon it. Nothing contained herein, nor the exercise of any right, power, or authority herein granted to Mortgagee shall be, or shall be construed to be, an affirmation by it of any tenancy, lease, or option, nor an assumption of liability under, nor the subordination of, the lien of this Mortgage, to any such tenancy, lease, or option, nor an election of judicial relief, if any such relief is requested or obtained as to Leases or Payments, with respect to the Subject Property or any other collateral given by Mortgagor to Mortgagee. In addition, from time to time Mortgagee may elect, and notice hereby is given to each lessee under any Lease, to subordinate the lien of this Mortgage to any Lease by unilaterally executing and recording an instrument of subordination, and upon such election the lien of this Mortgage shall be subordinate to the Lease identified in such instrument of subordination; provided, however, in each instance such subordination will not affect or be applicable to, and expressly excludes any lien, charge, encumbrance, security interest, claim, easement, restriction, option, covenant and other rights, titles, interests or estates of any nature whatsoever with respect to all or any portion of the Subject Property and Collateral to the extent that the same may have arisen or intervened during the period between the recordation of this Mortgage and the execution of the Lease identified in such instrument of subordination. |
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6.6 | APPLICATION OF FORECLOSURE SALE PROCEEDS. The proceeds of any foreclosure sale shall be applied first to the fees and expenses of the officer conducting the sale, and then to the reduction or discharge of the Secured Obligations; any surplus remaining shall be paid over to Borrowers or to such other person or persons as may be lawfully entitled to such surplus. |
6.7 | APPLICATION OF OTHER SUMS. Except as set forth in Section 6.3 above, all sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee. |
6.8 | NO CURE OR WAIVER. Neither Mortgagees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligations, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Default or notice of default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or limit or impair the Secured Obligations or Mortgagors liability therefor, or impair the status of the security, or prejudice Mortgagee or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the lien of or security interests created by this Mortgage. |
6.9 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Mortgagor agrees to pay to Mortgagee immediately and without demand all costs and expenses of any kind incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.10 | POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby irrevocably appoints Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation, or any other notices that Mortgagee deems appropriate to protect Mortgagees security interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Mortgageor the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform any obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Mortgagee under this Section. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage |
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and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Mortgagees acquiring any other estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Mortgagee, and the covenants, representations, warranties and obligations of Mortgagor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Mortgagor and rights and remedies of Mortgagee set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens, assignments, security interests and other security provided to Mortgagee hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as Mortgagor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | WAIVER OF MARSHALLING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property which is now or later may be security for any Secured Obligations (Other Property) marshalled upon any foreclosure of the lien of this Mortgagor on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate. |
7.5 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.6 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.11. |
7.7 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.8 | CHOICE OF LAW. WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF KENTUCKY, IT BEING UNDERSTOOD THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE |
Page 20
Loan No. 1002835
IN THIS PARAGRAPH AND TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING THEREUNDER OR HEREUNDER. |
7.9 | INCORPORATION. Exhibit A, Exhibit B and Exhibit C, all as attached, are incorporated into this Mortgage by this reference. |
7.10 | NOTICES. All notices, demands, or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Mortgagor: | KBSII National City Tower, LLC c/o KBS Capital Advisors 620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660 Attention: Mr. Giovanni Cordoves Tel: (949) 797-0324 Fax: (949) 417-6518 E-mail: GCordoves@kbsrealty.com
| |
Beneficiary: |
Wells Fargo Bank, National Association Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1003497
| |
With a copy to: |
Wells Fargo Bank, National Association Minnesota Loan Center 608 2nd Ave S. Minneapolis, MN 55402 Attention: Eva Lopez
|
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Subject Property or to Mortgagor naming Mortgagee, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreement.
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Loan No. 1002835
7.11 | LIMITATIONS ON RECOURSE. The limitations on personal liability of Mortgagor and of its directors, officers, partners and members contained in Section 13.27 of the Loan Agreement shall apply to this Mortgage. |
7.12 | FUTURE ADVANCES. This Mortgage secures not only present indebtedness but also future advances, whether such future advances are obligatory or are to be made at the option of Mortgagee or otherwise. The amount of indebtedness secured hereby may increase or decrease from time to time, and the rate or rates of interest payable may vary from time to time. |
7.13 | MAXIMUM AMOUNT SECURED. The maximum principal indebtedness secured by this Mortgage shall not exceed $372,000,000. |
7.14 | AMENDED AND RESTATED. This Mortgage completely amends, restates and replaces the Original Mortgage. |
[Signatures Follow on Next Page]
Page 22
IN WITNESS WHEREOF, Mortgagor and Mortgagee have executed this Mortgage as of the day and year set forth above.
MORTGAGOR | ||||||||||
KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XVI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, | |||||||||
general partner | ||||||||||
By: /s/ Charles J. Schreiber. Jr. | ||||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
MORTGAGEE | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent | ||
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
This instrument prepared by:
P. Reid Lemasters, Esq.
Frost Brown Todd LLC
201 East Fifth Street
2200 PNC Center
Cincinnati, Ohio 45202-4182
/s/ P. Reid Lemasters
P. Reid Lemasters
STATE OF CALIFORNIA
COUNTY OF ORANGE SS.
On January 20, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
STATE OF CALIFORNIA
COUNTY OF ORANGE SS.
On January 20, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013.
Exhibit A
Loan No. 1002835
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII National City Tower, LLC, a Delaware limited liability company, as Mortgagor to Wells Fargo Bank, National Association, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of January 27, 2011.
All the certain real property located in the County of Jefferson, Commonwealth of Kentucky, described as follows:
Parcel I (Fee Parcel):
Beginning at the Northeast corner of Fifth and Market Streets; thence along the Northerly line of Market Street South 81 degrees 12 minutes 52 seconds East 105 feet; thence North 8 degrees 46 minutes 38 seconds East 161.03 feet; thence South 81 degrees 08 minutes 37 seconds East 11.05 feet; thence North 8 degrees 51 minutes 23 seconds East 44 feet; thence South 81 degrees 08 minutes 37 seconds East 93.95 feet to the center line of an alley closed in Action No. CR-143,089, Jefferson Circuit Court; thence Northwardly with the center line of said closed alley 216 feet to its intersection with the Southerly line of Main Street; thence along the Southerly line of Main Street North 81 degrees 08 minutes 37 seconds West 210 feet to the Southeast corner of Fifth and Main Streets; thence along the Easterly line of Fifth Street South 8 degrees 46 minutes 38 seconds West 421.16 feet to the beginning.
Tax ID: 03-014E-0261-0000
Parcel II (Fee Parcel):
BEGINNING in the Southerly line of Main Street at its intersection with the center line of an alley running between Market and Main Streets in the block bounded on the West by Fifth Street and on the East by Fourth Street, said alley having been closed in Action No. CR-143,089, Jefferson Circuit Court; thence along the center line of said closed alley South 8 degrees 53 minutes 6 seconds West 235.41 feet, more or less, to its intersection with the Northerly line extended of the property conveyed to Greater Louisville First Federal Savings and Loan Association by deed of record in Deed Book 3745, Page 522 in the Office of the Clerk of Jefferson County, Kentucky; thence with the Northerly line of the property conveyed to Greater Louisville First Federal Savings and Loan Association, and same extended, South 81 degrees 12 minutes 22 seconds East 189.82 feet, more or less, to a point 20 feet West of Fourth Street; thence along a line 20 feet West of Fourth Street North 8 degrees 56 minutes 13 seconds East 235.20 feet, more or less, to the Southerly line of Main Street, thence with the Southerly line of Main Street North 81 degrees 08 minutes 37 seconds West 190.03 feet, more or less, to the beginning; together with the unlimited right of ingress and egress across any and all portions of the 20 foot wide tract of real estate lying between the Easternmost line of the above described tract and Fourth Street, which 20 foot tract is to be dedicated to public use as a part of Fourth Street.
Tax ID: 03-014E-0259-0000
Parcel III (Appurtenant Easement Parcel):
Easement for foundation and support as set forth in that certain Deed recorded February 26, 1971 in Deed Book 4405, Page 109 in the Office of the Clerk of Jefferson County, Kentucky.
Parcels I, II and III being the same property conveyed to TIC NCT FARE FAMILY TRUST LLC, a Delaware limited liability company, TIC NCT LYNCH LLC, a Delaware limited liability company, TIC NCT VAUGHAN LLC, a Delaware limited liability company, TIC NCT BIRCHER LLC, a Delaware limited liability company, TIC NCT STAUFFER LLC, a Delaware limited liability company, TIC NCT HUBBARD TRUST LLC, a Delaware limited liability company, TIC NCT VINCENTI LLC, a Delaware limited liability company, TIC NCT B JONES LLC, a Delaware limited liability company, TIC NCT R JONES LLC, a
Delaware limited liability company, TIC NCT HATAMIYA BROTHERS LLC, a Delaware limited liability company, TIC NCT DEY LLC, a Delaware limited liability company, TIC NCT RUTKOWSKI LLC, a Delaware limited liability company, TIC NCT KIHAPAI LLC, a Delaware limited liability company, TIC NCT READ LLC, a Delaware limited liability company, TIC NCT KIM LLC, a Delaware limited liability company, TIC NCT GOLOMB LLC, a Delaware limited liability company, TIC NCT RUNES LLC, a Delaware limited liability company, TIC NCT HOYLES LLC (aka TIC NCT #45, LLC according to Amended Certificate of Authority recorded in CB 666, Page 680), a Delaware limited liability company, TIC NCT DELAND LLC, a Delaware limited liability company, TIC NCT LAI LLC, a Delaware limited liability company, and TIC NCT GILL LLC, a Delaware limited liability company, by Deed dated August 30, 2005, of record in Deed Book 8688, Page 620, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT VILLA SANGRIA LLC, a Delaware limited liability company, TIC NCT BERKOVICH LLC, a Delaware limited liability company, TIC NCT POSIK LLC, a Delaware limited liability company, TIC NCT HOWE LLC, a Delaware limited liability company, and TIC NCT WALSH LLC, a Delaware limited liability company, by Deed dated September 23, 2005, of record in Deed Book 8701, Page 833, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT LYNCH LLC, a Delaware limited liability company, by Deed dated September 30, 2005, of record in Deed Book 8708, Page 271, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT MATHWIG LLC, a Delaware limited liability company, and TIC NCT HANLY LLC, a Delaware limited liability company, by Deed dated November 15, 2005, of record in Deed Book 8736, Page 90, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Parcels I, II and III being the same property conveyed to TIC NCT GILBERT LLC, a Delaware limited liability company, by Deed dated January 1, 2006, of record in Deed Book 8759, Page 565, in the Office of the Clerk of Jefferson County, Kentucky; see also Lease Termination Memo and Affidavit of Merger of Title dated July 14, 2006, recorded in Deed Book 8962, Page 569, in the Office aforesaid.
Exhibit B
Loan No. 1002835
NAMES AND ADDRESSES OF LENDERS
Exhibit B to Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII National City Tower, LLC, a Delaware limited liability company, as Mortgagor to Wells Fargo Bank, National Association, as Administrative Agent for certain lenders, as Mortgagee, dated as of January 27, 2011.
Name and Address | Amount of Note | |
Wells Fargo Bank, National Association 2030 Main Street, Suite 800 Irvine, California 92614 Attn: Bryan Stevens |
$360,000,000* |
* Note may increased up to a maximum principal amount of $372,000,000
Exhibit C
Loan No. 1002835
NON-BORROWER MORTGAGOR RIDER
Exhibit C to Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII National City Tower, LLC, a Delaware limited liability company, as Mortgagor, to Wells Fargo Bank, National Association, as Administrative Agent for certain lenders, as Mortgagee, dated as of January 27, 2011.
To the extent the Mortgage secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Mortgagor, the party or parties constituting Mortgagor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Mortgagor hereby waives any right it may now or hereafter have to require Mortgagee, as a condition to the exercise of any remedy or other right against Mortgagor hereunder or under any other document executed by Mortgagor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to pursue any other right or remedy in Mortgagees power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Mortgagee by any Borrower or other person (other than Mortgagor), or otherwise to comply with the UCC (as defined in the Mortgage) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Mortgagor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Mortgagor by any Borrower or otherwise intended or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Mortgage) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Mortgagee, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Mortgagors rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Mortgagee to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Mortgagee, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Mortgagor further waives any and all rights and defenses that Mortgagor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Mortgagee may collect from Mortgagor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Mortgagee |
forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing on the real property collateral, has destroyed any right Mortgagor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Mortgagor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Mortgagor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Mortgagor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Mortgagor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. |
3. | SUBROGATION. Mortgagor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Mortgagor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Mortgagee with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Mortgagor warrants and agrees: (a) that Mortgagee would not make the Loan but for this Mortgage; (b) that Mortgagor has not relied, and will not rely, on any representations or warranties by Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Mortgagor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Mortgagor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Mortgagee shall have no duty to disclose or report to Mortgagor any information now or hereafter known to Mortgagee with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Mortgagor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Mortgagees rights hereunder shall be reinstated and revived, and the enforceability of this Mortgage shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Mortgagee is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Mortgagor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Mortgagor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Mortgagor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Mortgagor, such payment or distribution shall be held in trust and immediately paid over to Mortgagee, is hereby assigned to Mortgagee as security for the Secured Obligations, and shall be held by Mortgagee in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Mortgagor warrants that all of the waivers in this Mortgage are made with full knowledge of their significance, and of the fact that events giving rise |
to any defense or other benefit waived by Mortgagor may destroy or impair rights which Mortgagor would otherwise have against Mortgagee, Borrower and other persons, or against collateral. Mortgagor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Mortgagor hereby acknowledges that: (a) the obligations undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Mortgagees consideration for entering into this transaction, Mortgagee has specifically bargained for the waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Mortgagor, and (iv) the legal consequences to Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes this Mortgage with the intent that this Mortgage and all of the informed waivers herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, MORTGAGEE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND MORTGAGEE HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS MORTGAGE AND MORTGAGEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND MORTGAGEE TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Mortgage and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Mortgage and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Mortgagee in writing. |
Exhibit 10.26
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Wells Fargo Bank, National Association
Real Estate Group (AU# 02955)
230 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS DEED OF TRUST SECURES A NOTE WHICH PROVIDES FOR A VARIABLE INTEREST
DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Term or Maturity Date (exclusive of any renewal or extension rights): January 27, 2016
THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Deed of Trust), made as of January 27, 2011, is from KBSII GRANITE TOWER, LLC, a Delaware limited liability company (Grantor), to the Public Trustee of the City and County of Denver, State of Colorado (Trustee), for the benefit of Wells Fargo Bank, National Association, as administrative agent for itself and certain additional lenders (Beneficiary).
ARTICLE 1. GRANT IN TRUST
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust, Grantor irrevocably grants, bargains, mortgages, sells, conveys and assigns to Trustee, in trust forever for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the County of Denver, State of Colorado, described on Exhibit A attached hereto, together with the Collateral (as defined in Section 4.1 below) together with all right, title, interest, and privileges of Grantor in and to all development rights or credits, air rights, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; any and all rights of Grantor, as a declarant or otherwise, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A hereto, including that certain Amended and Restated Master Declaration of Block 95 Condominiums dated December 16, 2005 and recorded December 19, 2005, Reception No. 2005215222, Official Record City and County of Denver (Official Record), amended and restated effective as of January 1, 2008, Reception No. 2010115794, Official Record, provided, however, that Beneficiary shall have no liability under such covenants, conditions, and restrictions unless and until Beneficiary forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all |
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Loan No. 1002835
right, title and interest of Grantor in any street, road, alley or other public right of way adjacent to the real property described on Exhibit A hereto, whether open, proposed or vacated; all rents, income, receipts, revenues, issues and profits of and from said real property, whether the same are attributable to or collected before or after any Default (as hereinafter defined); any and all governmental or quasi-governmental licenses, permits or approvals which relate to the development, use or operation of or otherwise relate to said real property; all awards and payments, including interest thereon, resulting from any public or private condemnation or taking of, casualty or injury to, or decrease in the value of, any of the property interests encumbered hereby; all water and water rights, wells and well rights, canals and canal rights, ditch and ditch rights and reservoirs and reservoir rights appurtenant to or associated with said real property, whether decreed or undecreed, tributary, non-tributary, or not non-tributary, surface or underground, or appropriated or unappropriated, and together with any and all shares of stock in water, ditch, lateral and canal companies, well permits and all other evidences of any such rights; and all rights under any condominium declaration and in and to any joint use cost sharing agreement for recreational facilities or other facilities affecting the real property; any and all contracts for sale of condominium units, together with any and all deposits paid under such contracts; all interest or estate which Grantor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
1.2 | ADDRESS. The address of the subject property (if known) is: 1099 18th Street, Denver, Colorado. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. |
ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan |
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Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | STATUTORY MAXIMUMS. Solely for purposes of applying Colorado Revised Statutes (C.R.S.) §38-39-106(1), Trustor stipulates that this Deed of Trust may secure advances, including future advances (whether obligatory or optional), up to a total maximum principal amount of $372,000,000, but this stated maximum will not otherwise be construed to limit the amount or scope of the Secured Obligations. That total maximum principal amount may include any sums or portions thereof included within the Secured Obligations from time to time as may be designated by Beneficiary. |
2.4 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. To the extent permitted by applicable law, all persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Grantor hereby irrevocably assigns to Beneficiary all of Grantors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits |
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and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Grantor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. To the extent permitted by applicable law, this is a present and absolute assignment, not an assignment for security purposes only, and Beneficiarys right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property, and without any commencement of a foreclosure or appointment of a receiver. |
3.2 | GRANT OF LICENSE. Beneficiary confers upon Grantor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). To the extent permitted by applicable law, upon a Default, the License shall be automatically revoked and Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property, and further without commencement of a foreclosure or appointment of a receiver. Grantor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Grantor hereby relieves the lessees from any liability to Grantor by reason of relying upon and complying with any such notice or demand by Beneficiary. Furthermore, upon any Default and revocation of the License as aforesaid, Beneficiary shall be entitled to receive and Grantor covenants to deliver immediately to Beneficiary, upon demand, any and all Payments theretofore collected by Grantor which remain in the possession or control of Grantor, whether or not commingled with other funds of Grantor, and to the extent such Payments have not been delivered, the Payments shall be held in trust for Beneficiary. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Beneficiary shall not directly or indirectly be liable to Grantor or any other person as a consequence of: (i) the exercise or failure to exercise by Beneficiary or Trustee, or any of their respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Beneficiary hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Grantor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that, to the best of Grantors knowledge: (a) Grantor has delivered to Beneficiary a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any |
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party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Grantor covenants and agrees at Grantors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Grantors best efforts to keep all portions of the Subject Property that are capable of being leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Beneficiary fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable effort to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Grantor shall not, without Beneficiarys prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiarys consent hereunder, any sums received by Grantor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Grantor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Grantor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Grantor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be
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incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under the Colorado Uniform Commercial Code, as amended or recodified from time to time (the UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that: (a) Grantor has, as of the date of recordation of this Deed of Trust, and will have, good title to the Collateral; (b) Grantor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Grantors principal place of business is located at the address shown in Section 7.11; and (d) Grantors legal name is exactly as set forth on the first page of this Deed of Trust and all of Grantors organizational documents or agreements delivered to Beneficiary are complete and accurate in every respect. |
4.3 | COVENANTS. Grantor agrees: (a) to execute and deliver such documents as Beneficiary deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Beneficiary prior written notice thereof; (c) to cooperate with Beneficiary in perfecting all security interests granted herein and in obtaining such agreements from third parties as Beneficiary deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Beneficiary is |
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authorized to file financing statements in the name of Grantor to perfect Beneficiarys security interest in Collateral. |
4.4 | RIGHTS OF BENEFICIARY. In addition to Beneficiarys rights as a Secured Party under the UCC, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Grantor: (a) give notice to any person of Beneficiarys rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Grantor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Grantor to Beneficiary unless Beneficiary shall make an express written election of said remedy under the UCC, or other applicable law. |
4.5 | RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiarys rights as a Secured Party under the UCC or otherwise at law, subject to applicable law: |
(a) | Beneficiary may (i) upon written notice, require Grantor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Grantors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Beneficiary may, for the account of Grantor and at Grantors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Grantor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Beneficiary may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Beneficiary to the payment of expenses incurred by Beneficiary in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Beneficiary toward the payment of the Secured Obligations in such order of application as Beneficiary may from time to time elect. |
Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Grantor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC, or other applicable law. Grantor agrees that Beneficiary shall have no obligation to process or prepare any Collateral for sale or other disposition.
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4.6 | POWER OF ATTORNEY. Grantor hereby irrevocably appoints Beneficiary as Grantors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Beneficiary may, without the obligation to do so, in Beneficiarys name, or in the name of Grantor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiarys security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Grantor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Deed of Trust or any of the Loan Documents, Grantor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Grantors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Grantor represents and warrants that, except as disclosed to Beneficiary in a writing which refers to this warranty, Grantor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Deed of Trust is a first and prior lien on the Subject Property. Grantor hereby represents and warrants that all of the Subject Property is a single tax parcel, and there are no properties included in such tax parcel other than the Subject Property. Grantor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Grantors rights to contest in good faith payment of taxes as provided in Section 5.2(c) below, Grantor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Grantor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligations or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligations; provided, however, Grantor shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiarys net income. |
(b) | Grantor will not, without the prior written consent of Beneficiary, which may be withheld in Beneficiarys discretion, consent to or allow the creation of any so-called special districts, special improvement districts, benefit assessment districts or similar districts of any nature, or any other body or entity of any type, or allow to occur any other event, that would or might result in the imposition of any additional taxes, assessments or other monetary obligations or burdens on |
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the Subject Property, and this provision shall serve as RECORD NOTICE to any such district or districts or any governmental entity under whose authority such district or districts are being formed that, subject to applicable law, should Grantor or any other person or entity include all or any portion of the Subject Property in such district or districts, whether formed or in the process of formation, without first obtaining Beneficiarys express written consent, then the lien of this Deed of Trust and the rights and interests in the Subject Property arising by virtue of this Deed of Trust in favor of Beneficiary or its successors in interest (which term shall include, without limitation, any foreclosure purchaser or purchaser acquiring by deed of lieu of foreclosure, and any transferee of the Subject Property following completion of foreclosure or deed in lieu thereof) shall be senior and superior to any taxes, assessments or impositions of any nature, or any liens (whether statutory, contractual or otherwise) levied or imposed upon the Subject Property or any portion thereof as a result of the inclusion of the Subject Property in such district or districts. |
(c) | Grantor may contest in good faith any taxes or assessments if: (i) Grantor pursues the contest diligently and in compliance with applicable laws, in a manner which Beneficiary determines is not prejudicial to Beneficiary, and does not impair the rights of Beneficiary under any of the Loan Documents; and (b) Grantor deposits with Beneficiary any funds or other forms of assurance which Beneficiary in good faith determines from time to time appropriate to protect Beneficiary from the consequences of the contest being unsuccessful. Grantors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default and in accordance with the other Loan Documents, at Beneficiarys option and upon its demand, Grantor shall, until all Secured Obligations have been paid in full, pay to Beneficiary monthly, annually or as otherwise directed by Beneficiary an amount estimated by Beneficiary to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and insurance required or requested pursuant to the Loan Documents when same are next due. If Beneficiary determines that any amounts paid by Grantor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Beneficiary shall notify Grantor of the increased amounts required to pay all amounts when due, whereupon Grantor shall pay to Beneficiary within thirty (30) days thereafter the additional amount as stated in Beneficiarys notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Beneficiary shall, unless Grantor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Beneficiary release said funds to Grantor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Grantor hereunder or under any Loan Document, Beneficiary may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Grantor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Deed of Trust, Beneficiary shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Beneficiary shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Beneficiary may elect, the balance of all amounts collected and in Beneficiarys possession shall be paid to Grantor and no other |
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party shall have any right or claim thereto. The provisions of this Section are not intended to contravene any applicable requirements of the laws of the State of Colorado, and from time to time the provisions of this Section shall be deemed modified as necessary to be in conformance with the laws of the State of Colorado (provided that the provisions of this Section shall be controlling to the extent any contrary requirements of Colorado law may be waived, and Grantor hereby waives those requirements of Colorado law to the fullest extent allowed). |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Grantor shall promptly pay and perform each Secured Obligation for which it is responsible hereunder or under the Loan Agreement when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Grantor shall immediately discharge any lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Subject to the following sentence, Grantor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a lien statement is recorded which affects the Subject Property, Grantor shall, within twenty (20) calendar days of such recording or within five (5) calendar days of Beneficiarys demand, whichever occurs first: (a) pay and discharge the lien statement; (b) effect the release thereof by recording or delivering to Beneficiary a surety bond in sufficient form and amount; or (c) provide Beneficiary with other assurances which Beneficiary deems, in its sole discretion, to be satisfactory for the payment of such lien statement and for the full and continuous protection of Beneficiary from the effect of such lien statement. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Grantor to Beneficiary and, at the request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Subject Property or Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Beneficiary, and/or Beneficiary may release all or any part of the proceeds to Grantor upon any conditions Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary; provided, however, in no event shall Beneficiary be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Beneficiary or its employees or agents. |
(b) | Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Beneficiary of such additional funds which Beneficiary determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance |
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and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Beneficiary, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Beneficiary; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Grantor since the date of this Deed of Trust; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Beneficiary may reasonably establish to protect its security. Grantor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Beneficiary of such insurance or condemnation proceeds, then Beneficiary may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Beneficiary in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Beneficiary shall release such proceeds to Grantor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Grantor covenants: (a) to insure the Subject Property and Collateral against such risks as Beneficiary may require pursuant to the Loan Agreement and, at Beneficiarys request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Beneficiarys prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Beneficiary elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Grantors sole expense, Grantor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Beneficiary hereunder against all adverse claims. Grantor shall give Beneficiary prompt notice in writing of the assertion |
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of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | POWERS OF BENEFICIARY. Beneficiary may, without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby and without liability therefor and without notice: (a) release or direct the Trustee to release all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Grantor shall pay Trustees fees and reimburse Trustee for expenses to which Trustee is entitled under applicable law. Grantor shall pay to Beneficiary reasonable compensation for services rendered concerning this Deed of Trust, including without limit any statement of amounts owing under any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Grantor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Grantor under any agreement related to the Subject Property or Collateral or under this Deed of Trust; or (iii) any loss sustained by Grantor or any third party resulting from Beneficiarys failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary, and all such liability is hereby expressly waived and released by Grantor. |
(b) | Grantor indemnifies Beneficiary against, and holds Beneficiary harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Deed of Trust; (ii) by reason of the execution of this deed of trust or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Grantor to perform Grantors obligations; or (iv) by reason of any alleged obligation or undertaking on Beneficiarys part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Grantor to indemnify and hold harmless Beneficiary shall survive the release and cancellation of the Secured Obligations and the release or partial release of this Deed of Trust. |
(c) | Grantor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Beneficiary together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Grantor represents, agrees and acknowledges that: |
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(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Beneficiary in approving loan applications. |
(b) | Grantor has represented to Beneficiary, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Beneficiary making the Loan, certain facts concerning Grantors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Beneficiary has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Beneficiary in the absence of these representations and warranties. |
(d) | Beneficiary would not have made this Loan if Beneficiary did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Grantors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Grantor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Grantor. |
(f) | Beneficiary has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Grantor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Beneficiarys security for the Note. |
(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Grantors right, title and/or interest in the Loan Documents and any subsequent documents executed by Grantor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Grantor if Grantor is a partnership; (v) legal or beneficial ownership of any membership interest in Grantor if Grantor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Grantor; or (vii) legal or beneficial ownership of any of the stock in Grantor if Grantor is a corporation or in any general partner, venturer or member in Grantor that is a corporation. |
(i) | Grantor shall not make or commit to make any Transfer without Beneficiarys prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Beneficiary or otherwise expressly |
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permitted under Sections 9.17, 9.18 or 9.19 of the Loan Agreement). It is expressly agreed that Beneficiary may predicate Beneficiarys decision to grant consent to a Transfer on such terms and conditions as Beneficiary may require, in Beneficiarys sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Beneficiarys ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Beneficiary for all costs and expenses incurred by Beneficiary in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Beneficiarys security will be impaired by the proposed Transfer, (v) payment to Beneficiary of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Beneficiarys reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Beneficiarys liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Beneficiarys consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Grantors interest shall: (i) assume all of Grantors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Grantor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Beneficiary. In the event of any Transfer without the prior written consent of Beneficiary, whether or not Beneficiary elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Beneficiary, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Grantor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Beneficiary relied upon in making the Loan may no longer be relied upon. A consent by Beneficiary to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Beneficiarys consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligations, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligations, or accept additional security or release or direct the Trustee to release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the liens, assignments and security interests granted under this Deed of Trust upon the Subject Property, the Collateral, or any other security provided herein or in the other Loan Documents. |
5.13 | RELEASE. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Deed of Trust, the Note, and the other Loan Documents, |
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then Beneficiary shall cause this Deed of Trust to be released by Trustee at Grantors request and expense, and Beneficiary shall have no further obligation to make advances under and pursuant to the provisions hereof or in the other Loan Documents. Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to cause Trustee to reconvey the Subject Property notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Subject to applicable law, Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to the Loan Documents or by the proceeds of any loan secured by this Deed of Trust. |
5.15 | RIGHT OF INSPECTION. Subject to applicable law, Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Grantors compliance with the terms hereof. |
5.16 | CONTRACTS. Grantor will deliver to Beneficiary a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Beneficiary required by any of the Loan Documents. Within twenty (20) days after a request by Beneficiary, Grantor shall prepare and deliver to Beneficiary a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Beneficiary, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Beneficiary). Grantor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property or Collateral, but are personal with Grantor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Beneficiarys option, the failure of Grantor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Grantor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Grantor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure, or (d) if Grantor or any other Person shall make a Transfer without the prior written consent of Beneficiary (which consent may be withheld in Beneficiarys sole discretion (except for those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Beneficiary shall have all the following rights and remedies, subject to applicable law: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable. |
(b) | With or without notice, and without releasing Grantor from any Secured Obligations, and without becoming a mortgagee in possession, to cure any |
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breach or Default of Grantor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Beneficiary deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary under this Deed of Trust; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Beneficiary, is or may be senior in priority to this Deed of Trust, the judgment of Beneficiary being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Deed of Trust; or (v) to employ counsel, accountants, contractors and other appropriate persons. |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Grantor hereunder, and Grantor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Grantor waives the defense of laches and any applicable statute of limitations. |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Grantor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Grantor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Grantor and Grantors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Grantor could legally do if Grantor were in possession of the Subject Property. All expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Beneficiary, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Beneficiary, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the property |
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has passed after foreclosure sale and all applicable periods of redemption have expired. |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Grantor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Beneficiary deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Beneficiarys sole judgment, to protect or enhance the security hereof. Beneficiary may also take possession of any and all Payments that may previously have been collected by or on behalf of Grantor and that remain in the possession or control of Grantor, whether or not commingled with other funds of Grantor, and together with any bank or similar accounts in which such Payments may be deposited or held. |
(f) | Notwithstanding the availability of legal remedies, the right to obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Grantor to cure or refrain from repeating any default. |
(g) | With or without accelerating the maturity of the Secured Obligations, sue from time to time for any payment due under any of the Loan Documents or for money damages resulting from Grantors default under any of the Loan Documents. |
(h) | Foreclose this Deed of Trust, by way of a trustees sale pursuant to the provisions of Title 38, Article 38, Colorado Revised Statutes, as currently in effect, as amended, or in any other manner then permitted by law. If this Deed of Trust encumbers more than one parcel of real estate, foreclosure may be by separate parcel or en masse, as Beneficiary may elect in its sole discretion. Foreclosure through Trustee will be initiated by Beneficiarys filing of its notice of election and demand for sale with Trustee. Upon the filing of such notice of election and demand for sale, Trustee shall promptly comply with all notice and other requirements of the laws of Colorado then in force with respect to such sales, and shall give four weeks public notice of the time and place of such sale by advertisement weekly in some newspaper of general circulation then published in the County or City and County in which the Subject Property is located. Any sale conducted by Trustee pursuant to this Section 6.2(h) shall be held at the front door of the county courthouse for such County or City and County, or on the Subject Property, or at such other place as similar sales are then customarily held in such County or City and County, provided that the actual place of sale shall be specified in the notice of sale. All fees, costs and expenses of any kind incurred by Beneficiary in connection with foreclosure of this Deed of Trust, including, without limitation, the costs of any appraisals of the Subject Property obtained by Beneficiary, all costs of any receivership for the Subject Property advanced by Beneficiary, and all attorneys and consultants fees incurred by Beneficiary, shall constitute a part of the Secured Obligations and may be included as part of the amount owing from Grantor to Beneficiary at any foreclosure sale. At the conclusion of any foreclosure sale, the officer conducting the sale shall execute and deliver to the purchaser at the sale a certificate of purchase which shall describe the property sold to such purchaser and shall state that upon the expiration of the applicable periods for redemption, the holder of such certificate will be entitled to a deed to the property described in the certificate. After the expiration of all applicable periods of redemption, unless the property sold has been redeemed by a party |
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entitled to redemption, the officer who conducted such sale shall, upon request, execute and deliver an appropriate deed to the holder of the certificate of purchase or the last certificate of redemption, as the case may be. For purposes of any redemption, interest shall accrue on all sums within the redemption amount at the interest rate applicable under the Note after its maturity (whether by acceleration or otherwise) until the redemption is made. Nothing in this Section 6.2(h) dealing with foreclosure procedures or specifying particular actions to be taken by Beneficiary or by Trustee or any similar officer shall be deemed to contradict or add to the requirements and procedures now or hereafter specified by Colorado law, and any such inconsistency shall be resolved in favor of Colorado law applicable at the time of foreclosure. |
(i) | To resort to and realize upon the security hereunder and any other security now or later held by Beneficiary concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Beneficiary determines in its sole discretion. |
(j) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Beneficiary may bid (as determined by Beneficiary in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such bid, to the extent permitted by law, Beneficiary may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Beneficiary in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Beneficiary with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Beneficiary anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Beneficiary; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Beneficiary (in its sole and absolute discretion) deems appropriate. In regard to the above, Grantor acknowledges and agrees that: (w) Beneficiary is not required to use any or all of the foregoing factors to determine the amount of its bid; (x) this Section does not impose upon Beneficiary any additional obligations that are not imposed by law at the time the bid is made; (y) the amount of Beneficiarys bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Grantor and Beneficiary; and (z) Beneficiarys bid may be (at Beneficiarys sole and absolute discretion) higher or lower than any appraised value of the Subject Property. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. The proceeds of any foreclosure sale shall be applied first to the fees and expenses of the Trustee or other officer conducting the sale, and then to the reduction or discharge of the Secured |
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Obligations; any surplus remaining shall be paid over to Borrower or to such other person or persons as may be lawfully entitled to such surplus. |
6.4 | APPLICATION OF OTHER SUMS. Except as set forth in Section 6.3 above, all sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. |
6.5 | NO CURE OR WAIVER. Neither Beneficiarys nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligations, nor the exercise or failure to exercise of any other right or remedy by Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Grantor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of or security interests created by this Deed of Trust. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Grantor agrees to pay to Beneficiary immediately and without demand all costs and expenses of any kind incurred by Beneficiary pursuant to Section 6.2 (including, without limitation, Trustee fees and expenses, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Grantor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems appropriate to protect Beneficiarys interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiarys security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Beneficiary may perform any obligation of Grantor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Grantor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Beneficiary under this Section. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
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7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Grantor which apply to this Deed of Trust and to the Subject Property and Collateral. |
7.2 | MERGER. No merger shall occur as a result of Beneficiarys acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Beneficiary, and the covenants, representations, warranties and obligations of Grantor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Grantor and rights and remedies of Beneficiary set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens, assignments, security interests and other security provided to Beneficiary hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF GRANTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as Grantor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | WAIVER OF HOMESTEAD AND OTHER EXEMPTIONS. To the extent permitted by law, Grantor hereby waives all rights to any homestead or other exemption to which Grantor would otherwise be entitled under any present or future constitutional, statutory, or other provision of applicable state or federal law. |
7.5 | WAIVER OF MARSHALLING RIGHTS. To the extent permitted by law, Grantor, for itself and for all parties claiming through or under Grantor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property, which is now or later may be security for any Secured Obligations (Other Property) marshalled upon any foreclosure of the lien of this Deed of Trust or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Trustee, if so directed by Beneficiary at its election, shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 6.1. |
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7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | COLORADO LAW. This Deed of Trust shall be construed in accordance with the laws of the State of Colorado, except to the extent that federal laws preempt the laws of the State of Colorado. |
7.10 | INCORPORATION. Exhibit A and Exhibit B, as attached, are incorporated into this Deed of Trust by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Grantor: | KBSII GRANITE TOWER, LLC c/o KBS Capital Advisors LLC 620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660 Attention: Mark Brecheen, Sr. Vice President Tel: (949) 417-6535 Fax: (949) 417-6518
| |
Beneficiary: | WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan # 1002835
| |
With a copy to: | Wells Fargo Bank, National Association Disbursement and Operations Center 2120 East Park Place, Suite 100 El Segundo, CA 90245 Attention: Eva Lopez
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Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Grantor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Grantor naming Beneficiary, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Grantor to perform its obligations to Beneficiary under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of Grantor and of its directors, officers, partners and members contained in Section 13.27 of the Loan Agreement shall apply to this Deed of Trust. |
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IN WITNESS WHEREOF, Grantor has executed this Deed of Trust as of the day and year set forth above.
GRANTOR
KBSII GRANITE TOWER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBS REIT ACQUISITION XVIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
EXHIBIT A
Loan No. 1002835
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII GRANITE TOWER, LLC, a Delaware limited liability company, as Grantor, to the Public Trustee of the County of Denver, State of Colorado, as Trustee, for the benefit of Wells Fargo Bank, National Association, as administrative agent for itself and certain additional lenders, as Beneficiary, dated as of January 27, 2011.
All the certain real property located in the County of Denver, State of Colorado, described as follows
Parcel 1 - Fee Title
Units 1, 1A, 1B, 1C and 5, Block 95 Condominiums,
According to the Amended and Restated Master Declaration of Block 95 Condominiums recorded December 19, 2005 under Reception No. 2005215222, as amended by Amended and Restated First Amendment to Amended and Restated Master Declaration of Block 95 Condominiums recorded October 7, 2010 at Reception No. 2010115794, and the Amended and Restated Condominium Map thereof recorded December 19, 2005 under Reception No. 2005215223, as amended by First Amendment to the Amended and Restated Condominium Map for Block 95 Condominiums recorded February 12, 2008 under Reception No. 2008017796, in the records of the Clerk and Recorder of the City and County of Denver, State of Colorado.
Parcel 2
Nonexclusive easements: (a) to use each Common Element (as defined in the Declaration, as hereinafter defined), (b) over and across all Common Elements for the use and enjoyment of Units 1, 1A, 1B, 1C and 5, Block 95 Condominiums, the Parking Rights and the Limited Common Elements (as such terms are defined in the Declaration, as hereinafter defined), (b) over and across all Common Elements and the other Units (as defined in the Declaration, as hereinafter defined) for horizontal, vertical, and lateral support, (c) over and across all stairs, hallways, lobbies, drive lanes, walkways and other access-ways designated as Common Elements to gain pedestrian and vehicular access, (d) over and across all stairs, hallways, lobbies, drive lanes, walkways and other access-ways for emergency egress, (e) for ingress and egress to and from the Loading Dock (as defined in the Declaration, as hereinafter defined) for the use of the Loading Dock, (f) for encroachments, (g) for repair, maintenance, restoration and reconstruction, (h) to enter upon, across, over, in, and under any portion of the Condominium Project (as defined in the Declaration, as hereinafter defined) for the purpose of changing, correcting, or otherwise modifying the grade or drainage channels to improve the drainage of water, (i) for the purpose of maintaining, repairing and replacing the existing drainage of water from, over, and across the Condominium Project, (j) for the use of all shafts, chutes, flues, ducts, vents, chases, pipes, wires, conduits, and utility lines for utilities, and (k) for access to and operation, maintenance, repair and replacement of the Central Plant (as defined in the Declaration, as hereinafter defined), including the Plate Heat Exchanger and the Plate Heat Distribution Lines (as such terms are defined in the Declaration, as hereinafter defined), contained in that Amended and Restated Master Declaration of Block 96 Condominiums, recorded December 19, 2005 at Reception No. 2005215222, and Amended and Restated First Amendment to Amended and Restated Master Declaration of Block 95 Condominiums recorded October 7, 2010 at Reception No. 2010115794 (as amended, the Declaration).
Parcel 3
Revocable permit or license to encroach with an underground parking structure, contained in that Ordinance No. 3, Series of 1981 recorded July 11, 1985 at Reception No. 037798, in the following described areas in the City and County of Denver and State of Colorado, to wit:
Exhibit A
EXHIBIT A
Loan No. 1002835
Those parts of 18th Street, 19th Street, Curtis Street and Arapahoe Street adjacent to Block 95, East Denver, described as follows:
Beginning at the most northerly corner of Block 95, East Denver; Thence westerly to a point that is 9.50 feet southwesterly of and 9.5 feet northwesterly of said northerly corner; Thence southwesterly and parallel with the northwesterly line of said Block 95, 382.41 feet; Thence southerly to a point that is 9.50 feet southeasterly of and 9.50 feet southwesterly of the most westerly corner of said Block 95; Thence southeasterly and parallel with the southwesterly line of said Block 95, 247.50 feet; Thence easterly to a point that is 9.50 feet northeasterly of and 9.50 feet southeasterly of the most southerly corner of said Block 95; Thence northeasterly and parallel with the southeasterly line of said Block 95, 382.41 feet; Thence northerly to a point that is 9.50 feet northeasterly of and 9.50 feet northwesterly of the most easterly corner of said Block 95; Thence northwesterly and parallel with the northeasterly line of said Block 95, 247.50 feet; thence westerly to the point of beginning.
Exhibit A
EXHIBIT B
Loan No. 1002835
EXHIBIT B
NON-BORROWER GRANTOR RIDER
Exhibit B to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII GRANITE TOWER, LLC, a Delaware limited liability company, as Grantor, to the Public Trustee of the County of Denver, State of Colorado, as Trustee, for the benefit of Wells Fargo Bank, National Association, as administrative agent for itself and certain additional lenders, as Beneficiary, dated as of January 27, 2011.
To the extent the Deed of Trust secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Grantor, the party or parties constituting Grantor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Subject to applicable law, Grantor hereby waives any right it may now or hereafter have to require Beneficiary, as a condition to the exercise of any remedy or other right against Grantor hereunder or under any other document executed by Grantor in connection with any Secured Obligations: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Beneficiary by Grantor or any Borrower or other person; (b) to pursue any other right or remedy in Beneficiarys power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Beneficiary by any Borrower or other person (other than Grantor), or otherwise to comply with the UCC (as modified or recodified from time to time) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligations or any collateral (other than the Subject Property) for any Secured Obligations. |
2. | DEFENSES. Subject to applicable law, Grantor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligations, by any Borrower or other person, for purposes other than the purposes represented to Grantor by any Borrower or otherwise intended or understood by Grantor or any Borrower; (d) any act or omission by Beneficiary which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligations; (e) the unenforceability or invalidity of any collateral assignment (other than this Deed of Trust) or guaranty with respect to any Secured Obligations, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligations; (f) any failure of Beneficiary to marshal assets in favor of Grantor or any other person; (g) any modification of any Secured Obligations, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Beneficiary; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Beneficiary to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Beneficiary, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Grantor further waives any and all rights and defenses that Grantor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Beneficiary may collect from Grantor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Beneficiary forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Beneficiary may collect from Grantor even if Beneficiary, by foreclosing on the real property |
EXHIBIT B
Loan No. 1002835
collateral, has destroyed any right Grantor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Grantor may have because Borrowers debt is secured by real property. Without limiting the generality of the foregoing or any other provision hereof, Grantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Grantor. |
3. | SUBROGATION. Grantor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligations; (b) any right to enforce any remedy Grantor may now or hereafter have against any Borrower that relates to any Secured Obligations; and (c) any right to participate in any collateral now or hereafter assigned to Beneficiary with respect to any Secured Obligations. |
4. | BORROWER INFORMATION. Grantor warrants and agrees: (a) that Beneficiary would not make the Loan but for this Deed of Trust; (b) that Grantor has not relied, and will not rely, on any representations or warranties by Beneficiary to Grantor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligations from sources other than the Subject Property; (c) that Grantor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Grantor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Beneficiary shall have no duty to disclose or report to Grantor any information now or hereafter known to Beneficiary with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Grantor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Beneficiarys rights hereunder shall be reinstated and revived, and the enforceability of this Deed of Trust shall continue, with respect to any amount at any time paid on account of any Secured Obligations which Beneficiary is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Grantor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Grantor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Grantor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Grantor, such payment or distribution shall be held in trust and immediately paid over to Beneficiary, is hereby assigned to Beneficiary as security for the Secured Obligations, and shall be held by Beneficiary in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Grantor warrants that all of the waivers in this Deed of Trust are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Grantor may destroy or impair rights which Grantor would otherwise have against Beneficiary, Borrower and other persons, or against collateral. Grantor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Grantor hereby acknowledges that: (a) the obligations undertaken by Grantor in this Deed of Trust are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Beneficiarys consideration for entering into this transaction, Beneficiary has specifically bargained for the waiver and relinquishment by |
EXHIBIT B
Loan No. 1002835
Grantor of all such defenses, and (d) Grantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Grantor does hereby represent and confirm to Beneficiary that Grantor is fully informed regarding, and that Grantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Grantor, and (iv) the legal consequences to Grantor of waiving such defenses. Grantor acknowledges that Grantor makes this Deed of Trust with the intent that this Deed of Trust and all of the informed waivers herein shall each and all be fully enforceable by Beneficiary, and that Beneficiary is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | DISCLOSURE OF INFORMATION; PARTICIPATIONS. Grantor understands and agrees that Beneficiary may elect, at any time, to sell, assign, or participate all or any part of Beneficiarys interest in the Loan, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Beneficiarys sole discretion. Grantor further agrees that Beneficiary may disseminate to any such potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Beneficiary with respect to: (a) the Subject Property and Collateral and its operation; (b) any party connected with the Loan (including, without limitation, the Grantor, the Borrower, any partner of Borrower and any guarantor); and/or (c) any lending relationship other than the Loan which Beneficiary may have with any party connected with the Loan. |
10. | INTEGRATION; INTERPRETATION. This Deed of Trust and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Deed of Trust and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Beneficiary in writing. |
STATE OF CALIFORNIA | ) | |
COUNTY OF ORANGE | ) |
On January 18, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr. , who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature/s/ K. Godin(Seal)
Exhibit 10.27
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
FIRST MODIFICATION OF DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST MODIFICATION OF DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Modification) is entered into this 27th day January, 2011, by KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company (Trustor), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
RECITALS
A. | Lenders (as defined in the Loan Agreement referenced below) previously made a loan to Trustor, KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, and KBSII Crescent VIII, LLC, a Delaware limited liability company (collectively, the Original Borrowers) in the original principal amount of Fifty Million Dollars ($50,000,000) (the Original Horizon Loan). |
B. | The Original Horizon Loan is evidenced by (i) a Secured Promissory Note, dated September 30, 2010, executed by Borrowers for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated September 30, 2010, executed by Borrowers, Beneficiary and the Lenders signatory thereto (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Loan Agreement), and secured by, among other things, a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by Trustor for the benefit of Beneficiary, and recorded October 1, 2010, as Document No. 2010-0524867, in the Official Records of San Diego County, California (the Deed of Trust). |
C. | Original Borrowers, certain additional borrowers (New Borrowers, and together with the Original Borrowers, the Borrowers), each of which is an affiliate of the Original Borrowers, Beneficiary and Lenders have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Amended Loan Agreement), whereby (i) the principal amounts of the Original Horizon Loan and the Original National City Loan (as defined in the Amended Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and conditions of the Loan Agreement, increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Trustor and Beneficiary hereby agree as follows:
AGREEMENT
1. | Amendment to Section 2.1. Section 2.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
2.1 | OBLIGATIONS SECURED. Trustor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Trustor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Trustor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2. | Amendment to Section 4.1. Section 4.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
Page 2
4.1 | SECURITY INTEREST. Trustor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Trustor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Trustors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Trustor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Trustor with respect to the Subject Property; all advance payments of insurance premiums made by Trustor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under the California Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
3. | Amendment to Section 5.15. The following is hereby added as a new sentence at the end of Section 5.15: |
Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to cause Trustee to reconvey the Subject Property notwithstanding the fact that all of the Secured Obligations have not been satisfied.
4. | Incorporation. This Modification is made upon all of the terms, covenants and agreements of the Deed of Trust, which are incorporated herein by reference, and the provisions contained herein shall have the same effect as if such provisions were originally included in the Deed of Trust. Except as supplemented and amended hereby or by instruments previously executed, all of the terms, covenants and agreements of the Deed of Trust remain unchanged, and as supplemented and amended they continue in full force and effect. |
5. | Ratification and Reconfirmation. Trustor and Beneficiary agree that except as specifically modified herein, all the terms, provisions, representations and warranties of the Deed of Trust are hereby ratified and reaffirmed by Trustor and Trustor specifically acknowledges the validity and enforceability thereof. Trustor and Beneficiary hereby agree that the Deed of Trust as modified by this Modification is in full force and effect and nothing herein contained shall be construed as modifying in any manner except as specifically modified hereby. |
Page 3
6. | Counterparts. This Modification may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
[Signatures Follow on Next Page]
Page 4
IN WITNESS WHEREOF, Beneficiary and Trustor have executed this Modification as of the day and year set forth above.
BENEFICIARY | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, | ||
as administrative agent |
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
TRUSTOR/BORROWER | ||||||||||
KBSII HORIZON TECH CENTER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Signature Page Modification of Deed of Trust
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On January 18th, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On January 18th, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013.
Exhibit 10.28
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVERS LICENSE NUMBER.
FIRST MODIFICATION OF DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST MODIFICATION OF DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Modification) is entered into this 27th day January, 2011, by KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company (Grantor), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
RECITALS
A. | Lenders (as defined in the Loan Agreement referenced below) previously made a loan to Grantor, KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII Crescent VIII, LLC, a Delaware limited liability company, and KBSII Horizon Tech Center, LLC, a Delaware limited liability company (collectively, the Original Borrowers) in the original principal amount of Fifty Million Dollars ($50,000,000) (the Original Horizon Loan). |
B. | The Original Horizon Loan is evidenced by (i) a Secured Promissory Note, dated September 30, 2010, executed by Borrowers for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated September 30, 2010, executed by Borrowers, Beneficiary and the Lenders signatory thereto (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Loan Agreement), and secured by, among other things, a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by Grantor for the benefit of Beneficiary, and recorded October 1, 2010, as Instrument No. 201000252594, in the Official Records of Dallas County, Texas, and as Instrument No. D210241789, in the Official Records or Tarrant County, Texas (the Deed of Trust). |
C. | Original Borrowers, certain additional borrowers (New Borrowers, and together with the Original Borrowers, the Borrowers), each of which is an affiliate of the Original Borrowers, Beneficiary and Lenders, have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Amended Loan Agreement), whereby (i) the principal amounts of the Original Horizon Loan and the Original National City Loan (as defined in the Amended Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and conditions of the Loan Agreement, increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Grantor and Beneficiary hereby agree as follows:
AGREEMENT
1. | Amendment to Section 2.1. Section 2.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
2.1 | OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2. | Amendment to Section 4.1. Section 4.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
Page 2
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under Article 9 of the Texas Business and Commerce Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
The filing of a financing statement covering the Collateral shall not be construed to derogate from or impair the lien or provisions of this Deed of Trust with respect to any property described herein which is real property or which the parties have agreed to treat as real property. Similarly, nothing in such financing statement shall be construed to alter any of the rights of Beneficiary under this Deed of Trust or the priority of the Beneficiarys lien created hereby, and such financing statement is declared to be for the protection of Beneficiary in the event any court shall at any time hold that notice of Beneficiarys priority of interest in any property or interests described in this Deed of Trust must, in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivision, agency or entity of the federal government, be filed in the Uniform Commercial Code records.
3. | Amendment to Section 5.15. The following is hereby added as a new sentence at the end of Section 5.15: |
Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Deed of Trust notwithstanding the fact that all of the Secured Obligations have not been satisfied.
Page 3
4. | Amendment to Section 7.11. Grantors address in Section 7.11 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
KBSII Plano Business Park, LLC
c/o KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300
Newport Beach, CA 92660
Attention: Ken Robertson, Sr. Vice President
Telephone: (949) 417-6502
Telecopier: (949) 417-6518
5. | Incorporation. This Modification is made upon all of the terms, covenants and agreements of the Deed of Trust, which are incorporated herein by reference, and the provisions contained herein shall have the same effect as if such provisions were originally included in the Deed of Trust. Except as supplemented and amended hereby or by instruments previously executed, all of the terms, covenants and agreements of the Deed of Trust remain unchanged, and as supplemented and amended they continue in full force and effect. |
6. | Ratification and Reconfirmation. Grantor and Beneficiary agree that except as specifically modified herein, all the terms, provisions, representations and warranties of the Deed of Trust are hereby ratified and reaffirmed by Grantor and Grantor specifically acknowledges the validity and enforceability thereof. Grantor and Beneficiary hereby agree that the Deed of Trust as modified by this Modification is in full force and effect and nothing herein contained shall be construed as modifying in any manner except as specifically modified hereby. |
7. | Counterparts. This Modification may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
[Signatures Follow on Next Page]
Page 4
IN WITNESS WHEREOF, Beneficiary and Grantor have executed this Modification as of the day and year set forth above.
BENEFICIARY | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent |
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
GRANTOR/BORROWER | ||||||||||
KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XIII, LLC, | |||||||||
a Delaware limited liability company, | ||||||||||
its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, | ||||||||||
its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, | ||||||||||
its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, | ||||||||||
general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Signature Page Modification of Deed of Trust
STATE OF CALIFORNIA | ||
COUNTY OF Orange SS. |
On January 18th, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
STATE OF CALIFORNIA | ||
COUNTY OF Orange SS. |
On January 18th, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013.
Exhibit 10.29
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVERS LICENSE NUMBER.
FIRST MODIFICATION OF DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST MODIFICATION OF DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Modification) is entered into this 27th day January, 2011, by KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company (Grantor), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
RECITALS
A. | Lenders (as defined in the Loan Agreement referenced below) previously made a loan to Grantor, KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Crescent VIII, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, and KBSII Horizon Tech Center, LLC, a Delaware limited liability company (collectively, the Original Borrowers) in the original principal amount of Fifty Million Dollars ($50,000,000) (the Original Horizon Loan). |
B. | The Original Horizon Loan is evidenced by (i) a Secured Promissory Note, dated September 30, 2010, executed by Borrowers for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated September 30, 2010, executed by Borrowers, Beneficiary and the Lenders signatory thereto (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Loan Agreement), and secured by, among other things, a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by Grantor for the benefit of Beneficiary, and recorded October 1, 2010, as Instrument No. 20101001001056220, in the Official Records of Collin County, Texas (the Deed of Trust). |
C. | Original Borrowers, certain additional borrowers (New Borrowers, and together with the Original Borrowers, the Borrowers), each of which is an affiliate of the Original Borrowers, Beneficiary and Lenders have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Amended Loan Agreement), whereby (i) the principal amounts of the Original Horizon Loan and the Original National City Loan (as defined in the Amended Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and conditions of the Loan Agreement, increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Grantor and Beneficiary hereby agree as follows:
AGREEMENT
1. | Amendment to Section 2.1. Section 2.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
2.1 | OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2. | Amendment to Section 4.1. Section 4.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
Page 2
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under Article 9 of the Texas Business and Commerce Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
The filing of a financing statement covering the Collateral shall not be construed to derogate from or impair the lien or provisions of this Deed of Trust with respect to any property described herein which is real property or which the parties have agreed to treat as real property. Similarly, nothing in such financing statement shall be construed to alter any of the rights of Beneficiary under this Deed of Trust or the priority of the Beneficiarys lien created hereby, and such financing statement is declared to be for the protection of Beneficiary in the event any court shall at any time hold that notice of Beneficiarys priority of interest in any property or interests described in this Deed of Trust must, in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivision, agency or entity of the federal government, be filed in the Uniform Commercial Code records.
3. | Amendment to Section 5.15. The following is hereby added as a new sentence at the end of Section 5.15: |
Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Deed of Trust notwithstanding the fact that all of the Secured Obligations have not been satisfied.
Page 3
4. | Amendment to Section 7.11. Grantors address in Section 7.11 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
KBSII Plano Business Park, LLC
c/o KBS Capital Advisors LLC
620 Newport Center Drive, Suite 1300
Newport Beach, CA 92660
Attention: Ken Robertson, Sr. Vice President
Telephone: (949) 417-6502
Telecopier: (949) 417-6518
5. | Incorporation. This Modification is made upon all of the terms, covenants and agreements of the Deed of Trust, which are incorporated herein by reference, and the provisions contained herein shall have the same effect as if such provisions were originally included in the Deed of Trust. Except as supplemented and amended hereby or by instruments previously executed, all of the terms, covenants and agreements of the Deed of Trust remain unchanged, and as supplemented and amended they continue in full force and effect. |
6. | Ratification and Reconfirmation. Grantor and Beneficiary agree that except as specifically modified herein, all the terms, provisions, representations and warranties of the Deed of Trust are hereby ratified and reaffirmed by Grantor and Grantor specifically acknowledges the validity and enforceability thereof. Grantor and Beneficiary hereby agree that the Deed of Trust as modified by this Modification is in full force and effect and nothing herein contained shall be construed as modifying in any manner except as specifically modified hereby. |
7. | Counterparts. This Modification may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
[Signatures Follow on Next Page]
Page 4
IN WITNESS WHEREOF, Beneficiary and Grantor have executed this Modification as of the day and year set forth above.
BENEFICIARY | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent |
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
GRANTOR/BORROWER | ||||||||||
KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION VIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Signature Page Modification of Deed of Trust
STATE OF CALIFORNIA | ||
COUNTY OF Orange SS. |
On January 18th, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
STATE OF CALIFORNIA | ||
COUNTY OF Orange SS. |
On January 18th, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013.
Exhibit 10.30
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
Parcel ID Number 1806070050
FIRST MODIFICATION OF DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT
THIS FIRST MODIFICATION OF DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (Modification) is entered into this 27th day January, 2011, by KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company (Grantor), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Grantee).
[Continued on Next Page]
NOTE TO TAX COMMISSIONER AND CLERK OF SUPERIOR COURT: THIS INSTRUMENT IS ONE OF SEVERAL INSTRUMENTS BEING GIVEN TO SECURE AN ADDITIONAL EXTENSION OF CREDIT IN THE AMOUNT OF $310,000,000.00 TO BE SECURED BY THE INSTRUMENT RECORDED AT BOOK 14803, PAGE 4320 OF THE RECORDS OF COBB COUNTY, GEORGIA, AS MODIFIED HEREBY. THE INTANGIBLES RECORDING TAX DUE AND PAYABLE IN CONNECTION WITH THIS INSTRUMENT IS THE MAXIMUM AMOUNT PAYABLE OF $25,000.00.
RECITALS
A. | Lenders (as defined in the Loan Agreement referenced below) previously made a loan to Grantor, KBSII Crescent VIII, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, and KBSII Horizon Tech Center, LLC, a Delaware limited liability company (collectively, the Original Borrowers) in the original principal amount of Fifty Million Dollars ($50,000,000) (the Original Horizon Loan). |
B. | The Original Horizon Loan is evidenced by (i) a Secured Promissory Note, dated September 30, 2010, executed by Borrowers for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated September 30, 2010, executed by Borrowers, Grantee and the Lenders signatory thereto (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Loan Agreement), and secured by, among other things, a Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated September 30, 2010, executed by Grantor for the benefit of Grantee, and recorded October 11, 2010, in Deed Book 14803, Page 4320, in the Deed Book of Cobb County, Georgia (the Security Deed). |
C. | Original Borrowers, certain additional borrowers (New Borrowers, and together with the Original Borrowers, the Borrowers), each of which is an affiliate of the Original Borrowers, Grantee and Lenders have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Amended Loan Agreement), whereby (i) the principal amounts of the Original Horizon Loan and the Original National City Loan (as defined in the Amended Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and conditions of the Loan Agreement increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Grantor and Grantee hereby agree as follows:
AGREEMENT
1. | Amendment to Section 2.1. Section 2.1 of the Security Deed is hereby deleted and replaced, in its entirety, with the following: |
2.1 | OBLIGATIONS SECURED. Grantor makes this Security Deed for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Security Deed; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Grantee, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Security Deed; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Grantee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Security Deed; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Security Deed; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2. | Amendment to Section 4.1. Section 4.1 of the Security Deed is hereby deleted and replaced, in its entirety, with the following: |
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Grantee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Grantee, whether or not disbursed; all funds deposited with Grantee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
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3. | Amendment to Section 5.15. The following is hereby added as a new sentence at the end of Section 5.15: |
Notwithstanding anything contained herein to the contrary, subject to the provisions of Section 2.10 of the Loan Agreement, this Security Deed shall be cancelled and surrendered notwithstanding the fact that all of the Secured Obligations have not been satisfied.
4. | Amendment to Section 7.11. Grantors address in Section 7.11 of the Security Deed is hereby deleted and replaced, in its entirety, with the following: |
KBSII HARTMAN BUSINESS CENTER, LLC
c/o KBS Capital Advisors LLC
3348 Peachtree Road, NE., Suite 1030
Atlanta, GA 30326
Attn: Allen Aldridge, Sr. Vice President
Telephone: (678) 784-0585
Telecopier: (770) 952-4611
5. | Incorporation. This Modification is made upon all of the terms, covenants and agreements of the Security Deed, which are incorporated herein by reference, and the provisions contained herein shall have the same effect as if such provisions were originally included in the Security Deed. Except as supplemented and amended hereby or by instruments previously executed, all of the terms, covenants and agreements of the Security Deed remain unchanged, and as supplemented and amended they continue in full force and effect. |
6. | Ratification and Reconfirmation. Grantor and Grantee agree that except as specifically modified herein, all the terms, provisions, representations and warranties of the Security Deed are hereby ratified and reaffirmed by Grantor and Grantor specifically acknowledges the validity and enforceability thereof. Grantor and Grantee hereby agree that the Security Deed as modified by this Modification is in full force and effect and nothing herein contained shall be construed as modifying in any manner except as specifically modified hereby. |
7. | Counterparts. This Modification may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
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IN WITNESS WHEREOF, Grantee and Grantor have executed this Modification as of the day and year set forth above.
GRANTEE
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as administrative agent
By: | /s/ Bryan Stevens | |||
Name: | Bryan Stevens | |||
Its: | Senior Vice President | |||
Signed, sealed, and delivered in the presence of: | ||||
Witness |
||||
Notary Public |
||||
[NOTARIAL SEAL] |
Commission Expiration Date:
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Signature Page Modification of Security Deed
GRANTOR/BORROWER
KBSII HARTMAN BUSINESS CENTER, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION IX, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
Signed, sealed, and delivered in the presence of:
Witness
Notary Public
[NOTARIAL SEAL]
Commission Expiration Date:
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Signature Page Modification of Security Deed
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On January 18, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013.
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On January 18, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
Exhibit 10.31
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
FIRST MODIFICATION OF DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Term or Maturity Date (exclusive of any renewal or extension rights): January 27, 2016
THIS FIRST MODIFICATION OF DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Modification) is entered into this 27th day January, 2011, by KBSII CRESCENT VIII, LLC, a Delaware limited liability company (Grantor), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
RECITALS
A. | Lenders (as defined in the Loan Agreement referenced below) previously made a loan to Grantor, KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, and KBSII Horizon Tech Center, LLC, a Delaware limited liability company (collectively, the Original Borrowers) in the original principal amount of Fifty Million Dollars ($50,000,000) (the Original Horizon Loan). |
B. | The Original Horizon Loan is evidenced by (i) a Secured Promissory Note, dated September 30, 2010, executed by Borrowers for the benefit of Wells Fargo Bank, National Association (the Original Note), (ii) a Loan Agreement, dated September 30, 2010, executed by Borrowers, Beneficiary and the Lenders signatory thereto (the Original Loan Agreement) and (iii) each of the other Loan Documents (as such term is defined in the Loan Agreement), and secured by, among other things, a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 30, 2010, executed by Grantor for the benefit of Beneficiary, and recorded September 30, 2010, as Reception No. D0098200, in the Official Records of Arapahoe County, Colorado (the Deed of Trust). |
C. | Original Borrowers, certain additional borrowers (New Borrowers, and together with the Original Borrowers, the Borrowers), each of which is an affiliate of the Original Borrowers, Beneficiary and Lenders have now entered into an Amended and Restated and Consolidated Loan Agreement, dated January 27, 2011 (as the same may be amended, restated or replaced from time to time, the Amended Loan Agreement), whereby (i) the principal amounts of the Original Horizon Loan and |
the Original National City Loan (as defined in the Amended Loan Agreement) have been consolidated and increased to an aggregate principal amount of $360,000,000, which amount may, subject to the terms and conditions of the Loan Agreement, increase to a maximum principal amount of $372,000,000 (the Loan); and (ii) certain additional collateral has been provided for the Loan. |
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Grantor and Beneficiary hereby agree as follows:
AGREEMENT
1. | Amendment to Section 2.1. Section 2.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
2.1 | OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such |
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future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2. | Amendment to Section 2.3. Section 2.3 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
2.3 | STATUTORY MAXIMUMS. Solely for purposes of applying Colorado Revised Statutes (C.R.S.) §38-39-106(1), Grantor stipulates that this Deed of Trust may secure advances, including future advances (whether obligatory or optional), up to a total maximum principal amount of $372,000,000, but this stated maximum will not otherwise be construed to limit the amount or scope of the Secured Obligations. That total maximum principal amount may include any sums or portions thereof included within the Secured Obligations from time to time as may be designated by Beneficiary. |
3. | Amendment to Section 4.1. Section 4.1 of the Deed of Trust is hereby deleted and replaced, in its entirety, with the following: |
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service
Page 3
marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under the Colorado Uniform Commercial Code, as amended or recodified from time to time (the UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
4. | Amendment to Section 5.13. The following is hereby added as a new sentence at the end of Section 5.13: |
Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to cause Trustee to release this Deed of Trust notwithstanding the fact that all of the Secured Obligations have not been satisfied.
5. | Incorporation. This Modification is made upon all of the terms, covenants and agreements of the Deed of Trust, which are incorporated herein by reference, and the provisions contained herein shall have the same effect as if such provisions were originally included in the Deed of Trust. Except as supplemented and amended hereby or by instruments previously executed, all of the terms, covenants and agreements of the Deed of Trust remain unchanged, and as supplemented and amended they continue in full force and effect. |
6. | Ratification and Reconfirmation. Grantor and Beneficiary agree that except as specifically modified herein, all the terms, provisions, representations and warranties of the Deed of Trust are hereby ratified and reaffirmed by Grantor and Grantor specifically acknowledges the validity and enforceability thereof. Grantor and Beneficiary hereby agree that the Deed of Trust as modified by this Modification is in full force and effect and nothing herein contained shall be construed as modifying the Deed of Trust in any manner except as specifically modified hereby. |
7. | Counterparts. This Modification may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
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IN WITNESS WHEREOF, Beneficiary and Grantor have executed this Modification as of the day and year set forth above.
BENEFICIARY | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent |
By: | /s/ Bryan Stevens | |
Name: | Bryan Stevens | |
Its: | Senior Vice President |
GRANTOR/BORROWER
KBSII CRESCENT VIII, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Signature Page Modification of Deed of Trust
STATE OF CALIFORNIA
COUNTY OF OrangeSS.
On January 18, 2011 before me, Stacy R. Novack, Notary Public, personally appeared Bryan Stevens, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ Stacy R. Novack
My commission expires 1/6/2013
STATE OF CALIFORNIA
COUNTY OF OrangeSS.
On January 18, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013
Exhibit 10.32
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS DEED OF TRUST SECURES A NOTE WHICH PROVIDES FOR A VARIABLE INTEREST RATE
DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Deed of Trust), made as of January 27, 2011, are KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company (Trustor), AMERICAN SECURITIES COMPANY, a California corporation (Trustee), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
ARTICLE 1. GRANT IN TRUST
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the City of Sacramento, County of Sacramento, State of California, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Trustor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; any and all rights of Trustor, as a declarant or otherwise, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A hereto including that certain Master Declaration of Reciprocal Covenants, Conditions and Restrictions and Grant of Reciprocal Easements dated and recorded on June 28, 2005, in Book No. 20050628, Page 2296, Official Record Sacramento County (Official Record), supplemented on July 20, 2005 in Book No. 20050720, Page 2055, Official Record, and supplemented December 11, 2006, in Book No. 20061211, Pages 1129-31, provided, however, that Beneficiary shall have no liability under such covenants, conditions, and restrictions unless and until Beneficiary forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Trustor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
Loan No. 1002835
1.2 | ADDRESS. The address of the Subject Property is: 160 and 180 Promenade Circle, Sacramento, California. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. |
ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Trustor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Beneficiary and Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Trustor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Trustor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
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Loan No. 1002835
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Trustor hereby irrevocably assigns to Beneficiary all of Trustors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Trustor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiarys right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
3.2 | GRANT OF LICENSE. Beneficiary confers upon Trustor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Trustor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying with any such notice or demand by Beneficiary. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Beneficiary and Trustee shall not directly or indirectly be liable to Trustor or any other person as a consequence of: (i) the exercise or failure to exercise by Beneficiary or Trustee, or any of their respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Beneficiary or Trustee hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that, to the best of Trustors knowledge: (a) Trustor has delivered to Beneficiary a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
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3.5 | COVENANTS. Trustor covenants and agrees at Trustors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Trustors best efforts to keep all portions of the Subject Property that are capable of being leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Beneficiary fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable effort to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Trustor shall not, without Beneficiarys prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiarys consent hereunder, any sums received by Trustor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Trustor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Trustor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Trustor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Trustor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Trustors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names,
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trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Trustor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Trustor with respect to the Subject Property; all advance payments of insurance premiums made by Trustor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under the California Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that: (a) Trustor has, as of the date of recordation of this Deed of Trust, and will have, good title to the Collateral; (b) Trustor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Trustors principal place of business is located at the address shown in Section 7.11; and (d) Trustors legal name is exactly as set forth on the first page of this Deed of Trust and all of Trustors organizational documents or agreements delivered to Beneficiary are complete and accurate in every respect. |
4.3 | COVENANTS. Trustor agrees: (a) to execute and deliver such documents as Beneficiary deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Beneficiary prior written notice thereof; (c) to cooperate with Beneficiary in perfecting all security interests granted herein and in obtaining such agreements from third parties as Beneficiary deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Beneficiary is authorized to file financing statements in the name of Trustor to perfect Beneficiarys security interest in Collateral. |
4.4 | RIGHTS OF BENEFICIARY. In addition to Beneficiarys rights as a Secured Party under the UCC, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Beneficiarys rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Trustor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiarys rights as a Secured Party under the UCC or otherwise at law: |
(a) | Beneficiary may (i) upon written notice, require Trustor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Trustors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
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(b) | Beneficiary may, for the account of Trustor and at Trustors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Trustor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Beneficiary may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Beneficiary to the payment of expenses incurred by Beneficiary in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Beneficiary toward the payment of the Secured Obligations in such order of application as Beneficiary may from time to time elect. |
Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Trustor shall make an express written election of said remedy under UCC §9620, or other applicable law. Trustor agrees that Beneficiary shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as Trustors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Beneficiary may, without the obligation to do so, in Beneficiarys name, or in the name of Trustor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiarys security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Trustor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Deed of Trust or any of the Loan Documents, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Trustors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Trustor represents and warrants that, except as disclosed to Beneficiary in a writing which refers to this warranty, Trustor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Deed of Trust is a first and prior lien on the Subject Property. Trustor hereby represents and warrants that all of the Subject Property is a single tax parcel, and there are no properties included in such tax parcel other than the Subject Property. Trustor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Trustors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Trustor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Trustor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligation; provided, however, Trustor |
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shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiarys net income. |
(b) | Trustor may contest in good faith any taxes or assessments if: (i) Trustor pursues the contest diligently and in compliance with applicable laws, in a manner which Beneficiary determines is not prejudicial to Beneficiary, and does not impair the rights of Beneficiary under any of the Loan Documents; and (b) Trustor deposits with Beneficiary any funds or other forms of assurance which Beneficiary in good faith determines from time to time appropriate to protect Beneficiary from the consequences of the contest being unsuccessful. Trustors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Beneficiarys option and upon its demand, Trustor shall, until all Secured Obligations have been paid in full, pay to Beneficiary monthly, annually or as otherwise directed by Beneficiary an amount estimated by Beneficiary to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and insurance required or requested pursuant to the Loan Documents when same are next due. If Beneficiary determines that any amounts paid by Trustor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Beneficiary shall notify Trustor of the increased amounts required to pay all amounts when due, whereupon Trustor shall pay to Beneficiary within thirty (30) days thereafter the additional amount as stated in Beneficiarys notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Beneficiary shall, unless Trustor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Beneficiary release said funds to Trustor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Trustor hereunder or under any Loan Document, Beneficiary may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Trustor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Deed of Trust, Beneficiary shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Beneficiary and the Trustee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Beneficiary may elect, the balance of all amounts collected and in Beneficiarys possession shall be paid to Trustor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Trustor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Trustor shall immediately discharge any lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Subject to the following sentence, Trustor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Beneficiary, Trustor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Beneficiarys demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Beneficiary a surety bond in sufficient form and amount; or (c) provide Beneficiary with other assurances which Beneficiary deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Beneficiary from the effect of such lien or bonded stop notice. |
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5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Trustor to Beneficiary and, at the request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Beneficiary to be maintained by Trustor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Beneficiary, and/or Beneficiary may release all or any part of the proceeds to Trustor upon any conditions Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary; provided, however, in no event shall Beneficiary be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Beneficiary or its employees or agents. |
(b) | Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Beneficiary of such additional funds which Beneficiary determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Beneficiary, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Beneficiary; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Trustor since the date of this Deed of Trust; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Beneficiary may reasonably establish to protect its security. Trustor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Beneficiary of such insurance or condemnation proceeds, then Beneficiary may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Beneficiary in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Beneficiary shall release such proceeds to Trustor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Trustor covenants: (a) to insure the Subject Property and Collateral against such risks as Beneficiary may require pursuant to the Loan Agreement and, at Beneficiarys request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any zoning or other land classification |
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which affects the Subject Property without Beneficiarys prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Beneficiary elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Trustors sole expense, Trustor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Beneficiary and Trustee hereunder against all adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | POWERS OF BENEFICIARY. Beneficiary may, without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby and without liability therefor and without notice: (a) release all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. |
5.10 | ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. |
(a) | Trustee accepts this trust when this Deed of Trust is recorded. Except as may be required by applicable law, Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trust hereunder and the enforcement of the rights and remedies available hereunder, and may obtain orders or decrees directing or confirming or approving acts in the execution of said trust and the enforcement of said remedies. |
(b) | Trustee shall not be required to take any action toward the execution and enforcement of the trust hereby created or to institute, appear in, or defend any action, suit, or other proceeding in connection therewith where, in his opinion, such action would be likely to involve him in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is tendered security and indemnity satisfactory to Trustee against any and all cost, expense, and liability arising therefrom. Trustee shall not be responsible for the execution, acknowledgment, or validity of the Loan Documents, or for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and Trustee makes no representation in respect thereof or in respect of the rights, remedies, and recourses of Beneficiary. |
(c) | With the approval of Beneficiary, Trustee shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Beneficiary) upon any matters arising hereunder, including the preparation, execution, and interpretation of the Loan Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his agents or attorneys, (iii) to select and employ, in and about the execution of his duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Trustee, and Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustees gross negligence or bad faith, and (iv) any and all other lawful action as Beneficiary may instruct Trustee to take to protect or enforce Beneficiarys |
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rights hereunder. Trustee shall not be personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein granted to Trustee, upon the Subject Property for debts contracted for or liability or damages incurred in the management or operation of the Subject Property. Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. Trustee shall be entitled to reimbursement for expenses incurred by Trustee in the performance of Trustees duties hereunder and to reasonable compensation for such of Trustees services hereunder as shall be rendered. TRUSTOR WILL, FROM TIME TO TIME, PAY THE COMPENSATION DUE TO TRUSTEE HEREUNDER AND REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND HOLD HARMLESS TRUSTEE AGAINST, ANY AND ALL LIABILITY AND EXPENSES WHICH MAY BE INCURRED BY TRUSTEE IN THE PERFORMANCE OF TRUSTEES DUTIES. |
(d) | All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by applicable law) and Trustee shall be under no liability for interest on any moneys received by Trustee hereunder. |
(e) | Should any deed, conveyance, or instrument of any nature be required from Trustor by any Trustee or substitute Trustee to more fully and certainly vest in and confirm to the Trustee or substitute Trustee such estates, rights, powers, and duties, then, upon request by the Trustee or substitute Trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Trustor. |
(f) | By accepting or approving anything required to be observed, performed, or fulfilled or to be given to Trustee pursuant to the Loan Documents, including without limitation, any deed, conveyance, instrument, officers certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Trustee shall not be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness, or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or affirmation with respect thereto by Trustee. |
5.11 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Trustor shall pay Trustees fees and reimburse Trustee for expenses in the administration of this trust, including attorneys fees. Trustor shall pay to Beneficiary reasonable compensation for services rendered concerning this Deed of Trust, including without limit any statement of amounts owing under any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Trustor under any agreement related to the Subject Property or Collateral or under this Deed of Trust; or (iii) any loss sustained by Trustor or any third party resulting from Beneficiarys failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary, and all such liability is hereby expressly waived and released by Trustor. |
(b) | TRUSTOR INDEMNIFIES TRUSTEE AND BENEFICIARY AGAINST, AND HOLDS TRUSTEE AND BENEFICIARY HARMLESS FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, CAUSES OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS FEES AND OTHER LEGAL EXPENSES, COST OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH EITHER MAY SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST; (ii) BY REASON OF THE EXECUTION OF THIS DEED OF TRUST OR IN PERFORMANCE OF ANY ACT REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii) AS |
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A RESULT OF ANY FAILURE OF TRUSTOR TO PERFORM TRUSTORS OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED OBLIGATION OR UNDERTAKING ON BENEFICIARYS PART TO PERFORM OR DISCHARGE ANY OF THE REPRESENTATIONS, WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS CONTAINED IN ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY. THE ABOVE OBLIGATION OF TRUSTOR TO INDEMNIFY AND HOLD HARMLESS TRUSTEE AND BENEFICIARY SHALL SURVIVE THE RELEASE AND CANCELLATION OF THE SECURED OBLIGATIONS AND THE RELEASE AND RECONVEYANCE OR PARTIAL RELEASE AND RECONVEYANCE OF THIS DEED OF TRUST. |
(c) | Trustor shall pay all amounts and indebtedness arising under this Section 5.11 immediately upon demand by Trustee or Beneficiary together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.12 | SUBSTITUTION OF TRUSTEES. From time to time, by a writing, signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Subject Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Trustee or any successor. Such writing shall set forth any information required by law. The recordation of such instrument of substitution shall discharge Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Trustee herein. A writing recorded pursuant to the provisions of this Section 5.12 shall be conclusive proof of the proper substitution of such new Trustee. |
5.13 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Trustor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Beneficiary in approving loan applications. |
(b) | Trustor has represented to Beneficiary, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Beneficiary making the Loan, certain facts concerning Trustors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Beneficiary has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Beneficiary in the absence of these representations and warranties. |
(d) | Beneficiary would not have made this Loan if Beneficiary did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Trustors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Trustor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Trustor. |
(f) | Beneficiary has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Trustor breaches its covenants contained below regarding Transfers. |
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(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Beneficiarys security for the Note. |
(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Trustors right, title and/or interest in the Loan Documents and any subsequent documents executed by Trustor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Trustor if Trustor is a partnership; (v) legal or beneficial ownership of any membership interest in Trustor if Trustor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Trustor; or (vii) legal or beneficial ownership of any of the stock in Trustor if Trustor is a corporation or in any general partner, venturer or member in Trustor that is a corporation. |
(i) | Trustor shall not make or commit to make any Transfer without Beneficiarys prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Beneficiary may predicate Beneficiarys decision to grant consent to a Transfer on such terms and conditions as Beneficiary may require, in Beneficiarys sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Beneficiarys ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Beneficiary for all costs and expenses incurred by Beneficiary in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Beneficiarys security will be impaired by the proposed Transfer, (v) payment to Beneficiary of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Beneficiarys reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Beneficiarys liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Beneficiarys consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Trustors interest shall: (i) assume all of Trustors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Trustor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Beneficiary. In the event of any Transfer without the prior written consent of Beneficiary, whether or not Beneficiary elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Beneficiary, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Trustor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Beneficiary relied upon in making the Loan may no longer be relied upon. A consent by Beneficiary to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Beneficiarys consent with respect to future Transfers. |
5.14 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance |
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of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Deed of Trust upon the Subject Property and Collateral. |
5.15 | RECONVEYANCE. Upon Beneficiarys written request, and upon surrender to Trustee for cancellation of this Deed of Trust or a certified copy thereof and any note, instrument, or instruments setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Subject Property or that portion thereof then held hereunder. To the extent permitted by law, the reconveyance may describe the grantee as the person or persons legally entitled thereto and the recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Subject Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to cause Trustee to reconvey the Subject Property notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.16 | SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to the Loan Documents or by the proceeds of any loan secured by this Deed of Trust. |
5.17 | RIGHT OF INSPECTION. Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Trustors compliance with the terms hereof. |
5.18 | CONTRACTS. Trustor will deliver to Beneficiary a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Beneficiary required by any of the Loan Documents. Within twenty (20) days after a request by Beneficiary, Trustor shall prepare and deliver to Beneficiary a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Beneficiary, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Beneficiary). Trustor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Trustor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Beneficiarys option, the failure of Trustor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Trustor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Trustor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure, or (d) if Trustor or any other Person shall make a Transfer without the prior written consent of Beneficiary (which consent may be withheld in Beneficiarys sole discretion (except for those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.13). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies: |
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(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Trustor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Trustor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Beneficiary or Trustee deem necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee under this Deed of Trust; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of either Beneficiary or Trustee, is or may be senior in priority to this Deed of Trust, the judgment of Beneficiary or Trustee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Deed of Trust; or (v) to employ counsel, accountants, contractors and other appropriate persons. |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Trustor hereunder, and Trustor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Trustor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Trustor hereby consents to such appointment; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Trustor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Beneficiary deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Trustees or Beneficiarys sole judgment, to protect or enhance the security hereof; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Trustee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Trustee, without notice to or demand upon Trustor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Beneficiary in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Trustor nor any other person or entity other than Beneficiary shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Trustee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Trustee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee, Trustor or Beneficiary may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Beneficiary concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Trustee and Beneficiary, or either of them, determine in their sole discretion. |
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(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Beneficiary may credit bid (as determined by Beneficiary in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Beneficiary may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Beneficiary in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Beneficiary with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Beneficiary anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Beneficiary; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Beneficiary (in its sole and absolute discretion) deems appropriate. In regard to the above, Trustor acknowledges and agrees that: (w) Beneficiary is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Beneficiary any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Beneficiarys credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Trustor and Beneficiary; and (z) Beneficiarys credit bid may be (at Beneficiarys sole and absolute discretion) higher or lower than any appraised value of the Subject Property. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Trustee, and of this trust, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Trustee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Beneficiary under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. |
6.5 | NO CURE OR WAIVER. Neither Beneficiarys nor Trustees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Trustor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of or security interests created by this Deed of Trust. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Trustor agrees to pay to Beneficiary immediately and without demand all costs and expenses incurred by Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. In addition, Trustor shall pay to Trustee |
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all Trustees fees hereunder and shall reimburse Trustee for all expenses incurred in the administration of this trust, including, without limitation, any attorneys fees. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems appropriate to protect Beneficiarys interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiarys security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Beneficiary may perform any obligation of Trustor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Trustor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Beneficiary under this Section. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Trustor which apply to this Deed of Trust and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Beneficiarys acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. |
7.3 | OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as Trustor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | RECOURSE TO SEPARATE PROPERTY. Any married person who executes this Deed of Trust as a Trustor agrees that any money judgment which Beneficiary or Trustee obtains pursuant to the terms of this Deed of Trust or any other obligation of that married person secured by this Deed of Trust may be collected by execution upon that persons separate property, and any community property of which that person is a manager. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Trustor, for itself and for all parties claiming through or under Trustor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property, which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Deed of Trust or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Beneficiary shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
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7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of clause (d) of Section 6.1. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CALIFORNIA LAW. This Deed of Trust shall be construed in accordance with the laws of the State of California, except to the extent that federal laws preempt the laws of the State of California. |
7.10 | INCORPORATION. Exhibits A and B, as attached, are incorporated into this Deed of Trust by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Trustor: |
KBSII Gateway Corporate Center, LLC c/o KBS Capital Advisors LLC Property Matters: Steve Silva, Sr. Vice President 201 California Street, Suite 470 San Francisco, CA 94111 Tel: (415) 962-0191 Fax (415) 962-0188 Email: ssilva@kbsrealty.com
| |
Trustee: |
American Securities Company, a California corporation Legal Department 633 Folsom, 7th floor San Francisco, CA 94107 MAC 0149-075 Attn: Real Estate Group Counsel (w/ reference to Loan # 1002835 and Beneficiary AU #02955)
|
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Beneficiary: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835
| |
With a copy to: |
Wells Fargo Bank, National Association Disbursement and Operations Center 2120 East Park Place, Suite 100 El Segundo, CA 90245 Attention: Eva Lopez
|
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Trustor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Trustor naming Beneficiary, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Trustor to perform its obligations to Beneficiary under the Note or the Loan Agreement. |
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Deed of Trust. |
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year set forth above.
TRUSTOR
KBSII GATEWAY CORPORATE CENTER, LLC,
a Delaware limited liability company
By: | KBSII REIT ACQUISITION XIX, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
EXHIBIT A
Loan No. 1002835
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, as Trustor, to AMERICAN SECURITIES COMPANY, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain other lenders, as Beneficiary, dated as of January 27, 2011.
All the certain real property located in the County of Sacramento, State of California, described as follows:
PARCEL A:
PARCEL 4, AS SHOWN ON THAT CERTAIN CERTIFICATE OF COMPLIANCE OF LOT LINE ADJUSTMENT RECORDED NOVEMBER 24, 2008 IN BOOK 20081124 PAGE 897, OFFICIAL RECORDS OF THE COUNTY OF SACRAMENTO, STATE OF CALIFORNIA, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
ALL THAT PORTION OF PARCEL 3 AS RECORDED IN THE LOT LINE ADJUSTMENT RECORDED IN BOOK 20070103, PAGE 1164, AND PARCEL 1 AS RECORDED IN THE LOT LINE ADJUSTMENT RECORDED IN BOOK 20070404, PAGE 0157, OFFICIAL RECORDS OF THE COUNTY OF SACRAMENTO, STATE OF CALIFORNIA, AND DESCRIBED AS FOLLOWS: COMMENCING AT A FOUND COTTON SPINDLE WITH WASHER STAMPED LS 6947 MARKING THE CENTERLINE INTERSECTION OF NORTH FREEWAY BOULEVARD AND PROMENADE CIRCLE AS SHOWN ON THE FINAL MAP OF PROMENADE AT NATOMAS FILED IN BOOK 341, MAPS PAGE 12 OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG THE CENTERLINE OF SAID PROMENADE CIRCLE SOUTH 00° 37. 56 EAST, 684.32 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE EASTERLY HAVING A RADIUS OF 600.00 FEET; THENCE SOUTHERLY 178.02 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 00. 00; THENCE SOUTH 17° 37. 56 EAST, 20.67 FEET; THENCE SOUTH 00° 37. 56 EAST, 113.97 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 00° 37. 56 EAST 450.12 FEET TO THE BEGINNING OF A NON-TANGENT CURVE CONCAVE NORTHERLY HAVING A RADIUS OF 625.00 FEET TO WHICH A RADIAL BEARS SOUTH 06° 29. 39 WEST; THENCE WESTERLY 80.59 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 07° 23. 16; THENCE TANGENT TO SAID CURVE NORTH 76° 07. 05 WEST, 584.14 FEET; THENCE NORTH 35° 20. 14 WEST, 309.84 FEET; THENCE NORTH 55° 50. 17 WEST, 32.59 FEET; THENCE NORTH 31° 29. 02 WEST, 30.13 FEET; THENCE NORTH 00° 21. 59 WEST, 45.64 FEET; THENCE NORTH 89° 22. 19 EAST, 12.67 FEET; THENCE NORTH 54° 41. 02 EAST 43.16 FEET; THENCE SOUTH 35° 18. 50 EAST, 294.27 FEET; THENCE NORTH 33° 43. 16 EAST, 233.70 FEET; THENCE NORTH 40° 19. 00 WEST, 106.41 FEET; THENCE NORTH 49° 41. 02 EAST, 62.00 FEET; THENCE NORTH 40° 19. 00 WEST, 25.88 FEET; THENCE NORTH 49° 41. 00 EAST, 30.09 FEET; THENCE NORTH 00° 37. 26 WEST, 155.40 FEET; THENCE NORTH 89° 22. 34 EAST, 66.88 FEET; THENCE SOUTH 00° 37. 26 EAST 310.00 FEET; THENCE NORTH 89° 22. 34 EAST, 67.19 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE NORTHERLY HAVING A RADIUS OF 600.00 FEET; THENCE EASTERLY 178.02 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 00. 00; THENCE TANGENT TO SAID CURVE NORTH 72° 22. 34 EAST, 58.16 FEET; THENCE SOUTH 17° 37. 26 EAST, 27.67 FEET; THENCE NORTH 72° 22. 34 EAST 26.29 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 42.33 FEET; THENCE EASTERLY 33.05 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 44° 44. 06 TO THE BEGINNING OF A COMPOUND CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 19.33 FEET; THENCE SOUTHEASTERLY 5.91 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 17° 31. 48 TO THE BEGINNING OF A COMPOUND CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 42.33 FEET; THENCE SOUTHERLY 33.05 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 44° 44. 06; THENCE TANGENT TO SAID CURVE SOUTH 00° 37. 26 EAST, 25.22 FEET; THENCE NORTH 89° 22. 34 EAST, 27.80 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL B:
EASEMENTS FOR INGRESS AND EGRESS, PARKING, UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF GATEWAY CORPORATE CENTER, RECORDED JUNE 28, 2005 IN BOOK 20050628 PAGE 2298, OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN.
Assessors Parcel Number : 225-2110-060-0000
PARCEL C
LOT 20 AS SHOWN ON THE MAP ENTITLED PROMENADE AT NATOMAS, RECORDED JUNE 16, 2005, IN BOOK 341 OF MAPS, AT PAGE 12, AND AS AMENDED BY THAT CERTAIN CERTIFICATE OF CORRECTION RECORDED AUGUST 21, 2008 AS BOOK 20080821 AT PAGE 1336, OF OFFICIAL RECORDS.
PARCEL D
A NON-EXCLUSIVE EASEMENT OVER THE REAL PROPERTY SHOWN ON THE FINAL MAP ENTITLED PROMENADE AT NATOMAS, RECORDED IN BOOK 341 OF MAPS AT PAGE 12, RECORDS OF SACRAMENTO COUNTY, CALIFORNIA FOR (1) THE FLOW OF STORM WATER DRAINAGE, (2) SANITARY SEWER FACILITIES NECESSARY TO SERVE PARCEL ONE AND (3) WATER FACILITIES NECESSARY TO SERVE PARCEL ONE TO THE EXTENT PROVIDED UNDER THE MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF SACRAMENTO GATEWAY (MASTER DECLARATION) RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2296, OFFICIAL RECORDS.
PARCEL E
EASEMENT FOR DRAINAGE AND UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF SACRAMENTO GATEWAY RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2296, OFFICIAL RECORDS.
PARCEL F
EASEMENTS FOR INGRESS AND EGRESS, PARKING, UTILITIES AND INCIDENTAL PURPOSES AND ALL OTHER EASEMENTS CONTAINED IN THE DOCUMENT ENTITLED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF RECIPROCAL EASEMENTS OF GATEWAY CORPORATE CENTER RECORDED JUNE 28, 2005 IN BOOK 20050628, PAGE 2298, OFFICIAL RECORDS.
Assessors Parcel Number: 225-2110-020-0000
EXHIBIT B
Loan No. 1002835
EXHIBIT B
NON-BORROWER TRUSTOR RIDER
Exhibit B to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, as Trustor, to AMERICAN SECURITIES COMPANY, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain other lenders, as Beneficiary, dated as of January 27, 2011.
To the extent the Deed of Trust secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Trustor, the party or parties constituting Trustor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Trustor hereby waives any right it may now or hereafter have to require Beneficiary, as a condition to the exercise of any remedy or other right against Trustor hereunder or under any other document executed by Trustor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Beneficiary by Trustor or any Borrower or other person; (b) to pursue any other right or remedy in Beneficiarys power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Beneficiary by any Borrower or other person (other than Trustor), or otherwise to comply with the UCC (as defined in the Deed of Trust) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Trustor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Trustor by any Borrower or otherwise intended or understood by Trustor or any Borrower; (d) any act or omission by Beneficiary which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Deed of Trust) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Beneficiary to marshal assets in favor of Trustor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Beneficiary, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Trustors rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Beneficiary to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Beneficiary, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Trustor further waives any and all rights and defenses that Trustor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Beneficiary may collect from Trustor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Beneficiary forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Beneficiary may collect from Trustor even if Beneficiary, by foreclosing on the real property collateral, has destroyed any right Trustor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Trustor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Trustor include, but are not limited to, any rights or defenses based upon Section |
EXHIBIT B
Loan No. 1002835
580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Trustor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Trustor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. |
3. | SUBROGATION. Trustor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Trustor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Beneficiary with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Trustor warrants and agrees: (a) that Beneficiary would not make the Loan but for this Deed of Trust; (b) that Trustor has not relied, and will not rely, on any representations or warranties by Beneficiary to Trustor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Trustor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Trustor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Beneficiary shall have no duty to disclose or report to Trustor any information now or hereafter known to Beneficiary with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Trustor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Beneficiarys rights hereunder shall be reinstated and revived, and the enforceability of this Deed of Trust shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Beneficiary is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Trustor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Trustor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Trustor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Trustor, such payment or distribution shall be held in trust and immediately paid over to Beneficiary, is hereby assigned to Beneficiary as security for the Secured Obligations, and shall be held by Beneficiary in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Trustor warrants that all of the waivers in this Deed of Trust are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Trustor may destroy or impair rights which Trustor would otherwise have against Beneficiary, Borrower and other persons, or against collateral. Trustor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Trustor hereby acknowledges that: (a) the obligations undertaken by Trustor in this Deed of Trust are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Beneficiarys consideration for entering into this transaction, Beneficiary has specifically bargained for the waiver and relinquishment by Trustor of all such defenses, and (d) Trustor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Trustor does hereby represent and confirm to Beneficiary that Trustor is fully informed regarding, and that Trustor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Trustor, and (iv) the legal consequences to |
EXHIBIT B
Loan No. 1002835
Trustor of waiving such defenses. Trustor acknowledges that Trustor makes this Deed of Trust with the intent that this Deed of Trust and all of the informed waivers herein shall each and all be fully enforceable by Beneficiary, and that Beneficiary is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS DEED OF TRUST, AND BY ITS ACCEPTANCE HEREOF, BENEFICIARY, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND BENEFICIARY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS DEED OF TRUST AND BENEFICIARY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND BENEFICIARY TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Deed of Trust and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Deed of Trust and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Beneficiary in writing. |
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On January 18th, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
Exhibit 10.33
Loan No. 1002835
AMENDED AND RESTATED AND CONSOLIDATED LIMITED GUARANTY
(Secured Loan)
THIS AMENDED AND RESTATED AND CONSOLIDATED LIMITED GUARANTY (Guaranty) is made as of January 27, 2011, by KBS REIT PROPERTIES II, LLC, a Delaware limited liability company (Guarantor), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (Administrative Agent), as administrative agent for itself and the Lenders from time to time a party to the Loan Agreement (defined below).
R E C I T A L S
A. | KBSII Hartman Business Center, LLC, a Delaware limited liability company, KBSII Plano Business Park, LLC, a Delaware limited liability company, KBSII Horizon Tech Center, LLC, a Delaware limited liability company, KBSII 2500 Regent Boulevard, LLC, a Delaware limited liability company, KBSII Crescent VIII, LLC, a Delaware limited liability company (together, Original Horizon Borrowers), Administrative Agent and Lenders previously executed a Loan Agreement, dated September 30, 2010 (the Horizon Loan Agreement), whereby Lenders made a loan to Original Horizon Borrowers in the original principal amount of $50,000,000 (the Original Horizon Loan). The Original Horizon Loan is secured by liens on certain real properties located in the states of California, Texas, Georgia and Colorado (the Horizon Properties). In connection with the Original Horizon Loan, Guarantor executed a Limited Guaranty, dated September 30, 2010 (the Horizon Guaranty). |
B. | KBSII National City Tower, LLC, a Delaware limited liability company (the Original National City Borrower, together with the Original Horizon Borrowers, collectively, the Original Borrowers), Administrative Agent and Lenders previously executed a Loan Agreement, dated December 16, 2010 (the National City Loan Agreement), whereby Lenders made a loan to Original National City Borrower in the original principal amount of $69,000,000 (the Original National City Loan, and, together with the Original Horizon Loan, collectively, the Original Loan). The Original National City Loan is secured by a lien on certain real property located in Kentucky (the National City Property, and, together with the Horizon Properties, collectively, the Original Properties). In connection with the Original National City Loan, Guarantor executed a Limited Guaranty, dated December 16, 2010 (the National City Guaranty). |
C. | Original Borrowers, KBSII Granite Tower, LLC, a Delaware limited liability company (Granite Borrower), KBSII Gateway Corporate Center, LLC, a Delaware limited liability company (Gateway Borrower, and, together with Original Borrowers and Granite Borrower, collectively, the Borrowers, and each individually, a Borrower), Administrative Agent and Lenders have entered into an Amended and Restated and Consolidated Loan Agreement, dated as of even date herewith (the Loan Agreement), whereby Lenders have agreed to lend to Borrowers and Borrowers have agreed to borrow from Lenders a principal amount of up to Three Hundred Sixty Million Dollars ($360,000,000), which amount may be increased to Three Hundred Seventy-Two Million Dollars ($372,000,000), subject to the terms of the Loan Agreement (the Loan). |
D. | The Loan is evidenced by one or more secured promissory notes in the aggregate principal amount of the Loan (collectively, as the same may amended, modified or replaced from time to time, the Note) executed by Borrowers in favor of Lenders pursuant to the terms of the Loan Agreement, and is further evidenced by the documents described in the Loan Agreement as the Loan Documents. The Note is secured by, among other things, the Security Documents. All capitalized terms not otherwise defined herein shall have the meanings given to them in the Loan Agreement. |
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Loan No. 1002835
E. | As a condition to Administrative Agents and Lenders agreement to enter into the Loan Agreement and to make the Loan, Guarantor has agreed to enter into this Guaranty, which amends, restates, consolidates and replaces the Horizon Guaranty and the National City Guaranty. |
F. | Guarantor is the direct or indirect owner of each of the Borrowers and will benefit from the Loan Agreement. |
THEREFORE, to induce Administrative Agent and Lenders to enter into the Loan Agreement, and in consideration thereof, Guarantor unconditionally, absolutely and irrevocably guarantees and agrees as follows:
1. | GUARANTY. Upon the occurrence of any event referred to in Section 11.1(f)(i) (provided, that, for purposes of this Guaranty, the 60-day time period for dismissal referred to in Section 11.1(f)(i) shall be increased to 120 days) or Section 11.1(g) of the Loan Agreement, Guarantor guarantees and promises to pay to Administrative Agent, or order, on demand, in lawful money of the United States, in immediately available funds, the entire principal sum which is now or hereafter due and owing under the Note or any of the other Loan Documents, together with interest and any other sums payable under the Note. Guarantor further guarantees and promises to pay to Administrative Agent, or order, on demand, in lawful money of the United States, in immediately available funds, and to defend, indemnify and hold harmless Administrative Agent and Lenders, their directors, officers, employees, successors and assigns from and against all losses, damages, liabilities, claims, actions, judgments, court costs and legal and other expenses (including, without limitation, attorneys fees and expenses) which Administrative Agent or any Lender may incur as a direct or indirect consequence of (a) fraud or willful misrepresentation by any Borrower, Guarantor, the Manager, KBS Real Estate Investment Trust II, Inc. (KBS REIT), or any other Affiliate of Guarantor or KBS REIT (collectively, Borrowers or their Affiliate); (b) intentional physical waste of any real property constituting collateral for the Loan (Property) by any Borrower or its Affiliate; (c) intentional misapplication or misappropriation by any Borrower or its Affiliate of (i) proceeds paid under any insurance policy by reason of damage, loss or destruction affecting any portion of the Property, or (ii) any proceeds or awards resulting from condemnation of all or any part of the Property or any deed given in lieu thereof; (d) intentional misapplication or misappropriation by Borrowers or their Affiliate of rents received after receipt by Borrowers, or any of them, of any notice of default, foreclosure or the exercise of the power of sale under the Security Documents, or any of them, or any other remedies by Administrative Agent upon a default by Borrowers; (e) intentional misappropriation or misapplication by Borrowers or their Affiliate of any funds disbursed to Borrowers, or any of them, from any Account; (f) Borrowers breach of the covenants set forth in Section 9.17(a) of the Loan Agreement; (g) Borrowers failure to maintain the policies of casualty and/or terrorism insurance required pursuant to the terms of the Loan Agreement, provided (i) such insurance is available at commercially reasonable rates and (ii) there is sufficient cash flow from the Properties to pay the premiums for such insurance (which premiums shall be paid before debt service); or (h) subject to Section 3 below, Administrative Agents inability to obtain and/or apply proceeds of casualty insurance resulting from a casualty at the Property owned by Granite Borrower (the Granite Property) in accordance with the terms of the Security Document recorded against the Granite Property but only to the extent Administrative Agent is prevented or prohibited from so obtaining or applying proceeds of insurance due to the provisions of the Amended and Restated Master Declaration of Block 95 Condominiums, dated December 16, 2005 (as amended, the Declaration). |
2. | REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty, Administrative Agent may from time to time, and without first requiring performance by Borrowers or exhausting any or all security for the Loan, bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action |
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Loan No. 1002835
compensation for all loss, cost, damage, injury and expense sustained or incurred by Administrative Agent and/or Lenders as a direct or indirect consequence of the failure of Guarantor to perform its obligations hereunder, together with interest thereon at the rate of interest applicable to the principal balance of the Note. |
3. | LIMITATION OF LIABILITY. Notwithstanding anything to the contrary, if Guarantor delivers to Administrative Agent an estoppel certificate or other writing in favor of Administrative Agent, for the benefit of Lenders, executed by each of the members of the Board of Directors (as defined in the Declaration), which estoppel certificate or other writing (a) confirms (i) that Granite Borrower is authorized to maintain its own policy of casualty insurance with respect to the Granite Property, (ii) that Granite Borrower has named Administrative Agent as a loss payee on Granite Borrowers policy of casualty insurance insuring the Granite Property and (iii) that upon the occurrence of a casualty at the Granite Property, Administrative Agent shall have the right to receive any casualty insurance proceeds resulting from such casualty and to apply such proceeds in the manner contemplated by the Security Document recorded against the Granite Property, and (b) is otherwise in form and substance reasonably acceptable to Administrative Agent, then following Administrative Agents receipt of such estoppel certificate or other writing , Guarantor shall have no further liability under clause (h) of Section 1 above; provided, however, that Guarantors liability under clause (h) of Section 1 shall be reinstated if at any time the Association either (i) is named as a loss payee on Granite Borrowers policy of casualty insurance or (ii) purchases a separate policy of casualty insurance with respect to the Granite Property. |
4. | RIGHTS OF ADMINISTRATIVE AGENT. Guarantor authorizes Administrative Agent, without giving notice to Guarantor or obtaining Guarantors consent and without affecting the liability of Guarantor, from time to time to: (a) renew or extend all or any portion of Borrowers obligations under the Note or any of the other Loan Documents; (b) declare all sums owing to any Lender under the Note and the other Loan Documents due and payable upon the occurrence of a Default (as defined in the Loan Agreement) under the Loan Documents; (c) make non-material changes in the dates specified for payments of any sums payable in periodic installments under the Note or any of the other Loan Documents; (d) otherwise modify the terms of any of the Loan Documents, except for (i) increases in the principal amount of the Note or changes in the manner by which interest rates, fees or charges are calculated under the Note and the other Loan Documents (Guarantor acknowledges that if the Note or other Loan Documents so provide, said interest rates, fees and charges may vary from time to time) or (ii) advancement of the Maturity Date of the Note where no Default has occurred under the Loan Documents; (e) take and hold security for the performance of Borrowers obligations under the Note or the other Loan Documents and exchange, enforce, waive and release any such security; (f) apply such security and direct the order or manner of sale thereof as Administrative Agent in its discretion may determine; (g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrowers obligations under the Note or the other Loan Documents; (h) apply payments received by Administrative Agent from Borrowers to any obligations of Borrowers to Administrative Agent, in such order as Administrative Agent shall determine in its sole discretion, whether or not any such obligations are covered by this Guaranty; (i) assign this Guaranty in whole or in part; and (j) assign, transfer or negotiate all or any part of the indebtedness evidenced by the Note and the other Loan Documents. |
5. | GUARANTORS WAIVERS. Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrowers, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Borrowers from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of any Borrower or any principal of any Borrower or any defect in the formation of any Borrower or any principal of any Borrower; (c) any defense based upon the application by any Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrowers to |
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Loan No. 1002835
Administrative Agent or intended or understood by Administrative Agent or Guarantor; (d) any right and defense arising out of an election of remedies by Administrative Agent, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantors rights of subrogation and reimbursement against Borrowers, or any of them, by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (e) any defense based upon Administrative Agents failure to disclose to Guarantor any information concerning any Borrowers financial condition or any other circumstances bearing on Borrowers ability to pay all sums payable under the Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon Administrative Agents election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which Administrative Agent may have against Borrowers and any right to participate in, or benefit from, any security for the Note or the other Loan Documents now or hereafter held by Administrative Agent; (j) presentment, demand, protest and notice of any kind; (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof; and (l) any rights under California Code of Civil Procedure Sections 580a and 726(b), which provide, among other things, that (i) a creditor must file a complaint for deficiency within three (3) months of a nonjudicial foreclosure sale or judicial foreclosure sale, as applicable, (ii) a fair market value hearing must be held, and (iii) the amount of the deficiency judgment shall be limited to the amount by which the unpaid debt exceeds the fair market value of the security, but not more than the amount by which the unpaid debt exceeds the sale price of the security. Guarantor further waives any and all rights and defenses that Guarantor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Administrative Agent may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrowers; (2) if Administrative Agent forecloses on any real property collateral pledged by Borrowers, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Administrative Agent may collect from Guarantor even if Administrative Agent, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrowers. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Guarantor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Guarantor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Note or any of the other Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantors liability hereunder. |
6. | GUARANTORS WARRANTIES. Guarantor warrants and acknowledges that: (a) Administrative Agent and Lenders would not make the Loan but for this Guaranty; (b) there are no conditions precedent to the effectiveness of this Guaranty; (c) Guarantor has established adequate means of obtaining from sources other than Administrative Agent, on a continuing basis, financial and other information pertaining to Borrowers financial condition, the Property and Borrowers activities relating thereto and the status of Borrowers performance of obligations under the Loan Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantors risks hereunder and |
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Administrative Agent has made no representation to Guarantor as to any such matters; (d) the most recent financial statements of Guarantor previously delivered to Administrative Agent are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied (or other principles acceptable to Administrative Agent and Lenders) and fairly present the financial condition of Guarantor as of the respective dates thereof, and no material adverse change has occurred in the financial condition of Guarantor since the respective dates thereof; and (e) Guarantor has not and will not, without the prior written consent of Administrative Agent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein, other than in the ordinary course of Guarantors business. Notwithstanding the foregoing, or anything to the contrary, the calculation of the liabilities of Guarantor shall not include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount. |
7. | SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by Borrowers, or any of them, to Guarantor to the obligations at any time owing by Borrowers to Administrative Agent and/or Lenders under the Note and the other Loan Documents. Guarantor assigns all such indebtedness to Administrative Agent for the benefit of Lenders as security for this Guaranty, the Note and the other Loan Documents. Guarantor agrees to make no claim for such indebtedness until all obligations of Borrowers under the Note and the other Loan Documents have been fully discharged. Guarantor agrees that it will not take any action or initiate any proceedings, judicial or otherwise, to enforce Guarantors rights or remedies with respect to any such indebtedness, including without limitation any action to enforce remedies with respect to any defaults under such indebtedness or to any collateral securing such indebtedness or to obtain any judgment or prejudgment remedy against Borrowers or any such collateral. Guarantor also agrees that it will not commence or join with any other creditor or creditors of Borrowers in commencing any bankruptcy, reorganization or insolvency proceedings against Borrowers. Guarantor further agrees not to assign all or any part of such indebtedness unless Administrative Agent is given prior notice and such assignment is expressly made subject to the terms of this Guaranty. If Administrative Agent so requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Administrative Agent, (b) all security for such indebtedness shall be duly assigned and delivered to Administrative Agent, (c) such indebtedness shall be enforced, collected and held by Guarantor as trustee for Administrative Agent and shall be paid over to Administrative Agent on account of the Loan but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments and take such other action as Administrative Agent deems necessary or appropriate to perfect, preserve and enforce Administrative Agents rights in and to such indebtedness and any security therefor. If Guarantor fails to take any such action, Administrative Agent, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked. |
8. | BANKRUPTCY OF A BORROWER. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor may have against any Borrower relating to any indebtedness of such Borrower to Guarantor and shall assign to Administrative Agent all rights of Guarantor thereunder. If Guarantor does not file any such claim, Administrative Agent, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Administrative Agents discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Administrative Agents nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Administrative Agent or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in |
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such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Administrative Agent the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Administrative Agent all of Guarantors rights to any such payments or distributions; provided, however, Guarantors obligations hereunder shall not be satisfied except to the extent that Administrative Agent receives cash by reason of any such payment or distribution. If Administrative Agent receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or performed, the obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from Administrative Agent as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents. |
9. | LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Subject to the limitations set forth in the Loan Agreement, Guarantor agrees that Administrative Agent may elect, at any time, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Administrative Agents sole discretion. Guarantor further agrees that Administrative Agent may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Administrative Agent with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Guarantor, any Borrower, any partner of any Borrower, any constituent partner of any Borrower, any other guarantor and any non-borrower trustor); and/or (c) any lending relationship other than the Loan which Administrative Agent may have with any party connected with the Loan. In the event of any such sale, assignment or participation, Administrative Agent and the parties to such transaction shall share in the rights and obligations of Administrative Agent as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant, and upon written request by Administrative Agent, Guarantor shall, within fifteen (15) days after request by Administrative Agent, (x) deliver to Administrative Agent and any other party designated by Administrative Agent an estoppel certificate, in form and substance acceptable to Administrative Agent, verifying for the benefit of Administrative Agent and any such other party the status, terms and provisions of this Guaranty, and (y) enter into such amendments or modifications to this Guaranty and the Loan Documents as Administrative Agent may reasonably request in order to evidence and facilitate any such sale, assignment, or participation without impairing Guarantors rights or increasing Guarantors obligations hereunder. |
Anything in this Agreement to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Agreement, including this Section, any lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release such lender from its obligations thereunder. |
10. | ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a continuing guaranty of payment and not of collection and cannot be revoked by Guarantor and shall continue to be effective with respect to any indebtedness referenced in Section 1 hereof arising or created after any attempted revocation hereof or after the death of Guarantor (if Guarantor is a natural person, in which event this Guaranty shall be binding upon Guarantors |
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estate and Guarantors legal representatives and heirs). The obligations of Guarantor hereunder shall be in addition to and shall not limit or in any way affect the obligations of Guarantor under any other existing or future guaranties unless said other guaranties are expressly modified or revoked in writing. This Guaranty is independent of the obligations of Borrowers under the Note, the Security Documents and the other Loan Documents. Guarantor hereby authorizes and empowers Administrative Agent to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may then be available, since it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. Administrative Agent may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Borrowers or any other party or joining Borrowers or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty. |
11. | ATTORNEYS FEES; ENFORCEMENT. If any attorney is engaged by Administrative Agent to enforce or defend any provision of this Guaranty, or any of the other Loan Documents, or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, Guarantor shall pay to Administrative Agent, immediately upon demand all attorneys fees and costs incurred by Administrative Agent in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein. |
12. | RULES OF CONSTRUCTION. The term Borrowers as used herein shall include both the named Borrowers and any other person at any time assuming or otherwise becoming primarily liable for all or any part of the obligations of the named Borrowers under the Note and the other Loan Documents. The term person as used herein shall include any individual, company, trust or other legal entity of any kind whatsoever. If this Guaranty is executed by more than one person, the term Guarantor shall include all such persons. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty. |
13. | CREDIT REPORTS. Each legal entity and individual obligated on this Guaranty hereby authorizes Administrative Agent to order and obtain, from a credit reporting agency of Administrative Agents choice, a third party credit report on such legal entity and individual. |
14. | GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of California, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to Administrative Agent and Lenders under this Guaranty consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law. |
15. | ELECTRONIC DOCUMENT DELIVERIES. Documents required to be delivered pursuant to this Guaranty shall be delivered by electronic communication and delivery, including, the internet, e-mail or intranet websites to which the Administrative Agent and each Lender have access (including a commercial, third-party website such as www.edgar.com <http://www.edgar.com> or a website sponsored or hosted by the administrative agent or the Borrowers) provided that the foregoing shall not apply to notices to a Lender that have not notified the Administrative Agent or Guarantor that it cannot or does not want to receive electronic communications. The Administrative Agent or the Guarantor may, in its discretion, agree to accept notices and other communications to it hereunder by electronic delivery pursuant to procedures approved by it for all or particular notices or communications. Documents or notices delivered electronically shall be deemed to have been delivered twenty-four (24) hours after the date and time on which the |
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Administrative Agent or Guarantor posts such documents or the documents become available on a commercial website and the Administrative Agent or Guarantor notify each Lender of said posting and provides a link thereto provided if such notice or other communication is not sent or posted during the normal business hours of the recipient, said posting date and time shall be deemed to have commenced as of 9:00 a.m. on the opening of business on the next business day for the recipient. |
16. | MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor, Administrative Agent and Lenders. The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty. This Guaranty shall be deemed to be continuing in nature and shall remain in full force and effect and shall survive the exercise of any remedy by Administrative Agent under any Security Document or any other Loan Document, including without limitation any foreclosure or deed in lieu thereof. |
17. | ADDITIONAL PROVISIONS. Such additional terms, covenants and conditions as may be set forth on any exhibit executed by Guarantor and attached hereto which recites that it is an exhibit to this Guaranty are incorporated herein by this reference. |
18. | ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Administrative Agent and Lenders consideration for entering into this transaction, Administrative Agent and Lenders have specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to Administrative Agent and Lenders that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall each and all be fully enforceable by Administrative Agent and Lenders, and that Administrative Agent and Lenders are induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
19. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS GUARANTY, AND BY ITS ACCEPTANCE HEREOF, ADMINISTRATIVE AGENT AND LENDERS, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY, ADMINISTRATIVE AGENT AND LENDERS HEREBY AGREE AND CONSENT THAT ANY PARTY TO THIS GUARANTY AND ADMINISTRATIVE AGENT AND LENDERS MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS |
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WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND ADMINISTRATIVE AGENT AND LENDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR ADMINISTRATIVE AGENT AND LENDERS TO MAKE THE LOAN TO BORROWERS. |
20. | AMENDED AND RESTATED GUARANTY. This Guaranty amends, restates, consolidates and replaces the Horizon Guaranty and the National City Guaranty (together, the Existing Guaranty); provided, such amendment, restatement, consolidation and replacement of the Existing Guaranty by this Guaranty shall not cause or constitute a novation, release, impairment or discharge of the obligations existing under the Existing Guaranty. |
[Signature on following page.]
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IN WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the date first written above.
Guarantor | ||||||
KBS REIT PROPERTIES II, LLC, | ||||||
a Delaware limited liability company | ||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||
a Delaware limited partnership, its sole member | ||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||
a Maryland corporation, general partner | ||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||
Charles J. Schreiber, Jr. | ||||||
Chief Executive Officer |
Address of Guarantor:
KBS REIT Properties II, LLC
c/o KBS Capital Advisors LLC
Todd Smith, VP Controller, Corporate
620 Newport Center Drive, Suite 1300
Newport Beach, CA 92660
Tel: (949) 797-0338
Fax: (949) 417-6520
Email: tsmith@kbsrealty.com
Address of Administrative Agent:
Wells Fargo Bank, National Association
Real Estate Group
Orange County
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: | Bryan Stevens | |
Senior Vice President | ||
Tel: | (949) 251-4251 | |
Fax: | (949) 851-9728 |
Signature Page Amended and Restated and Consolidated Limited Guaranty
Exhibit 10.34
SECOND AMENDED AND RESTATED AND CONSOLIDATED SECURED PROMISSORY NOTE
$360,000,000 | February 8, 2011 |
FOR VALUE RECEIVED, KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, and KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust (collectively, Borrowers), HEREBY PROMISE TO PAY to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (Lender) the principal sum of Three Hundred and Sixty Million Dollars ($360,000,000), or if less, the aggregate unpaid principal amount of all disbursements disbursed by Lender pursuant to the requirements set forth in the Amended and Restated and Consolidated Loan Agreement dated as of January 27, 2011 (as amended, supplemented or restated from time to time the Loan Agreement), among Borrowers, Lender, certain other Lenders named therein or made parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, together with interest on the unpaid principal balance hereof at the rate (or rates) determined in accordance with Section 2.7 of the Loan Agreement from the date such principal is advanced until it is paid in full. It is contemplated that there will be advances and payments under this Note from time to time, but no advances or payments under this Note (including payment in full of the unpaid balance of principal hereof prior to maturity) shall affect or impair the validity or enforceability of this Note as to future advances hereunder.
This Note is one of the Notes referred to in and governed by the Loan Agreement, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity hereof and for the payment of certain additional sums to Lender upon the happening of certain stated events. Capitalized terms used in this Note without definition have the same meanings as in the Loan Agreement.
The principal amount of this Note, unless accelerated in accordance with Loan Agreement as described below, if not sooner paid, will be due and payable, together with all accrued and unpaid interest and other amounts due and unpaid under the Loan Agreement, on the Maturity Date.
This Note is secured by, among other things, the Security Documents referred to in the Loan Agreement.
Interest on the Loans is payable in arrears on the first Business Day of each month during the term of the Loan Agreement, commencing with the first Business Day of the first calendar month to begin after the date of this Note. Interest will be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of three hundred sixty (360) days. The Loan Agreement provides for the payment by Borrower of various other charges and fees, in addition to the interest charges described in the Loan Agreement, as set forth more fully in the Loan Agreement.
All payments of any amount becoming due under this Note shall be made in the manner provided in the Loan Agreement, in Dollars.
Upon and after the occurrence of a Default, unless such Default is waived as provided in the Loan Agreement, this Note may, at the option of Requisite Lenders and without further demand, notice or legal process of any kind, be declared by Administrative Agent, and in such case immediately shall become, due and payable. Upon and after the occurrence of certain Defaults, this Note shall, without any action by Lenders and without demand, notice or legal process of any kind, automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by
Borrower. Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon or agree to any subordination of Borrowers obligations hereunder without affecting or diminishing Lenders right of recourse against Borrower, which right is hereby expressly reserved.
This Note has been delivered and accepted at Irvine, California. This Note shall be interpreted in accordance with, and the rights and liabilities of the parties hereto shall be determined and governed by, the laws of the State of California.
All notices or other communications required or permitted to be given pursuant to this Note shall be given to the Borrowers or Lender at the address and in the manner provided for in the Loan Agreement.
In no contingency or event whatsoever shall interest charged in respect of the Loan evidenced hereby, however such interest may be characterized or computed, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall, at Lenders election, either (a) promptly refund such excess interest to Borrower or (b) credit such excess to the principal balance hereof. This provision shall control over every other provision of all agreements between Borrower and Lender.
Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
The limitations on personal liability of the shareholders, partners and members of Borrowers contained in Section 13.27 of the Loan Agreement shall apply to this Note.
This Note is issued in replacement of an Amended and Restated and Consolidated Secured Promissory Note dated January 27, 2011 in the amount of $360,000,000, (the Previous Note) previously issued by Borrowers (excluding KBSII I-81 Industrial Portfolio Trust) to Lender pursuant to the Loan Agreement and shall not be construed as a novation of the Previous Note. Aggregate amounts outstanding under the Previous Note shall be deemed outstanding under this Note.
[Signatures on Following Pages]
BORROWER
KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company |
||||||||||||
By: | KBSII REIT ACQUISITION IX, LLC, a Delaware limited liability company, its sole member |
|||||||||||
By: | KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member |
|||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member |
||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner |
||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company | ||||||||||||
By: | KBSII REIT ACQUISITION XIII, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION VIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XVI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XIX, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII GRANITE TOWER, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XVIII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER
KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XII, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on the Next Page]
BORROWER
KBSII CRESCENT VIII, LLC, a Delaware limited liability company | ||||||||||
By: | KBSII REIT ACQUISITION XI, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on the Next Page]
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, | ||||||||||||
a Delaware Statutory Trust | ||||||||||||
By: | KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, | |||||||||||
a Delaware limited liability company, as Administrative Trustee | ||||||||||||
By: | KBSII REIT ACQUISITION XXI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
Exhibit 10.35
OPEN-END MORTGAGE
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST,
A Delaware Statutory Trust,
as Mortgagor,
TO
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Mortgagee
Dated as of February 8, 2011
THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES. THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS INSTRUMENT IS SUCH AMOUNT AS MAY BE DUE AND OWING ON THE NOTE DESCRIBED HEREIN NOT TO EXCEED $372,000,000 PLUS ALL OTHER COSTS AND INDEBTEDNESS DESCRIBED IN 42 Pa. C.S. §8143
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS INSTRUMENT PREPARED BY:
Mark Appelbaum
Jones Day
555 California Street, 26th floor
San Francisco, CA 94104
Tax Parcel Numbers: 12602-010-00103 and 12602-010-00104
THE PARTIES TO THIS OPEN-END MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Mortgage), dated as of the 8th day of February, 2011, but intended to be effective as of February 16, 2011, are KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust (Mortgagor), for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Mortgagee).
ARTICLE 1. GRANT
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys, assigns and mortgages to Mortgagee and its successors and assigns forever all of that real property located in the Borough of Jessup, County of Lackawanna, Commonwealth of Pennsylvania, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; and any and all rights of Mortgagor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Mortgagee shall have no liability under such covenants, conditions, and restrictions unless and until Mortgagee forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
TO HAVE AND TO HOLD the Subject Property, together with the Collateral (as hereinafter defined) and all the rights, easements, profits and appurtenances and other property described above, together with all proceeds, products, replacements, additions, substitutions and renewals to or of any or all of the foregoing belonging unto and to the use of the Mortgagee, its successors and assigns, in fee simple forever;
PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and performs all obligations on its behalf contained in this Mortgage, the Loan Agreement (as such terms are defined below) or any of the other documents evidencing any of the Secured Obligations, then and in that case, the Subject Property and the Collateral hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor at Mortgagors cost, an appropriate release and discharge of this Mortgage in form to be recorded.
1.2 | ADDRESS. The address of the Subject Property is: 14-46 Alberigi Drive, Jessup, Pennsylvania. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Mortgage on the Subject Property as described on Exhibit A. |
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ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Mortgagor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Second Amended and Restated and Consolidated Secured Promissory Note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Mortgagor under this Mortgage; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Mortgagee, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Mortgage; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Mortgage; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
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2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagees right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
Nothing contained in this Mortgage is intended to diminish, alter, impair, or affect any other rights and remedies of Mortgagee, including but not limited to, the appointment of a receiver, nor shall any provision in this section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Subject Property or without regard to the adequacy of the Subject Property to serve as security for the obligations owed by Mortgagor to Mortgagee, and shall be in addition to any rights at law or in equity. Further, except for the notices required hereunder, if any, Mortgagor hereby waives any notice of default or demand for turnover of rents by Mortgagee, together with any rights, if any, to apply to a court to deposit the Payments into the registry of the court or such other depository as the court may designate.
3.2 | GRANT OF LICENSE. Mortgagee confers upon Mortgagor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee. Furthermore, upon any Default and |
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revocation of the License as aforesaid, Mortgagee shall be entitled to receive and Mortgagor covenants to deliver immediately to Mortgagee, upon demand, any and all payments theretofore collected by Mortgagor which remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and to the extent such Payments have not been delivered, the Payments shall be held in trust from Mortgagee. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise by Mortgagee, or any of its respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that, to the best of Mortgagors knowledge: (a) Mortgagor has delivered to Mortgagee a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Mortgagor covenants and agrees at Mortgagors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Mortgagee prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Mortgagors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Mortgagee fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without Mortgagees prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or |
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agree to subordinate any of the Leases to any other mortgage or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Mortgagees consent hereunder, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Mortgagors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Subject Property; all advance payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion
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thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Mortgage constitutes a fixture filing under the Pennsylvania Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a mortgage under the UCC.
Security Agreement. THIS MORTGAGE IS TO BE FILED AND RECORDED IN, AMONG OTHER PLACES, THE REAL ESTATE RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED AND THE FOLLOWING INFORMATION IS INCLUDED: (1) THE MORTGAGOR SHALL BE DEEMED TO BE THE DEBTOR WITH AN ADDRESS OF: 620 NEWPORT CENTER DRIVE, SUITE 1300, NEWPORT BEACH, CA 92660, WHICH THE MORTGAGOR CERTIFIES IS ACCURATE; (2) THE MORTGAGEE SHALL BE DEEMED TO BE THE SECURED PARTY WITH THE ADDRESS OF: 2030 MAIN STREET, SUITE 800, IRVINE, CA 92614, AND SHALL HAVE ALL OF THE RIGHTS OF A SECURED PARTY UNDER THE UCC; (3) THIS MORTGAGE COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES; (4) THE NAME OF THE RECORD OWNER OF THE LAND IS THE MORTGAGOR; (F) THE ORGANIZATIONAL IDENTIFICATION NUMBER OF THE MORTGAGOR IS 4936754; (6) THE MORTGAGOR IS A STATUTORY TRUST, ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE; AND (7) THE LEGAL NAME OF THE MORTGAGOR IS KBSII I-81 INDUSTRIAL PORTFOLIO TRUST.
This Mortgage creates a security interest in the Collateral, and, to the extent the Collateral is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has, as of the date of recordation of this Mortgage, and will have good title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Mortgagors principal place of business is located at the address shown in Section 7.11; and (d) Mortgagors legal name is exactly as set forth on the first page of this Mortgage and all of Mortgagors organizational documents or agreements delivered to Mortgagee are complete and accurate in every respect. |
4.3 | COVENANTS. Mortgagor agrees: (a) to execute and deliver such documents as Mortgagee deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee prior written notice thereof; (c) to cooperate with Mortgagee in perfecting all security interests granted herein and in obtaining such agreements from third parties as Mortgagee deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Mortgagee is authorized to file financing statements in the name of Mortgagor to perfect Mortgagees security interest in Collateral. |
4.4 | RIGHTS OF MORTGAGEE. In addition to Mortgagees rights as a Secured Party under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagees rights hereunder and |
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enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF MORTGAGEE ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Mortgage, then in addition to all of Mortgagees rights as a Secured Party under the UCC or otherwise at law, and subject to applicable law: |
(a) | Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Mortgagee may, for the account of Mortgagor and at Mortgagors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee may from time to time elect. |
Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9621, or other applicable law, and the provisions of UCC §9620 have been satisfied. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagees name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagees security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Mortgagor; provided, however, |
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that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Mortgagors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Mortgagor represents and warrants that, except as disclosed to Mortgagee in a writing which refers to this warranty and the Permitted Liens, Mortgagor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Mortgage is a first and prior lien on the Subject Property. Mortgagor hereby represents and warrants that all of the Subject Property is one or more tax parcels, and there are no properties included in such tax parcels other than the Subject Property. Mortgagor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Mortgagors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Mortgagor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagees net income. |
(b) | Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor pursues the contest diligently and in compliance with applicable laws, in a manner which Mortgagee determines is not prejudicial to Mortgagee, and does not impair the rights of Mortgagee under any of the Loan Documents; and (b) Mortgagor deposits with Mortgagee any funds or other forms of assurance which Mortgagee in good faith determines from time to time appropriate to protect Mortgagee from the consequences of the contest being unsuccessful. Mortgagors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Mortgagees option and upon its demand, Mortgagor, shall, until all Secured Obligations have been paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and |
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insurance required or requested pursuant to the Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased amounts required to pay all amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30) days thereafter the additional amount as stated in Mortgagees notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Mortgagee shall, unless Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor hereunder or under any Loan Document, Mortgagee may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Mortgagee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts collected and in Mortgagees possession shall be paid to Mortgagor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Mortgagor shall immediately discharge any lien not permitted under the Loan Documents or approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject to the following sentence, Mortgagor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Mortgagee, Mortgagor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Mortgagees demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Mortgagee a surety bond in sufficient form and amount; or (c) provide Mortgagee with other assurances which Mortgagee deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Mortgagee from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Mortgagee to be maintained by Mortgagor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or |
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Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Mortgagee, and/or Mortgagee may release all or any part of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents. |
(b) | Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Mortgagee of such additional funds which Mortgagee determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Mortgagee; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Mortgagee of such insurance or condemnation proceeds, then Mortgagee may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such proceeds to Mortgagor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject Property and Collateral against such risks as Mortgagee may require pursuant to the Loan Agreement and, at Mortgagees request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any |
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zoning or other land classification which affects the Subject Property without Mortgagees prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Mortgagee elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagors sole expense, Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | ACTIONS BY MORTGAGEE. From time to time and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Mortgagee, without liability thereof and without notice, may: (a) release all or any part of the Subject Property from this Mortgage; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Mortgage. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning this Mortgage, including without limit any statement of amounts owing under any Secured Obligation. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Subject Property or Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagees failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor. |
(b) | Mortgagor indemnifies Mortgagee against, and holds Mortgagee harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the execution of this Mortgage or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Mortgagor to |
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perform Mortgagors obligations; or (iv) by reason of any alleged obligation or undertaking on Mortgagees part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee shall survive the release and cancellation of the Secured Obligations and the release of this Mortgage. |
(c) | Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Mortgagor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Mortgagee in approving loan applications. |
(b) | Mortgagor has represented to Mortgagee, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Mortgagee making the Loan, certain facts concerning Mortgagors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Mortgagee has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Mortgagee in the absence of these representations and warranties. |
(d) | Mortgagee would not have made this Loan if Mortgagee did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Mortgagors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Mortgagor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Mortgagor. |
(f) | Mortgagee has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Mortgagor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Mortgagees security for the Note. |
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(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Mortgagors right, title and/or interest in the Loan Documents and any subsequent documents executed by Mortgagor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial ownership of any membership interest in Mortgagor if Mortgagor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Mortgagor; or (vii) legal or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a corporation or in any general partner, venturer or member in Mortgagor that is a corporation. |
(i) | Mortgagor shall not make or commit to make any Transfer without Mortgagees prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Mortgagee may predicate Mortgagees decision to grant consent to a Transfer on such terms and conditions as Mortgagee may require, in Mortgagees sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Mortgagees ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee for all costs and expenses incurred by Mortgagee in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Mortgagees security will be impaired by the proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Mortgagees reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Mortgagees liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Mortgagees consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Mortgagors interest shall: (i) assume all of Mortgagors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Mortgagor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Mortgagee. In the event of any Transfer without the prior written consent of Mortgagee, whether or not Mortgagee elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Mortgagee, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Mortgagee relied upon in making the Loan |
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may no longer be relied upon. A consent by Mortgagee to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Mortgagees consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Mortgage upon the Subject Property and Collateral. |
5.13 | RELEASE OF ASSIGNMENT. When this Mortgage has been fully released, the last such release shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Mortgagee hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Mortgage notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Mortgagee shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan Documents or by the proceeds of any loan secured by this Mortgage. |
5.15 | RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagors compliance with the terms hereof. |
5.16 | CONTRACTS. Mortgagor will deliver to Mortgagee a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Mortgagee required by any of the Loan Documents. Within twenty (20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to Mortgagee a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Mortgagee, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Mortgagee). Mortgagor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Mortgagor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Mortgagees option, the failure of Mortgagor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Mortgagor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure; or, (d) if Mortgagor or any other Person shall make a Transfer without the prior |
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written consent of Mortgagee (which consent may be withheld in Mortgagees sole discretion (except for those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18, and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Mortgagee shall have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons; |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Mortgagor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Mortgagor and Mortgagors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items as may be reasonably necessary at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for insurance thereon, all utility and other reasonable operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Mortgagor would reasonably do in its course of business at the Subject Property if Mortgagor were in possession of the Subject |
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Property. All reasonable expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Mortgagee, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Subject Property has passed after foreclosure sale and all applicable periods of redemption have expired; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Mortgagees sole judgment, to protect or enhance the security hereof. Mortgagee may also take possession of any and all Payments that may previously have been collected by or on behalf of Mortgagor following the Default and that remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and together with any bank or similar accounts in which such Payments may be deposited or held; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Mortgagee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Mortgagee, without notice to or demand upon Mortgagor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Mortgagee in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Mortgagee nor any other person or entity other than Mortgagee shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Mortgagee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Mortgagee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Mortgagor or Mortgagee may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion; |
(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure sale, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the |
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following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagees credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Mortgagor and Mortgagee; and (z) Mortgagees credit bid may be (at Mortgagees sole and absolute discretion) higher or lower than any appraised value of the Subject Property; |
(i) | Upon the completion of any foreclosure of all or a portion of the Subject Property, commence an action to recover any of the Secured Obligations that remains unpaid or unsatisfied; |
(j) | Exercise any and all remedies at law, equity, or under the Note, this Mortgage or other Loan Documents for such Default. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, all proceeds of any foreclosure sale shall be applied: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under either Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee. |
6.5 | NO CURE OR WAIVER. Neither Mortgagees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Default or notice of |
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default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or limit or impair the Secured Obligations or Mortgagors liability thereof, or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the lien of or security interest created by this Mortgage. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Mortgagor agrees to pay to Mortgagee immediately and without demand all costs and expenses of any kind incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby irrevocably appoints Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Mortgagee deems appropriate to protect Mortgagees interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Mortgage or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform any obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Mortgagee under this Section. |
6.8 | REMEDIES CUMULATIVE. All rights and remedies of Mortgagee provided hereunder are cumulative and are in addition to all rights and remedies provided by applicable law (including specifically that of foreclosure of this instrument as though it were a mortgage) or in any other agreements between Mortgagor and Mortgagee. No failure on the part of Mortgagee to exercise any of its rights hereunder arising upon any Default shall be construed to prejudice its rights upon the occurrence of any other or subsequent Default. No delay on the part of Mortgagee in exercising any such rights shall be construed to preclude it from the exercise thereof at any time while that Default is continuing. Mortgagee may enforce any one or more remedies or rights hereunder successively or concurrently. By accepting payment or performance of any of the Secured Obligations after its due date, Mortgagee shall not thereby waive the agreement contained herein that time is of the essence, nor shall Mortgagee waive either its right to require prompt payment or performance when due of the remainder of the Secured Obligations or its right to consider the failure to so pay or perform a Default. |
6.9 | CONFESSION OF JUDGMENT. FOR THE PURPOSE OF OBTAINING POSSESSION OF THE SUBJECT PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH |
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MORTGAGOR, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE SUBJECT PROPERTY, IN FAVOR OF MORTGAGEE, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE SUBJECT PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE SUBJECT PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE SUBJECT PROPERTY. MORTGAGEE MAY CONFESS JUDGMENT IN AN ACTION IN EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFFS SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE SUBJECT PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO MORTGAGEE. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Mortgagees acquiring any other estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Mortgagee, and the covenants, representations, warranties and obligations of Mortgagor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Mortgagor and rights and remedies of Mortgagee set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens assignments, security interests and other security provided to Mortgagee hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as Mortgagor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | INTENTIONALLY OMITTED. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and |
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Collateral and/or any other property which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Mortgage or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.11. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CHOICE OF LAW. WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, IT BEING UNDERSTOOD THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS PARAGRAPH AND TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING THEREUNDER OR HEREUNDER. |
7.10 | INCORPORATION. Exhibits A, and B, all as attached, are incorporated into this Mortgage by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
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Mortgagor: | KBSII I-81 INDUSTRIAL PORTFOLIO TRUST c/o KBS Capital Advisors LLC 590 Madison Avenue, 26th Floor New York, NY 10022 Attention: Mr. Charles Valentino Tel: (212) 644-6662 Fax: (212) 644-1372 E-mail: cvalentino@kbsrealty.com | |
Mortgagee: | WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835 | |
With a copy to: | Wells Fargo Bank, National Association Los Angeles Loan Center 2120 East Park Place, Suite 100 El Segundo, California 90245 Attention: Eva Lopez |
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Subject Property or to Mortgagor naming Mortgagee, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Mortgage. |
7.13 | PURCHASE MONEY MORTGAGE. This Mortgage is intended to be a purchase money mortgage as defined in 42 Pa. C.S.A. §8141. |
7.14 | OPEN-END MORTGAGE. This Mortgage shall constitute an Open-End Mortgage as such term is defined in 42 Pa.C.S. §8143(f), and shall secure Future Advances and shall have lien priority in accordance with the provisions of 42 Pa.C.S. §§8143 and 8144. Notwithstanding the foregoing, to the maximum extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives its right to submit a notice to Mortgagee under 42 Pa.C.S. §8143(c). In addition to the other remedies available under the Loan Agreement and any other document evidencing the Secured Obligations, any advances made after receipt of any such notice, whether or not made pursuant to 42 Pa.C.S. §8143 and/or §8144, shall be secured hereby and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. In the event any person or entity shall submit a notice to Mortgagee under 42 Pa.C.S. §8143(b), in addition to the other remedies available under this Mortgage, the Loan Agreement and any other document evidencing the Secured Obligations, Mortgagor shall have the lien or encumbrance which is the subject of such notice removed of record in accordance with this Mortgage; and any advances made by Mortgagee after receipt of any |
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such notice whether or not made under 42 Pa.C.S. §8143(b) shall be deemed to be obligatory advances made under, shall be secured hereby, and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. By placing or accepting any such lien or encumbrance against any or all of the Subject Property, the holder thereof shall be deemed to have agreed to the maximum extent permitted by law that its lien or encumbrance shall be subject and subordinate in lien priority to this Mortgage and to any subsequent advances made under the Loan Agreement and any other document evidencing the Secured Obligations, to all accrued and unpaid interest and to all other sums secured hereby. This Mortgage is given to secure the obligations of the Mortgagor and certain of Mortgagors Affiliates under, or in respect of, the Loan Documents to which Mortgagor and its Affiliates are parties, up to that amount which is equal to the amount of the aggregate maximum permitted principal indebtedness provided under the terms of the Loan Documents and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements, but also any and all other indebtedness now owing or which may hereafter be owing by Mortgagor and its Affiliates to Mortgagee and/or Lenders, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Loan Documents, advances for the payment of taxes and assessments and municipal claims, maintenance charges, insurance premiums, costs incurred for the protection of the property or the lien of this Mortgage, expenses incurred by Mortgagee or any Lender by reason of a Default under this Mortgage, or for any other permissible purpose, whether such advances are obligatory or are to be at the option of Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all indebtedness secured hereby, including future advances, from the time of its filing for record in the recorders office of the county in which the property is located; and the lien of all present and future advances shall relate back to the date of this Mortgage. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. The amount of principal indebtedness that may be secured by this Mortgage may increase or decrease from time to time. The maximum amount of principal indebtedness outstanding at any one time shall not exceed $372,000,000 exclusive of accrued and unpaid interest and unpaid balances of advances and other extensions of credit secured by this Mortgage made for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Subject Property within the meaning of 42 Pa. C.S.A. § 8143(f), and expenses incurred by the Mortgagee or any Lender by reason of the occurrence of a Default under this Mortgage and other costs and advances to the fullest extent permitted by the terms of 42 Pa. C.S.A. § 8144. |
SECTION 6.9 OF THIS MORTGAGE PROVIDES FOR THE REMEDY OF CONFESSION OF JUDGMENT IN EJECTMENT. IN CONNECTION THEREWITH, MORTGAGOR VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS, IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY OF OR EXECUTION UPON SUCH JUDGMENT. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND THAT COUNSEL HAS REVIEWED WITH AND EXPLAINED TO MORTGAGOR THE MEANING OF THIS WAIVER AND THE AFORESAID REMEDY.
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IN WITNESS WHEREOF, Mortgagor, intending to be legally bound, has executed this Mortgage.
MORTGAGOR | ||||||||||||
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: | KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, | |||||||||||
a Delaware limited liability company, as Administrative Trustee | ||||||||||||
By: | KBSII REIT ACQUISITION XXI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: | /s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
CERTIFICATE OF RESIDENCE
I hereby certify that the precise residence of Mortgagee is:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Bryan Stevens, Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Bryan Stevens
Name: Bryan Stevens
Its: Senior Vice President
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On February 8, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
All the certain real property located in the County of Lackawanna, Commonwealth of Pennsylvania, described as follows:
LOTS 3 & 4, JESSUP SMALL BUSINESS CENTER 14-46 ALBERIGI DRIVE
PIN# 12602 010 00103 (Lot 3)
LOT 3:
ALL that certain lot or parcel of land situate in the Borough of Jessup, County of Lackawanna and Commonwealth of Pennsylvania bounded and described as follows, to wit:
BEGINNING at a point on the northwesterly right-of-way line of Alberigi Drive, a common corner of Lot 3 and Lot 5 as shown on a plan titled S.L.I.B.CO Jessup Small Business Center Lots 3 & 4 Lot line adjustment - Final Subdivision Plan dwg. no. C-1 dated April 4, 2005 and prepared by Acker Associates, Inc.;
THENCE along said line of Alberigi Drive South 39°5137 West nine hundred ninety-two and seventy-seven hundredths (992.77) feet to a point of curvature;
THENCE continuing along said line of Alberigi Drive in a southwesterly direction along a curve to the left having a radius of one thousand forty-five (1045.00) feet for an arc length of eighty-four and seventy-nine hundredths (84.79) feet (chord bearing and distance being South 37°3209 West 84.77) to a point;
THENCE leaving Alberigi Drive along Lot 2 North 54°4719 West four hundred fifty-nine and four hundredths (459.04) feet to a point;
THENCE along Lot 4 the following five (5) courses and distances:
1. North 11°1336 East one hundred eighteen and eighty-six hundredths (118.86) feet to a point,
2. North 23°2737 East three hundred fifty-one and forty-three hundredths (351.43) feet to a point,
3. North 36°4310 East one hundred seven and ninety-four hundredths (107.94) feet to a point,
4. North 42°5335 East two hundred ninety-four and fifteen hundredths (294.15) feet to a point, and
5. North 56°5410 East two hundred eighty-four and eighteen hundredths (284.18) feet to a point in line of Lot 5,
THENCE along Lot 5 South 50°0823 East five hundred seventeen and thirty-four hundredths (517.34) feet to the point of BEGINNING.
CONTAINING 14.41 Acres of land being the same, more or less.
BEING ALL of Lot 3, as described on that certain Subdivision Plan dated April 4, 2005, and entitled Final Subdivision Plan - S.L.I.B.C.O. Jessup Small Business Center - Lots 3 & 4 Line Adjustment - Jessup
EXHIBIT A
Borough, Lackawanna County, Pennsylvania prepared by Acker Associates and recorded in Lackawanna County on May 27, 2005 in Book 6 AM, at page 4927 (the Subdivision Plan).
PIN# 12602 010 00104 (Lot 4)
LOT 4:
ALL that certain lot of parcel of land situate in the Borough of Jessup, County of Lackawanna and Commonwealth of Pennsylvania bounded and described as follows, to wit:
BEGINNING at a point on the southeasterly right-of-way line of Sunnyside Drive, a common corner of Lot 2 and Lot 4 as shown on a plan titled S.L.I.B.CO Jessup Small Business Center Lots 3 & 4 Lot Line Adjustment - Final Subdivision Plan dwg. no. C-1 dated April 4, 2005 and prepared by Acker Associates, Inc.;
THENCE along said line of Sunnyside Drive North 33°3824 East two hundred ninety-one and eighty-two hundredths (291.82) feet to a point of curvature;
THENCE continuing along said line of Sunnyside Drive in a northeasterly direction along a curve to the right having a radius of two thousand seven hundred ninety-nine and seventy- nine hundredths (2799.79) feet for an arc length of six hundred twenty-one and eighteen hundredths (621.18) feet (chord bearing and distance being North 39°5946 East 619.91) to a point of tangency;
THENCE continuing along said line of Sunnyside Drive North 46°2108 East two hundred thirty-eight and seventy-six hundredths (238.76) feet to a point;
THENCE leaving Sunnyside Drive along Lot 5 South 50°0823 East three hundred forty and thirty-five hundredths (340.35) feet to a point;
THENCE along Lot 3 the following five (5) courses and distances:
1. South 56°5410 West two hundred eighty-four and eighteen hundredths (284.18) feet to a point,
2. South 42°5335 West two hundred ninety-four and fifteen hundredths (294.15) feet to a point,
3, South 36°4310 West one hundred seven and ninety-four hundredths (107.94) feet to a point,
4. South 23°2737 West three hundred fifty-one and forty-three hundredths (351.43) feet to a point, and
5. South 11°1336 West one hundred eighteen and eighty-six hundredths (118.86) feet to a point in line of Lot 2;
THENCE along Lot 2 North 54°4719 West four hundred one and seventy-six hundredths (401.76) feet to the point of BEGINNING.
BEING ALL of Lot 4 as described on the above-mentioned plan.
Containing Eight and twenty-one one hundredths (8.21) acres of land, more or less.
Tax ID / Parcel No. 12602-010-00103 and 12602-010-00104
EXHIBIT B
NON-BORROWER MORTGAGOR RIDER
Exhibit B to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
To the extent the Mortgage secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Mortgagor, the party or parties constituting Mortgagor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Mortgagor hereby waives any right it may now or hereafter have to require Mortgagee, as a condition to the exercise of any remedy or other right against Mortgagor hereunder or under any other document executed by Mortgagor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to pursue any other right or remedy in Mortgagees power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Mortgagee by any Borrower or other person (other than Mortgagor), or otherwise to comply with the UCC (as defined in the Mortgage) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Mortgagor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Mortgagor by any Borrower or otherwise intended or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Mortgage) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Mortgagee, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Mortgagors rights of subrogation and reimbursement against the principal by operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Mortgagee to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Mortgagee, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Mortgagor further waives any and all rights and defenses that Mortgagor may have because Borrowers debt is secured by real |
EXHIBIT B
property; this means, among other things, that: (1) Mortgagee may collect from Mortgagor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Mortgagee forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing on the real property collateral, has destroyed any right Mortgagor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Mortgagor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Mortgagor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Mortgagor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Mortgagor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.. |
3. | SUBROGATION. Mortgagor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Mortgagor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Mortgagee with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Mortgagor warrants and agrees: (a) that Mortgagee would not make the Loan but for this Mortgage; (b) that Mortgagor has not relied, and will not rely, on any representations or warranties by Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Mortgagor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Mortgagor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Mortgagee shall have no duty to disclose or report to Mortgagor any information now or hereafter known to Mortgagee with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Mortgagor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Mortgagees rights hereunder shall be reinstated and revived, and the enforceability of this Mortgage shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Mortgagee is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Mortgagor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Mortgagor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Mortgagor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Mortgagor, such payment or distribution shall be held in trust and immediately paid over to Mortgagee, is hereby assigned to Mortgagee as security |
EXHIBIT B
for the Secured Obligations, and shall be held by Mortgagee in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Mortgagor warrants that all of the waivers in this Mortgage are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Mortgagor may destroy or impair rights which Mortgagor would otherwise have against Mortgagee, Borrower and other persons, or against collateral. Mortgagor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Mortgagor hereby acknowledges that: (a) the obligations undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Mortgagees consideration for entering into this transaction, Mortgagee has specifically bargained for the waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Mortgagor, and (iv) the legal consequences to Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes this Mortgage with the intent that this Mortgage and all of the informed waivers herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, MORTGAGEE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND MORTGAGEE HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS MORTGAGE AND MORTGAGEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND MORTGAGEE TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Mortgage and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Mortgage and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Mortgagee in writing. |
Exhibit 10.36
OPEN-END MORTGAGE
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST,
A Delaware Statutory Trust,
as Mortgagor,
TO
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Mortgagee
Dated as of February 8, 2011
THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES. THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS INSTRUMENT IS SUCH AMOUNT AS MAY BE DUE AND OWING ON THE NOTE DESCRIBED HEREIN NOT TO EXCEED $372,000,000 PLUS ALL OTHER COSTS AND INDEBTEDNESS DESCRIBED IN 42 Pa. C.S. §8143
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS INSTRUMENT PREPARED BY:
Mark Appelbaum
Jones Day
555 California Street, 26th floor
San Francisco, CA 94104
Tax Parcel Number: 33-F12-00A-16H
THE PARTIES TO THIS OPEN-END MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Mortgage), dated as of the 8th day of February, 2011, but intended to be effective as of February 16, 2011, are KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust (Mortgagor), for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Mortgagee).
ARTICLE 1. GRANT
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys, assigns and mortgages to Mortgagee and its successors and assigns forever all of that real property located in the City of Pittston, County of Luzerne, Commonwealth of Pennsylvania, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; and any and all rights of Mortgagor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Mortgagee shall have no liability under such covenants, conditions, and restrictions unless and until Mortgagee forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
TO HAVE AND TO HOLD the Subject Property, together with the Collateral (as hereinafter defined) and all the rights, easements, profits and appurtenances and other property described above, together with all proceeds, products, replacements, additions, substitutions and renewals to or of any or all of the foregoing belonging unto and to the use of the Mortgagee, its successors and assigns, in fee simple forever;
PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and performs all obligations on its behalf contained in this Mortgage, the Loan Agreement (as such terms are defined below) or any of the other documents evidencing any of the Secured Obligations, then and in that case, the Subject Property and the Collateral hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor at Mortgagors cost, an appropriate release and discharge of this Mortgage in form to be recorded.
1.2 | ADDRESS. The address of the Subject Property is: 325 CenterPoint Boulevard, Pittston, Pennsylvania. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Mortgage on the Subject Property as described on Exhibit A. |
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ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Mortgagor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Second Amended and Restated and Consolidated Secured Promissory Note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Mortgagor under this Mortgage; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Mortgagee, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Mortgage; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Mortgage; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
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2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagees right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
Nothing contained in this Mortgage is intended to diminish, alter, impair, or affect any other rights and remedies of Mortgagee, including but not limited to, the appointment of a receiver, nor shall any provision in this section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Subject Property or without regard to the adequacy of the Subject Property to serve as security for the obligations owed by Mortgagor to Mortgagee, and shall be in addition to any rights at law or in equity. Further, except for the notices required hereunder, if any, Mortgagor hereby waives any notice of default or demand for turnover of rents by Mortgagee, together with any rights, if any, to apply to a court to deposit the Payments into the registry of the court or such other depository as the court may designate.
3.2 | GRANT OF LICENSE. Mortgagee confers upon Mortgagor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee. Furthermore, upon any Default and |
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revocation of the License as aforesaid, Mortgagee shall be entitled to receive and Mortgagor covenants to deliver immediately to Mortgagee, upon demand, any and all payments theretofore collected by Mortgagor which remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and to the extent such Payments have not been delivered, the Payments shall be held in trust from Mortgagee. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise by Mortgagee, or any of its respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that, to the best of Mortgagors knowledge: (a) Mortgagor has delivered to Mortgagee a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Mortgagor covenants and agrees at Mortgagors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Mortgagee prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Mortgagors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Mortgagee fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without Mortgagees prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or |
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agree to subordinate any of the Leases to any other mortgage or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Mortgagees consent hereunder, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Mortgagors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Subject Property; all advance payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion
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thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Mortgage constitutes a fixture filing under the Pennsylvania Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a mortgage under the UCC.
Security Agreement. THIS MORTGAGE IS TO BE FILED AND RECORDED IN, AMONG OTHER PLACES, THE REAL ESTATE RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED AND THE FOLLOWING INFORMATION IS INCLUDED: (1) THE MORTGAGOR SHALL BE DEEMED TO BE THE DEBTOR WITH AN ADDRESS OF: 620 NEWPORT CENTER DRIVE, SUITE 1300, NEWPORT BEACH, CA 92660, WHICH THE MORTGAGOR CERTIFIES IS ACCURATE; (2) THE MORTGAGEE SHALL BE DEEMED TO BE THE SECURED PARTY WITH THE ADDRESS OF: 2030 MAIN STREET, SUITE 800, IRVINE, CA 92614, AND SHALL HAVE ALL OF THE RIGHTS OF A SECURED PARTY UNDER THE UCC; (3) THIS MORTGAGE COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES; (4) THE NAME OF THE RECORD OWNER OF THE LAND IS THE MORTGAGOR; (F) THE ORGANIZATIONAL IDENTIFICATION NUMBER OF THE MORTGAGOR IS 4936754; (6) THE MORTGAGOR IS A STATUTORY TRUST, ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE; AND (7) THE LEGAL NAME OF THE MORTGAGOR IS KBSII I-81 INDUSTRIAL PORTFOLIO TRUST.
This Mortgage creates a security interest in the Collateral, and, to the extent the Collateral is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has, as of the date of recordation of this Mortgage, and will have good title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Mortgagors principal place of business is located at the address shown in Section 7.11; and (d) Mortgagors legal name is exactly as set forth on the first page of this Mortgage and all of Mortgagors organizational documents or agreements delivered to Mortgagee are complete and accurate in every respect. |
4.3 | COVENANTS. Mortgagor agrees: (a) to execute and deliver such documents as Mortgagee deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee prior written notice thereof; (c) to cooperate with Mortgagee in perfecting all security interests granted herein and in obtaining such agreements from third parties as Mortgagee deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Mortgagee is authorized to file financing statements in the name of Mortgagor to perfect Mortgagees security interest in Collateral. |
4.4 | RIGHTS OF MORTGAGEE. In addition to Mortgagees rights as a Secured Party under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagees rights hereunder and |
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enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF MORTGAGEE ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Mortgage, then in addition to all of Mortgagees rights as a Secured Party under the UCC or otherwise at law, and subject to applicable law: |
(a) | Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Mortgagee may, for the account of Mortgagor and at Mortgagors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee may from time to time elect. |
Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9621, or other applicable law, and the provisions of UCC §9620 have been satisfied. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagees name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagees security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Mortgagor; provided, however, |
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that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Mortgagors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Mortgagor represents and warrants that, except as disclosed to Mortgagee in a writing which refers to this warranty and the Permitted Liens, Mortgagor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Mortgage is a first and prior lien on the Subject Property. Mortgagor hereby represents and warrants that all of the Subject Property is one or more tax parcels, and there are no properties included in such tax parcels other than the Subject Property. Mortgagor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Mortgagors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Mortgagor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagees net income. |
(b) | Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor pursues the contest diligently and in compliance with applicable laws, in a manner which Mortgagee determines is not prejudicial to Mortgagee, and does not impair the rights of Mortgagee under any of the Loan Documents; and (b) Mortgagor deposits with Mortgagee any funds or other forms of assurance which Mortgagee in good faith determines from time to time appropriate to protect Mortgagee from the consequences of the contest being unsuccessful. Mortgagors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Mortgagees option and upon its demand, Mortgagor, shall, until all Secured Obligations have been paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and |
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insurance required or requested pursuant to the Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased amounts required to pay all amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30) days thereafter the additional amount as stated in Mortgagees notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Mortgagee shall, unless Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor hereunder or under any Loan Document, Mortgagee may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Mortgagee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts collected and in Mortgagees possession shall be paid to Mortgagor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Mortgagor shall immediately discharge any lien not permitted under the Loan Documents or approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject to the following sentence, Mortgagor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Mortgagee, Mortgagor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Mortgagees demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Mortgagee a surety bond in sufficient form and amount; or (c) provide Mortgagee with other assurances which Mortgagee deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Mortgagee from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Mortgagee to be maintained by Mortgagor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or |
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Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Mortgagee, and/or Mortgagee may release all or any part of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents. |
(b) | Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Mortgagee of such additional funds which Mortgagee determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Mortgagee; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Mortgagee of such insurance or condemnation proceeds, then Mortgagee may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such proceeds to Mortgagor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject Property and Collateral against such risks as Mortgagee may require pursuant to the Loan Agreement and, at Mortgagees request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any |
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zoning or other land classification which affects the Subject Property without Mortgagees prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Mortgagee elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagors sole expense, Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | ACTIONS BY MORTGAGEE. From time to time and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Mortgagee, without liability thereof and without notice, may: (a) release all or any part of the Subject Property from this Mortgage; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Mortgage. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning this Mortgage, including without limit any statement of amounts owing under any Secured Obligation. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Subject Property or Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagees failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor. |
(b) | Mortgagor indemnifies Mortgagee against, and holds Mortgagee harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the execution of this Mortgage or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Mortgagor to |
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perform Mortgagors obligations; or (iv) by reason of any alleged obligation or undertaking on Mortgagees part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee shall survive the release and cancellation of the Secured Obligations and the release of this Mortgage. |
(c) | Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Mortgagor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Mortgagee in approving loan applications. |
(b) | Mortgagor has represented to Mortgagee, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Mortgagee making the Loan, certain facts concerning Mortgagors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Mortgagee has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Mortgagee in the absence of these representations and warranties. |
(d) | Mortgagee would not have made this Loan if Mortgagee did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Mortgagors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Mortgagor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Mortgagor. |
(f) | Mortgagee has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Mortgagor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Mortgagees security for the Note. |
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(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Mortgagors right, title and/or interest in the Loan Documents and any subsequent documents executed by Mortgagor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial ownership of any membership interest in Mortgagor if Mortgagor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Mortgagor; or (vii) legal or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a corporation or in any general partner, venturer or member in Mortgagor that is a corporation. |
(i) | Mortgagor shall not make or commit to make any Transfer without Mortgagees prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Mortgagee may predicate Mortgagees decision to grant consent to a Transfer on such terms and conditions as Mortgagee may require, in Mortgagees sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Mortgagees ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee for all costs and expenses incurred by Mortgagee in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Mortgagees security will be impaired by the proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Mortgagees reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Mortgagees liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Mortgagees consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Mortgagors interest shall: (i) assume all of Mortgagors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Mortgagor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Mortgagee. In the event of any Transfer without the prior written consent of Mortgagee, whether or not Mortgagee elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Mortgagee, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Mortgagee relied upon in making the Loan |
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may no longer be relied upon. A consent by Mortgagee to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Mortgagees consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Mortgage upon the Subject Property and Collateral. |
5.13 | RELEASE OF ASSIGNMENT. When this Mortgage has been fully released, the last such release shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Mortgagee hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Mortgage notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Mortgagee shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan Documents or by the proceeds of any loan secured by this Mortgage. |
5.15 | RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagors compliance with the terms hereof. |
5.16 | CONTRACTS. Mortgagor will deliver to Mortgagee a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Mortgagee required by any of the Loan Documents. Within twenty (20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to Mortgagee a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Mortgagee, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Mortgagee). Mortgagor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Mortgagor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Mortgagees option, the failure of Mortgagor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Mortgagor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure; or, (d) if Mortgagor or any other Person shall make a Transfer without the prior |
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written consent of Mortgagee (which consent may be withheld in Mortgagees sole discretion (except for those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18, and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Mortgagee shall have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons; |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Mortgagor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Mortgagor and Mortgagors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items as may be reasonably necessary at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for insurance thereon, all utility and other reasonable operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Mortgagor would reasonably do in its course of business at the Subject Property if Mortgagor were in possession of the Subject |
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Property. All reasonable expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Mortgagee, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Subject Property has passed after foreclosure sale and all applicable periods of redemption have expired; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Mortgagees sole judgment, to protect or enhance the security hereof. Mortgagee may also take possession of any and all Payments that may previously have been collected by or on behalf of Mortgagor following the Default and that remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and together with any bank or similar accounts in which such Payments may be deposited or held; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Mortgagee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Mortgagee, without notice to or demand upon Mortgagor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Mortgagee in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Mortgagee nor any other person or entity other than Mortgagee shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Mortgagee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Mortgagee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Mortgagor or Mortgagee may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion; |
(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure sale, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the |
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following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagees credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Mortgagor and Mortgagee; and (z) Mortgagees credit bid may be (at Mortgagees sole and absolute discretion) higher or lower than any appraised value of the Subject Property; |
(i) | Upon the completion of any foreclosure of all or a portion of the Subject Property, commence an action to recover any of the Secured Obligations that remains unpaid or unsatisfied; |
(j) | Exercise any and all remedies at law, equity, or under the Note, this Mortgage or other Loan Documents for such Default. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, all proceeds of any foreclosure sale shall be applied: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under either Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee. |
6.5 | NO CURE OR WAIVER. Neither Mortgagees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Default or notice of |
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default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or limit or impair the Secured Obligations or Mortgagors liability thereof, or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the lien of or security interest created by this Mortgage. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Mortgagor agrees to pay to Mortgagee immediately and without demand all costs and expenses of any kind incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby irrevocably appoints Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Mortgagee deems appropriate to protect Mortgagees interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Mortgage or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform any obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Mortgagee under this Section. |
6.8 | REMEDIES CUMULATIVE. All rights and remedies of Mortgagee provided hereunder are cumulative and are in addition to all rights and remedies provided by applicable law (including specifically that of foreclosure of this instrument as though it were a mortgage) or in any other agreements between Mortgagor and Mortgagee. No failure on the part of Mortgagee to exercise any of its rights hereunder arising upon any Default shall be construed to prejudice its rights upon the occurrence of any other or subsequent Default. No delay on the part of Mortgagee in exercising any such rights shall be construed to preclude it from the exercise thereof at any time while that Default is continuing. Mortgagee may enforce any one or more remedies or rights hereunder successively or concurrently. By accepting payment or performance of any of the Secured Obligations after its due date, Mortgagee shall not thereby waive the agreement contained herein that time is of the essence, nor shall Mortgagee waive either its right to require prompt payment or performance when due of the remainder of the Secured Obligations or its right to consider the failure to so pay or perform a Default. |
6.9 | CONFESSION OF JUDGMENT. FOR THE PURPOSE OF OBTAINING POSSESSION OF THE SUBJECT PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST |
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MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE SUBJECT PROPERTY, IN FAVOR OF MORTGAGEE, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE SUBJECT PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE SUBJECT PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE SUBJECT PROPERTY. MORTGAGEE MAY CONFESS JUDGMENT IN AN ACTION IN EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFFS SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE SUBJECT PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO MORTGAGEE. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Mortgagees acquiring any other estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Mortgagee, and the covenants, representations, warranties and obligations of Mortgagor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Mortgagor and rights and remedies of Mortgagee set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens assignments, security interests and other security provided to Mortgagee hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as Mortgagor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | INTENTIONALLY OMITTED. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a lien on or interest in the |
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Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Mortgage or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.11. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CHOICE OF LAW. WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, IT BEING UNDERSTOOD THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS PARAGRAPH AND TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING THEREUNDER OR HEREUNDER. |
7.10 | INCORPORATION. Exhibits A, and B, all as attached, are incorporated into this Mortgage by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept |
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delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Mortgagor: |
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST c/o KBS Capital Advisors LLC 590 Madison Avenue, 26th Floor New York, NY 10022 Attention: Mr. Charles Valentino Tel: (212) 644-6662 Fax: (212) 644-1372 E-mail: cvalentino@kbsrealty.com | |
Mortgagee: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835 | |
With a copy to: |
Wells Fargo Bank, National Association Los Angeles Loan Center 2120 East Park Place, Suite 100 El Segundo, California 90245 Attention: Eva Lopez |
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Subject Property or to Mortgagor naming Mortgagee, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Mortgage. |
7.13 | PURCHASE MONEY MORTGAGE. This Mortgage is intended to be a purchase money mortgage as defined in 42 Pa. C.S.A. §8141. |
7.14 | OPEN-END MORTGAGE. This Mortgage shall constitute an Open-End Mortgage as such term is defined in 42 Pa.C.S. §8143(f), and shall secure Future Advances and shall have lien priority in accordance with the provisions of 42 Pa.C.S. §§8143 and 8144. Notwithstanding the foregoing, to the maximum extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives its right to submit a notice to Mortgagee under 42 Pa.C.S. §8143(c). In addition to the other remedies available under the Loan Agreement and any other document evidencing the Secured Obligations, any advances made after receipt of any such notice, whether or not made pursuant to 42 Pa.C.S. §8143 and/or §8144, shall be secured hereby and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. In the event any person or entity shall submit a notice to Mortgagee under 42 Pa.C.S. §8143(b), in addition to the other remedies available under this Mortgage, the Loan Agreement and any other document evidencing the Secured Obligations, Mortgagor |
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shall have the lien or encumbrance which is the subject of such notice removed of record in accordance with this Mortgage; and any advances made by Mortgagee after receipt of any such notice whether or not made under 42 Pa.C.S. §8143(b) shall be deemed to be obligatory advances made under, shall be secured hereby, and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. By placing or accepting any such lien or encumbrance against any or all of the Subject Property, the holder thereof shall be deemed to have agreed to the maximum extent permitted by law that its lien or encumbrance shall be subject and subordinate in lien priority to this Mortgage and to any subsequent advances made under the Loan Agreement and any other document evidencing the Secured Obligations, to all accrued and unpaid interest and to all other sums secured hereby. This Mortgage is given to secure the obligations of the Mortgagor and certain of Mortgagors Affiliates under, or in respect of, the Loan Documents to which Mortgagor and its Affiliates are parties, up to that amount which is equal to the amount of the aggregate maximum permitted principal indebtedness provided under the terms of the Loan Documents and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements, but also any and all other indebtedness now owing or which may hereafter be owing by Mortgagor and its Affiliates to Mortgagee and/or Lenders, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Loan Documents, advances for the payment of taxes and assessments and municipal claims, maintenance charges, insurance premiums, costs incurred for the protection of the property or the lien of this Mortgage, expenses incurred by Mortgagee or any Lender by reason of a Default under this Mortgage, or for any other permissible purpose, whether such advances are obligatory or are to be at the option of Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all indebtedness secured hereby, including future advances, from the time of its filing for record in the recorders office of the county in which the property is located; and the lien of all present and future advances shall relate back to the date of this Mortgage. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. The amount of principal indebtedness that may be secured by this Mortgage may increase or decrease from time to time. The maximum amount of principal indebtedness outstanding at any one time shall not exceed $372,000,000 exclusive of accrued and unpaid interest and unpaid balances of advances and other extensions of credit secured by this Mortgage made for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Subject Property within the meaning of 42 Pa. C.S.A. § 8143(f), and expenses incurred by the Mortgagee or any Lender by reason of the occurrence of a Default under this Mortgage and other costs and advances to the fullest extent permitted by the terms of 42 Pa. C.S.A. § 8144. |
SECTION 6.9 OF THIS MORTGAGE PROVIDES FOR THE REMEDY OF CONFESSION OF JUDGMENT IN EJECTMENT. IN CONNECTION THEREWITH, MORTGAGOR VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS, IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY OF OR EXECUTION UPON SUCH JUDGMENT. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND THAT COUNSEL HAS REVIEWED WITH AND EXPLAINED TO MORTGAGOR THE MEANING OF THIS WAIVER AND THE AFORESAID REMEDY.
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IN WITNESS WHEREOF, Mortgagor, intending to be legally bound, has executed this Mortgage.
MORTGAGOR | ||||||||||||
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: |
KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, | |||||||||||
a Delaware limited liability company, as Administrative Trustee | ||||||||||||
By: |
KBSII REIT ACQUISITION XXI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
CERTIFICATE OF RESIDENCE
I hereby certify that the precise residence of Mortgagee is:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Bryan Stevens, Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:/s/ Bryan Stevens
Name: Bryan Stevens
Its: Senior Vice President
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On February 8, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
PARCEL 1 (Fee Premises) Tax ID / Parcel No. 33-F12-00A-16H
LOT 13, CENTERPOINT COMMERCE & TRADE PARK EAST
325 CENTERPOINT BLVD.
PIN# F12 00A 16H
ALL that certain piece, parcel or tract of land, situate, lying and being in the Township of Jenkins, County of Luzerne and Commonwealth of Pennsylvania, more particularly bounded and described as follows to, wit:
BEGINNING at a point along the Southwesterly Right-of-Way Line of CenterPoint Boulevard, said point being located on the Division Line between Lot 11B and Lot 13 as shown on plan titled CenterPoint Commerce and Trade Park East, Final Minor Subdivision Plan of Lots 7, 11, & 13 Drawing S-1 dated January 30, 2007 prepared by Vincent J. Stranch, PLS;
THENCE along said Right-of-Way Line, South 65`4847 East, one thousand eight hundred ninety-seven and eighty-seven one-hundredths (1897.87) feet to a point located along the northwesterly line of lands now or formerly of Mericle 112 Armstrong, LLC;
THENCE along said Mericle lands, South 21`4640 West, nine hundred fifty-two and seventy- four one-hundredths (952.74) feet to a point located along the northerly line of lands now or formerly of Pennsy Supply Inc.;
THENCE along said Pennsy lands, North 79°0231 West, one thousand seven hundred thirty- nine and twenty-one one hundredths (1739.21) feet to a point located along the easterly line of Lot 11B;
THENCE along said Lot 11B, North 10°5729 East, one thousand seventy (1070.00) feet to a point;
THENCE along the same, North 24°1113 East, three hundred eight and thirty one-hundredths (308.30) feet to a point, the PLACE OF BEGINNING.
CONTAINING a total area of 48.95 acres of land, more or less.
BEING ALL of Lot 13 as shown on Final Subdivision entitled CenterPoint Commerce and Trade Park East, Final Minor Subdivision Plan of Lots 7, 11, & 13 Drawing S-2 dated January 30, 2007 prepared by Vincent J. Stranch, PLS and recorded in the Office of the Luzerne County Recorder of Deeds in Map Book 194 at Page 72.
PARCEL 2 (Appurtenant Easement Parcel)
TOGETHER with the irrevocable easement in, through, over and across and under the Easement Area (as defined in the Easement Agreement, as hereinafter defined) for the purposes of (a) installing, constructing, replacing, maintaining and operating the Utilities (as defined in the Easement Agreement, as hereinafter defined) and (b) ingress, egress and regress for the purpose of access contained in that
EXHIBIT A
certain Easement Agreement recorded in Record Books 3008, Page 168419 (the Easement Agreement).
EXHIBIT B
NON-BORROWER MORTGAGOR RIDER
Exhibit B to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
To the extent the Mortgage secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Mortgagor, the party or parties constituting Mortgagor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Mortgagor hereby waives any right it may now or hereafter have to require Mortgagee, as a condition to the exercise of any remedy or other right against Mortgagor hereunder or under any other document executed by Mortgagor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to pursue any other right or remedy in Mortgagees power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Mortgagee by any Borrower or other person (other than Mortgagor), or otherwise to comply with the UCC (as defined in the Mortgage) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Mortgagor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Mortgagor by any Borrower or otherwise intended or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Mortgage) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Mortgagee, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Mortgagors rights of subrogation and reimbursement against the principal by operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Mortgagee to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Mortgagee, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Mortgagor further waives any and all rights and defenses that Mortgagor may have because Borrowers debt is secured by real |
EXHIBIT B
property; this means, among other things, that: (1) Mortgagee may collect from Mortgagor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Mortgagee forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing on the real property collateral, has destroyed any right Mortgagor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Mortgagor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Mortgagor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Mortgagor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Mortgagor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.. |
3. | SUBROGATION. Mortgagor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Mortgagor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Mortgagee with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Mortgagor warrants and agrees: (a) that Mortgagee would not make the Loan but for this Mortgage; (b) that Mortgagor has not relied, and will not rely, on any representations or warranties by Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Mortgagor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Mortgagor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Mortgagee shall have no duty to disclose or report to Mortgagor any information now or hereafter known to Mortgagee with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Mortgagor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Mortgagees rights hereunder shall be reinstated and revived, and the enforceability of this Mortgage shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Mortgagee is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Mortgagor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Mortgagor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Mortgagor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Mortgagor, such payment or distribution shall be held in trust and immediately paid over to Mortgagee, is hereby assigned to Mortgagee as security |
EXHIBIT B
for the Secured Obligations, and shall be held by Mortgagee in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Mortgagor warrants that all of the waivers in this Mortgage are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Mortgagor may destroy or impair rights which Mortgagor would otherwise have against Mortgagee, Borrower and other persons, or against collateral. Mortgagor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Mortgagor hereby acknowledges that: (a) the obligations undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Mortgagees consideration for entering into this transaction, Mortgagee has specifically bargained for the waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Mortgagor, and (iv) the legal consequences to Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes this Mortgage with the intent that this Mortgage and all of the informed waivers herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, MORTGAGEE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND MORTGAGEE HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS MORTGAGE AND MORTGAGEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND MORTGAGEE TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Mortgage and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Mortgage and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Mortgagee in writing. |
Exhibit 10.37
OPEN-END MORTGAGE
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST,
A Delaware Statutory Trust,
as Mortgagor,
TO
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Mortgagee
Dated as of February 8, 2011
THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES. THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS INSTRUMENT IS SUCH AMOUNT AS MAY BE DUE AND OWING ON THE NOTE DESCRIBED HEREIN NOT TO EXCEED $372,000,000 PLUS ALL OTHER COSTS AND INDEBTEDNESS DESCRIBED IN 42 Pa. C.S. §8143
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS INSTRUMENT PREPARED BY:
Mark Appelbaum
Jones Day
555 California Street, 26th floor
San Francisco, CA 94104
Tax Parcel Number: 33-F12-00A-16J
THE PARTIES TO THIS OPEN-END MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Mortgage), dated as of the 8th day of February, 2011, but intended to be effective as of February 16, 2011, are KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust (Mortgagor), for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Mortgagee).
ARTICLE 1. GRANT
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys, assigns and mortgages to Mortgagee and its successors and assigns forever all of that real property located in the City of Pittston, County of Luzerne, Commonwealth of Pennsylvania, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; and any and all rights of Mortgagor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Mortgagee shall have no liability under such covenants, conditions, and restrictions unless and until Mortgagee forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
TO HAVE AND TO HOLD the Subject Property, together with the Collateral (as hereinafter defined) and all the rights, easements, profits and appurtenances and other property described above, together with all proceeds, products, replacements, additions, substitutions and renewals to or of any or all of the foregoing belonging unto and to the use of the Mortgagee, its successors and assigns, in fee simple forever;
PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and performs all obligations on its behalf contained in this Mortgage, the Loan Agreement (as such terms are defined below) or any of the other documents evidencing any of the Secured Obligations, then and in that case, the Subject Property and the Collateral hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor at Mortgagors cost, an appropriate release and discharge of this Mortgage in form to be recorded.
1.2 | ADDRESS. The address of the Subject Property is: 125 Capital Road, Pittston, Pennsylvania. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Mortgage on the Subject Property as described on Exhibit A. |
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ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Mortgagor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Second Amended and Restated and Consolidated Secured Promissory Note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Mortgagor under this Mortgage; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Mortgagee, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Mortgage; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Mortgage; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
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2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagees right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
Nothing contained in this Mortgage is intended to diminish, alter, impair, or affect any other rights and remedies of Mortgagee, including but not limited to, the appointment of a receiver, nor shall any provision in this section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Subject Property or without regard to the adequacy of the Subject Property to serve as security for the obligations owed by Mortgagor to Mortgagee, and shall be in addition to any rights at law or in equity. Further, except for the notices required hereunder, if any, Mortgagor hereby waives any notice of default or demand for turnover of rents by Mortgagee, together with any rights, if any, to apply to a court to deposit the Payments into the registry of the court or such other depository as the court may designate.
3.2 | GRANT OF LICENSE. Mortgagee confers upon Mortgagor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee. Furthermore, upon any Default and |
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revocation of the License as aforesaid, Mortgagee shall be entitled to receive and Mortgagor covenants to deliver immediately to Mortgagee, upon demand, any and all payments theretofore collected by Mortgagor which remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and to the extent such Payments have not been delivered, the Payments shall be held in trust from Mortgagee. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise by Mortgagee, or any of its respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that, to the best of Mortgagors knowledge: (a) Mortgagor has delivered to Mortgagee a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Mortgagor covenants and agrees at Mortgagors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Mortgagee prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Mortgagors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Mortgagee fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without Mortgagees prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or |
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agree to subordinate any of the Leases to any other mortgage or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Mortgagees consent hereunder, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Mortgagors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Subject Property; all advance payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion
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thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Mortgage constitutes a fixture filing under the Pennsylvania Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a mortgage under the UCC.
Security Agreement. THIS MORTGAGE IS TO BE FILED AND RECORDED IN, AMONG OTHER PLACES, THE REAL ESTATE RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED AND THE FOLLOWING INFORMATION IS INCLUDED: (1) THE MORTGAGOR SHALL BE DEEMED TO BE THE DEBTOR WITH AN ADDRESS OF: 620 NEWPORT CENTER DRIVE, SUITE 1300, NEWPORT BEACH, CA 92660, WHICH THE MORTGAGOR CERTIFIES IS ACCURATE; (2) THE MORTGAGEE SHALL BE DEEMED TO BE THE SECURED PARTY WITH THE ADDRESS OF: 2030 MAIN STREET, SUITE 800, IRVINE, CA 92614, AND SHALL HAVE ALL OF THE RIGHTS OF A SECURED PARTY UNDER THE UCC; (3) THIS MORTGAGE COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES; (4) THE NAME OF THE RECORD OWNER OF THE LAND IS THE MORTGAGOR; (F) THE ORGANIZATIONAL IDENTIFICATION NUMBER OF THE MORTGAGOR IS 4936754; (6) THE MORTGAGOR IS A STATUTORY TRUST, ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE; AND (7) THE LEGAL NAME OF THE MORTGAGOR IS KBSII I-81 INDUSTRIAL PORTFOLIO TRUST.
This Mortgage creates a security interest in the Collateral, and, to the extent the Collateral is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has, as of the date of recordation of this Mortgage, and will have good title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Mortgagors principal place of business is located at the address shown in Section 7.11; and (d) Mortgagors legal name is exactly as set forth on the first page of this Mortgage and all of Mortgagors organizational documents or agreements delivered to Mortgagee are complete and accurate in every respect. |
4.3 | COVENANTS. Mortgagor agrees: (a) to execute and deliver such documents as Mortgagee deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee prior written notice thereof; (c) to cooperate with Mortgagee in perfecting all security interests granted herein and in obtaining such agreements from third parties as Mortgagee deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Mortgagee is authorized to file financing statements in the name of Mortgagor to perfect Mortgagees security interest in Collateral. |
4.4 | RIGHTS OF MORTGAGEE. In addition to Mortgagees rights as a Secured Party under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagees rights hereunder and |
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enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF MORTGAGEE ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Mortgage, then in addition to all of Mortgagees rights as a Secured Party under the UCC or otherwise at law, and subject to applicable law: |
(a) | Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Mortgagee may, for the account of Mortgagor and at Mortgagors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee may from time to time elect. |
Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9621, or other applicable law, and the provisions of UCC §9620 have been satisfied. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagees name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagees security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Mortgagor; provided, however, |
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that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Mortgagors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Mortgagor represents and warrants that, except as disclosed to Mortgagee in a writing which refers to this warranty and the Permitted Liens, Mortgagor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Mortgage is a first and prior lien on the Subject Property. Mortgagor hereby represents and warrants that all of the Subject Property is one or more tax parcels, and there are no properties included in such tax parcels other than the Subject Property. Mortgagor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Mortgagors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Mortgagor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagees net income. |
(b) | Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor pursues the contest diligently and in compliance with applicable laws, in a manner which Mortgagee determines is not prejudicial to Mortgagee, and does not impair the rights of Mortgagee under any of the Loan Documents; and (b) Mortgagor deposits with Mortgagee any funds or other forms of assurance which Mortgagee in good faith determines from time to time appropriate to protect Mortgagee from the consequences of the contest being unsuccessful. Mortgagors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Mortgagees option and upon its demand, Mortgagor, shall, until all Secured Obligations have been paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and |
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insurance required or requested pursuant to the Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased amounts required to pay all amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30) days thereafter the additional amount as stated in Mortgagees notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Mortgagee shall, unless Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor hereunder or under any Loan Document, Mortgagee may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Mortgagee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts collected and in Mortgagees possession shall be paid to Mortgagor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Mortgagor shall immediately discharge any lien not permitted under the Loan Documents or approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject to the following sentence, Mortgagor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Mortgagee, Mortgagor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Mortgagees demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Mortgagee a surety bond in sufficient form and amount; or (c) provide Mortgagee with other assurances which Mortgagee deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Mortgagee from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Mortgagee to be maintained by Mortgagor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or |
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Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Mortgagee, and/or Mortgagee may release all or any part of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents. |
(b) | Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Mortgagee of such additional funds which Mortgagee determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Mortgagee; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Mortgagee of such insurance or condemnation proceeds, then Mortgagee may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such proceeds to Mortgagor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject Property and Collateral against such risks as Mortgagee may require pursuant to the Loan Agreement and, at Mortgagees request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any |
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zoning or other land classification which affects the Subject Property without Mortgagees prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Mortgagee elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagors sole expense, Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | ACTIONS BY MORTGAGEE. From time to time and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Mortgagee, without liability thereof and without notice, may: (a) release all or any part of the Subject Property from this Mortgage; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Mortgage. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning this Mortgage, including without limit any statement of amounts owing under any Secured Obligation. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Subject Property or Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagees failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor. |
(b) | Mortgagor indemnifies Mortgagee against, and holds Mortgagee harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the execution of this Mortgage or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Mortgagor to |
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perform Mortgagors obligations; or (iv) by reason of any alleged obligation or undertaking on Mortgagees part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee shall survive the release and cancellation of the Secured Obligations and the release of this Mortgage. |
(c) | Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Mortgagor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Mortgagee in approving loan applications. |
(b) | Mortgagor has represented to Mortgagee, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Mortgagee making the Loan, certain facts concerning Mortgagors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Mortgagee has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Mortgagee in the absence of these representations and warranties. |
(d) | Mortgagee would not have made this Loan if Mortgagee did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Mortgagors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Mortgagor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Mortgagor. |
(f) | Mortgagee has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Mortgagor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Mortgagees security for the Note. |
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(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Mortgagors right, title and/or interest in the Loan Documents and any subsequent documents executed by Mortgagor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial ownership of any membership interest in Mortgagor if Mortgagor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Mortgagor; or (vii) legal or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a corporation or in any general partner, venturer or member in Mortgagor that is a corporation. |
(i) | Mortgagor shall not make or commit to make any Transfer without Mortgagees prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Mortgagee may predicate Mortgagees decision to grant consent to a Transfer on such terms and conditions as Mortgagee may require, in Mortgagees sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Mortgagees ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee for all costs and expenses incurred by Mortgagee in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Mortgagees security will be impaired by the proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Mortgagees reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Mortgagees liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Mortgagees consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Mortgagors interest shall: (i) assume all of Mortgagors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Mortgagor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Mortgagee. In the event of any Transfer without the prior written consent of Mortgagee, whether or not Mortgagee elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Mortgagee, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Mortgagee relied upon in making the Loan |
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may no longer be relied upon. A consent by Mortgagee to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Mortgagees consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Mortgage upon the Subject Property and Collateral. |
5.13 | RELEASE OF ASSIGNMENT. When this Mortgage has been fully released, the last such release shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Mortgagee hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Mortgage notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Mortgagee shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan Documents or by the proceeds of any loan secured by this Mortgage. |
5.15 | RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagors compliance with the terms hereof. |
5.16 | CONTRACTS. Mortgagor will deliver to Mortgagee a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Mortgagee required by any of the Loan Documents. Within twenty (20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to Mortgagee a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Mortgagee, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Mortgagee). Mortgagor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Mortgagor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Mortgagees option, the failure of Mortgagor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Mortgagor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure; or, (d) if Mortgagor or any other Person shall make a Transfer without the prior |
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written consent of Mortgagee (which consent may be withheld in Mortgagees sole discretion (except for those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18, and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Mortgagee shall have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons; |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Mortgagor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Mortgagor and Mortgagors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items as may be reasonably necessary at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for insurance thereon, all utility and other reasonable operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Mortgagor would reasonably do in its course of business at the Subject Property if Mortgagor were in possession of the Subject |
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Property. All reasonable expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Mortgagee, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Subject Property has passed after foreclosure sale and all applicable periods of redemption have expired; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Mortgagees sole judgment, to protect or enhance the security hereof. Mortgagee may also take possession of any and all Payments that may previously have been collected by or on behalf of Mortgagor following the Default and that remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and together with any bank or similar accounts in which such Payments may be deposited or held; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Mortgagee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Mortgagee, without notice to or demand upon Mortgagor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Mortgagee in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Mortgagee nor any other person or entity other than Mortgagee shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Mortgagee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Mortgagee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Mortgagor or Mortgagee may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion; |
(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure sale, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the |
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following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagees credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Mortgagor and Mortgagee; and (z) Mortgagees credit bid may be (at Mortgagees sole and absolute discretion) higher or lower than any appraised value of the Subject Property; |
(i) | Upon the completion of any foreclosure of all or a portion of the Subject Property, commence an action to recover any of the Secured Obligations that remains unpaid or unsatisfied; |
(j) | Exercise any and all remedies at law, equity, or under the Note, this Mortgage or other Loan Documents for such Default. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, all proceeds of any foreclosure sale shall be applied: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under either Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee. |
6.5 | NO CURE OR WAIVER. Neither Mortgagees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Default or notice of |
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default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or limit or impair the Secured Obligations or Mortgagors liability thereof, or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the lien of or security interest created by this Mortgage. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Mortgagor agrees to pay to Mortgagee immediately and without demand all costs and expenses of any kind incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby irrevocably appoints Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Mortgagee deems appropriate to protect Mortgagees interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Mortgage or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform any obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Mortgagee under this Section. |
6.8 | REMEDIES CUMULATIVE. All rights and remedies of Mortgagee provided hereunder are cumulative and are in addition to all rights and remedies provided by applicable law (including specifically that of foreclosure of this instrument as though it were a mortgage) or in any other agreements between Mortgagor and Mortgagee. No failure on the part of Mortgagee to exercise any of its rights hereunder arising upon any Default shall be construed to prejudice its rights upon the occurrence of any other or subsequent Default. No delay on the part of Mortgagee in exercising any such rights shall be construed to preclude it from the exercise thereof at any time while that Default is continuing. Mortgagee may enforce any one or more remedies or rights hereunder successively or concurrently. By accepting payment or performance of any of the Secured Obligations after its due date, Mortgagee shall not thereby waive the agreement contained herein that time is of the essence, nor shall Mortgagee waive either its right to require prompt payment or performance when due of the remainder of the Secured Obligations or its right to consider the failure to so pay or perform a Default. |
6.9 | CONFESSION OF JUDGMENT. FOR THE PURPOSE OF OBTAINING POSSESSION OF THE SUBJECT PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST |
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MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE SUBJECT PROPERTY, IN FAVOR OF MORTGAGEE, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE SUBJECT PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE SUBJECT PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE SUBJECT PROPERTY. MORTGAGEE MAY CONFESS JUDGMENT IN AN ACTION IN EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFFS SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE SUBJECT PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO MORTGAGEE. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Mortgagees acquiring any other estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Mortgagee, and the covenants, representations, warranties and obligations of Mortgagor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Mortgagor and rights and remedies of Mortgagee set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens assignments, security interests and other security provided to Mortgagee hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as Mortgagor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | INTENTIONALLY OMITTED. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a lien on or interest in the |
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Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Mortgage or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.11. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CHOICE OF LAW. WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, IT BEING UNDERSTOOD THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS PARAGRAPH AND TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING THEREUNDER OR HEREUNDER. |
7.10 | INCORPORATION. Exhibits A, and B, all as attached, are incorporated into this Mortgage by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept |
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delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Mortgagor: |
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST c/o KBS Capital Advisors LLC 590 Madison Avenue, 26th Floor New York, NY 10022 Attention: Mr. Charles Valentino Tel: (212) 644-6662 Fax: (212) 644-1372 E-mail: cvalentino@kbsrealty.com | |
Mortgagee: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835 | |
With a copy to: |
Wells Fargo Bank, National Association Los Angeles Loan Center 2120 East Park Place, Suite 100 El Segundo, California 90245 Attention: Eva Lopez |
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Subject Property or to Mortgagor naming Mortgagee, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Mortgage. |
7.13 | PURCHASE MONEY MORTGAGE. This Mortgage is intended to be a purchase money mortgage as defined in 42 Pa. C.S.A. §8141. |
7.14 | OPEN-END MORTGAGE. This Mortgage shall constitute an Open-End Mortgage as such term is defined in 42 Pa.C.S. §8143(f), and shall secure Future Advances and shall have lien priority in accordance with the provisions of 42 Pa.C.S. §§8143 and 8144. Notwithstanding the foregoing, to the maximum extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives its right to submit a notice to Mortgagee under 42 Pa.C.S. §8143(c). In addition to the other remedies available under the Loan Agreement and any other document evidencing the Secured Obligations, any advances made after receipt of any such notice, whether or not made pursuant to 42 Pa.C.S. §8143 and/or §8144, shall be secured hereby and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. In the event any person or entity shall submit a notice to Mortgagee under 42 Pa.C.S. §8143(b), in addition to the other remedies available under this Mortgage, the Loan Agreement and any other document evidencing the Secured Obligations, Mortgagor |
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shall have the lien or encumbrance which is the subject of such notice removed of record in accordance with this Mortgage; and any advances made by Mortgagee after receipt of any such notice whether or not made under 42 Pa.C.S. §8143(b) shall be deemed to be obligatory advances made under, shall be secured hereby, and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. By placing or accepting any such lien or encumbrance against any or all of the Subject Property, the holder thereof shall be deemed to have agreed to the maximum extent permitted by law that its lien or encumbrance shall be subject and subordinate in lien priority to this Mortgage and to any subsequent advances made under the Loan Agreement and any other document evidencing the Secured Obligations, to all accrued and unpaid interest and to all other sums secured hereby. This Mortgage is given to secure the obligations of the Mortgagor and certain of Mortgagors Affiliates under, or in respect of, the Loan Documents to which Mortgagor and its Affiliates are parties, up to that amount which is equal to the amount of the aggregate maximum permitted principal indebtedness provided under the terms of the Loan Documents and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements, but also any and all other indebtedness now owing or which may hereafter be owing by Mortgagor and its Affiliates to Mortgagee and/or Lenders, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Loan Documents, advances for the payment of taxes and assessments and municipal claims, maintenance charges, insurance premiums, costs incurred for the protection of the property or the lien of this Mortgage, expenses incurred by Mortgagee or any Lender by reason of a Default under this Mortgage, or for any other permissible purpose, whether such advances are obligatory or are to be at the option of Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all indebtedness secured hereby, including future advances, from the time of its filing for record in the recorders office of the county in which the property is located; and the lien of all present and future advances shall relate back to the date of this Mortgage. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. The amount of principal indebtedness that may be secured by this Mortgage may increase or decrease from time to time. The maximum amount of principal indebtedness outstanding at any one time shall not exceed $372,000,000 exclusive of accrued and unpaid interest and unpaid balances of advances and other extensions of credit secured by this Mortgage made for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Subject Property within the meaning of 42 Pa. C.S.A. § 8143(f), and expenses incurred by the Mortgagee or any Lender by reason of the occurrence of a Default under this Mortgage and other costs and advances to the fullest extent permitted by the terms of 42 Pa. C.S.A. § 8144. |
SECTION 6.9 OF THIS MORTGAGE PROVIDES FOR THE REMEDY OF CONFESSION OF JUDGMENT IN EJECTMENT. IN CONNECTION THEREWITH, MORTGAGOR VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS, IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY OF OR EXECUTION UPON SUCH JUDGMENT. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND THAT COUNSEL HAS REVIEWED WITH AND EXPLAINED TO MORTGAGOR THE MEANING OF THIS WAIVER AND THE AFORESAID REMEDY.
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IN WITNESS WHEREOF, Mortgagor, intending to be legally bound, has executed this Mortgage.
MORTGAGOR | ||||||||||||
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: |
KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, | |||||||||||
a Delaware limited liability company, as Administrative Trustee | ||||||||||||
By: |
KBSII REIT ACQUISITION XXI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||||
a Maryland corporation, general partner | ||||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
CERTIFICATE OF RESIDENCE
I hereby certify that the precise residence of Mortgagee is:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Bryan Stevens, Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Bryan Stevens
Name: Bryan Stevens
Its: Senior Vice President
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On February 8, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as February 8, 2011.
PARCEL 1 (Fee Parcel) Tax ID/Parcel No. 33-F12-00A-16J
ALL that certain piece, parcel or tract of land, situate, lying and being in the Township of Jenkins, County of Luzerne and Commonwealth of Pennsylvania, more particularly bounded and described as follows to, wit:
BEGINNING at a point in the Southerly Right-of-Way Line of Capital Road, said point being in the Division Line between Lot 7 and Lot 6 as shown on plan titled CenterPoint Commerce and Trade Park East, Final Minor Subdivision Plan of Lots 7, 11, & 13 Drawing S-1 dated January 30, 2007 prepared by Vincent J. Stranch, PLS;
THENCE continuing along said Right-of-Way Line of Capital Road, South 88°0820 East, nine hundred thirty-six and forty-six one-hundredths (936.46) feet to a point;
THENCE continuing along said Right-of-Way Line on a curve to the left having a radius of four hundred forty (440.00) feet, an arc length of four hundred forty-three and sixty-nine one-hundredths (443.69) feet and having a chord bearing and distance of North 62°5823 East, four hundred twenty-five and thirteen one-hundredths (425.13) feet to a point being a corner of Lot 11 A of said subdivision;
THENCE continuing along the Westerly Line of Lot 11A, South 55°5454 East, thirty-five and thirty one-hundredths (35.30) feet to a point;
THENCE continuing along the Westerly Line of Lot 11 A, South 14°0208 East, one hundred sixty-eight and forty-four one-hundredths (168.44) feet to a point;
THENCE continuing along same, South 36°4236 West, one hundred fifty-nine and thirty-eight one-hundredths (159.38) feet to a point;
THENCE continuing along same, South 01°5107 West, four hundred sixty and eighty-seven one-hundredths (460.87) feet to a point in the Northerly line of lands of Pennsy Supply, Inc.;
THENCE continuing along the Northerly line of lands of said Pennsy Supply, Inc., North 79°0231 West, one hundred thirty and ninety-six one-hundredths (130.96) feet to a point;
THENCE continuing along same, North 87°0544 West, six hundred eighty-five and fifty-three one-hundredths (685.53) feet to a point;
THENCE continuing along same along a curve to the left having a radius of four hundred ninety-one and seventy seven one-hundredths (491.77) feet, an arc length of six hundred seventy-four and ninety-seven one-hundredths (674.97) feet and a chord bearing and distance of North 48°2137 West, six hundred twenty-three and twenty-two one-hundredths (623.22) feet to a point being a corner of aforementioned Lot 6 of said subdivision;
THENCE continuing along the Easterly line of said Lot 6, North 01°5140 East, one hundred thirty five and seventeen one-hundredths (135.17) feet to a point, the PLACE OF BEGINNING.
EXHIBIT A
CONTAINING a total area of 13.59 acres of land, more or less.
BEING ALL of Lot 7 as shown on Final Subdivision entitled CenterPoint Commerce and Trade Park East, Final Minor Subdivision Plan of Lots 7, 11, & 13 Drawing S-1 dated January 30, 2007 prepared by Vincent J. Stranch, PLS and recorded in the Office of the Luzerne County Recorder of Deeds in Map Book 194 at Page 72.
PARCEL 2 (Appurtenant Easement Parcel)
TOGETHER with the irrevocable easement in, through, over and across and under the Easement Area (as defined in the Easement Agreement, as hereinafter defined) for the purposes of (a) installing, constructing, replacing, maintaining and operating the Utilities (as defined in the Easement Agreement, as hereinafter defined) and (b) ingress, egress and regress for the purpose of access contained in that certain Easement Agreement recorded in Record Books 3008, Page 168428 (the Easement Agreement).
EXHIBIT B
NON-BORROWER MORTGAGOR RIDER
Exhibit B to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
To the extent the Mortgage secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Mortgagor, the party or parties constituting Mortgagor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Mortgagor hereby waives any right it may now or hereafter have to require Mortgagee, as a condition to the exercise of any remedy or other right against Mortgagor hereunder or under any other document executed by Mortgagor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to pursue any other right or remedy in Mortgagees power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Mortgagee by any Borrower or other person (other than Mortgagor), or otherwise to comply with the UCC (as defined in the Mortgage) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Mortgagor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Mortgagor by any Borrower or otherwise intended or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Mortgage) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Mortgagee, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Mortgagors rights of subrogation and reimbursement against the principal by operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Mortgagee to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Mortgagee, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Mortgagor further waives any and all rights and defenses that Mortgagor may have because Borrowers debt is secured by real |
EXHIBIT B
property; this means, among other things, that: (1) Mortgagee may collect from Mortgagor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Mortgagee forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing on the real property collateral, has destroyed any right Mortgagor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Mortgagor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Mortgagor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Mortgagor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Mortgagor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.. |
3. | SUBROGATION. Mortgagor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Mortgagor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Mortgagee with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Mortgagor warrants and agrees: (a) that Mortgagee would not make the Loan but for this Mortgage; (b) that Mortgagor has not relied, and will not rely, on any representations or warranties by Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Mortgagor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Mortgagor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Mortgagee shall have no duty to disclose or report to Mortgagor any information now or hereafter known to Mortgagee with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Mortgagor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Mortgagees rights hereunder shall be reinstated and revived, and the enforceability of this Mortgage shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Mortgagee is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Mortgagor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Mortgagor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Mortgagor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Mortgagor, such payment or distribution shall be held in trust and immediately paid over to Mortgagee, is hereby assigned to Mortgagee as security |
EXHIBIT B
for the Secured Obligations, and shall be held by Mortgagee in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Mortgagor warrants that all of the waivers in this Mortgage are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Mortgagor may destroy or impair rights which Mortgagor would otherwise have against Mortgagee, Borrower and other persons, or against collateral. Mortgagor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Mortgagor hereby acknowledges that: (a) the obligations undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Mortgagees consideration for entering into this transaction, Mortgagee has specifically bargained for the waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Mortgagor, and (iv) the legal consequences to Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes this Mortgage with the intent that this Mortgage and all of the informed waivers herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, MORTGAGEE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND MORTGAGEE HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS MORTGAGE AND MORTGAGEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND MORTGAGEE TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Mortgage and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Mortgage and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Mortgagee in writing. |
Exhibit 10.38
OPEN-END MORTGAGE
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST,
A Delaware Statutory Trust,
as Mortgagor,
TO
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Mortgagee
Dated as of February 8, 2011
THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES. THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS INSTRUMENT IS SUCH AMOUNT AS MAY BE DUE AND OWING ON THE NOTE DESCRIBED HEREIN NOT TO EXCEED $372,000,000 PLUS ALL OTHER COSTS AND INDEBTEDNESS DESCRIBED IN 42 Pa. C.S. §8143
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS INSTRUMENT PREPARED BY:
Mark Appelbaum
Jones Day
555 California Street, 26th floor
San Francisco, CA 94104
Tax Parcel Number: 26-U6S3-001-36A-000
THE PARTIES TO THIS OPEN-END MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Mortgage), dated as of the 8th day of February, 2011, but intended to be effective as of February 16, 2011, are KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust (Mortgagor), for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Mortgagee).
ARTICLE 1. GRANT
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys, assigns and mortgages to Mortgagee and its successors and assigns forever all of that real property located in the Township of Hazle, County of Luzerne, Commonwealth of Pennsylvania, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Mortgagor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; and any and all rights of Mortgagor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Mortgagee shall have no liability under such covenants, conditions, and restrictions unless and until Mortgagee forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
TO HAVE AND TO HOLD the Subject Property, together with the Collateral (as hereinafter defined) and all the rights, easements, profits and appurtenances and other property described above, together with all proceeds, products, replacements, additions, substitutions and renewals to or of any or all of the foregoing belonging unto and to the use of the Mortgagee, its successors and assigns, in fee simple forever;
PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and performs all obligations on its behalf contained in this Mortgage, the Loan Agreement (as such terms are defined below) or any of the other documents evidencing any of the Secured Obligations, then and in that case, the Subject Property and the Collateral hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor at Mortgagors cost, an appropriate release and discharge of this Mortgage in form to be recorded.
1.2 | ADDRESS. The address of the Subject Property is: 550 Oak Ridge Road, Hazle Township, Pennsylvania. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Mortgage on the Subject Property as described on Exhibit A. |
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ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Mortgagor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Second Amended and Restated and Consolidated Secured Promissory Note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Mortgagor under this Mortgage; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Mortgagee, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Mortgage; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Mortgage; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement, which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
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2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagees right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
Nothing contained in this Mortgage is intended to diminish, alter, impair, or affect any other rights and remedies of Mortgagee, including but not limited to, the appointment of a receiver, nor shall any provision in this section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Subject Property or without regard to the adequacy of the Subject Property to serve as security for the obligations owed by Mortgagor to Mortgagee, and shall be in addition to any rights at law or in equity. Further, except for the notices required hereunder, if any, Mortgagor hereby waives any notice of default or demand for turnover of rents by Mortgagee, together with any rights, if any, to apply to a court to deposit the Payments into the registry of the court or such other depository as the court may designate.
3.2 | GRANT OF LICENSE. Mortgagee confers upon Mortgagor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee. Furthermore, upon any Default and |
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revocation of the License as aforesaid, Mortgagee shall be entitled to receive and Mortgagor covenants to deliver immediately to Mortgagee, upon demand, any and all payments theretofore collected by Mortgagor which remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and to the extent such Payments have not been delivered, the Payments shall be held in trust from Mortgagee. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise by Mortgagee, or any of its respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that, to the best of Mortgagors knowledge: (a) Mortgagor has delivered to Mortgagee a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Mortgagor covenants and agrees at Mortgagors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Mortgagee prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Mortgagors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Mortgagee fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Mortgage, in form and substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall not, without Mortgagees prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or |
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agree to subordinate any of the Leases to any other mortgage or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Mortgagees consent hereunder, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Mortgagors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.16 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Subject Property; all advance payments of insurance premiums made by Mortgagor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion
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thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Mortgage constitutes a fixture filing under the Pennsylvania Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a mortgage under the UCC.
Security Agreement. THIS MORTGAGE IS TO BE FILED AND RECORDED IN, AMONG OTHER PLACES, THE REAL ESTATE RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED AND THE FOLLOWING INFORMATION IS INCLUDED: (1) THE MORTGAGOR SHALL BE DEEMED TO BE THE DEBTOR WITH AN ADDRESS OF: 620 NEWPORT CENTER DRIVE, SUITE 1300, NEWPORT BEACH, CA 92660, WHICH THE MORTGAGOR CERTIFIES IS ACCURATE; (2) THE MORTGAGEE SHALL BE DEEMED TO BE THE SECURED PARTY WITH THE ADDRESS OF: 2030 MAIN STREET, SUITE 800, IRVINE, CA 92614, AND SHALL HAVE ALL OF THE RIGHTS OF A SECURED PARTY UNDER THE UCC; (3) THIS MORTGAGE COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES; (4) THE NAME OF THE RECORD OWNER OF THE LAND IS THE MORTGAGOR; (F) THE ORGANIZATIONAL IDENTIFICATION NUMBER OF THE MORTGAGOR IS 4936754; (6) THE MORTGAGOR IS A STATUTORY TRUST, ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE; AND (7) THE LEGAL NAME OF THE MORTGAGOR IS KBSII I-81 INDUSTRIAL PORTFOLIO TRUST.
This Mortgage creates a security interest in the Collateral, and, to the extent the Collateral is not real property, this Mortgage constitutes a security agreement from Mortgagor to Mortgagee under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has, as of the date of recordation of this Mortgage, and will have good title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Mortgagors principal place of business is located at the address shown in Section 7.11; and (d) Mortgagors legal name is exactly as set forth on the first page of this Mortgage and all of Mortgagors organizational documents or agreements delivered to Mortgagee are complete and accurate in every respect. |
4.3 | COVENANTS. Mortgagor agrees: (a) to execute and deliver such documents as Mortgagee deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Mortgagee prior written notice thereof; (c) to cooperate with Mortgagee in perfecting all security interests granted herein and in obtaining such agreements from third parties as Mortgagee deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Mortgagee is authorized to file financing statements in the name of Mortgagor to perfect Mortgagees security interest in Collateral. |
4.4 | RIGHTS OF MORTGAGEE. In addition to Mortgagees rights as a Secured Party under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagees rights hereunder and |
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enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF MORTGAGEE ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Mortgage, then in addition to all of Mortgagees rights as a Secured Party under the UCC or otherwise at law, and subject to applicable law: |
(a) | Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Mortgagee may, for the account of Mortgagor and at Mortgagors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Mortgagee to the payment of expenses incurred by Mortgagee in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Mortgagee toward the payment of the Secured Obligations in such order of application as Mortgagee may from time to time elect. |
Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9621, or other applicable law, and the provisions of UCC §9620 have been satisfied. Mortgagor agrees that Mortgagee shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Mortgagor hereby irrevocably appoints Mortgagee as Mortgagors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagees name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagees security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Mortgagor; provided, however, |
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that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Mortgagors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Mortgagor represents and warrants that, except as disclosed to Mortgagee in a writing which refers to this warranty and the Permitted Liens, Mortgagor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Mortgage is a first and prior lien on the Subject Property. Mortgagor hereby represents and warrants that all of the Subject Property is one or more tax parcels, and there are no properties included in such tax parcels other than the Subject Property. Mortgagor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Mortgagors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Mortgagor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Mortgagor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagees net income. |
(b) | Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor pursues the contest diligently and in compliance with applicable laws, in a manner which Mortgagee determines is not prejudicial to Mortgagee, and does not impair the rights of Mortgagee under any of the Loan Documents; and (b) Mortgagor deposits with Mortgagee any funds or other forms of assurance which Mortgagee in good faith determines from time to time appropriate to protect Mortgagee from the consequences of the contest being unsuccessful. Mortgagors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Mortgagees option and upon its demand, Mortgagor, shall, until all Secured Obligations have been paid in full, pay to Mortgagee monthly, annually or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and |
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insurance required or requested pursuant to the Loan Documents when same are next due. If Mortgagee determines that any amounts paid by Mortgagor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased amounts required to pay all amounts when due, whereupon Mortgagor shall pay to Mortgagee within thirty (30) days thereafter the additional amount as stated in Mortgagees notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Mortgagee shall, unless Mortgagor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Mortgagee release said funds to Mortgagor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor hereunder or under any Loan Document, Mortgagee may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Mortgagor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Mortgage, Mortgagee shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Mortgagee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Mortgagee may elect, the balance of all amounts collected and in Mortgagees possession shall be paid to Mortgagor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Mortgagor shall immediately discharge any lien not permitted under the Loan Documents or approved by Mortgagee in writing that has or may attain priority over this Mortgage. Subject to the following sentence, Mortgagor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Mortgagee, Mortgagor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Mortgagees demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Mortgagee a surety bond in sufficient form and amount; or (c) provide Mortgagee with other assurances which Mortgagee deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Mortgagee from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Mortgagee to be maintained by Mortgagor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or |
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Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Mortgagee, and/or Mortgagee may release all or any part of the proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents. |
(b) | Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Mortgagee of such additional funds which Mortgagee determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Mortgagee, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Mortgagee; and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Mortgagee; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Mortgagee may reasonably establish to protect its security. Mortgagor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Mortgagee of such insurance or condemnation proceeds, then Mortgagee may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Mortgagee in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such proceeds to Mortgagor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject Property and Collateral against such risks as Mortgagee may require pursuant to the Loan Agreement and, at Mortgagees request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any |
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zoning or other land classification which affects the Subject Property without Mortgagees prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Mortgagee elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagors sole expense, Mortgagor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | ACTIONS BY MORTGAGEE. From time to time and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Mortgagee, without liability thereof and without notice, may: (a) release all or any part of the Subject Property from this Mortgage; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Mortgage. |
5.10 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Mortgagor shall pay to Mortgagee reasonable compensation for services rendered concerning this Mortgage, including without limit any statement of amounts owing under any Secured Obligation. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Subject Property or Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagees failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Mortgagee in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor. |
(b) | Mortgagor indemnifies Mortgagee against, and holds Mortgagee harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which it may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the execution of this Mortgage or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Mortgagor to |
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perform Mortgagors obligations; or (iv) by reason of any alleged obligation or undertaking on Mortgagees part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee shall survive the release and cancellation of the Secured Obligations and the release of this Mortgage. |
(c) | Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon demand by Mortgagee together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.11 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Mortgagor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Mortgagee in approving loan applications. |
(b) | Mortgagor has represented to Mortgagee, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Mortgagee making the Loan, certain facts concerning Mortgagors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Mortgagee has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Mortgagee in the absence of these representations and warranties. |
(d) | Mortgagee would not have made this Loan if Mortgagee did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Mortgagors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Mortgagor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Mortgagor. |
(f) | Mortgagee has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Mortgagor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Mortgagees security for the Note. |
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(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Mortgagors right, title and/or interest in the Loan Documents and any subsequent documents executed by Mortgagor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial ownership of any membership interest in Mortgagor if Mortgagor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Mortgagor; or (vii) legal or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a corporation or in any general partner, venturer or member in Mortgagor that is a corporation. |
(i) | Mortgagor shall not make or commit to make any Transfer without Mortgagees prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Mortgagee may predicate Mortgagees decision to grant consent to a Transfer on such terms and conditions as Mortgagee may require, in Mortgagees sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Mortgagees ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee for all costs and expenses incurred by Mortgagee in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Mortgagees security will be impaired by the proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Mortgagees reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Mortgagees liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Mortgagees consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Mortgagors interest shall: (i) assume all of Mortgagors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Mortgagor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Mortgagee. In the event of any Transfer without the prior written consent of Mortgagee, whether or not Mortgagee elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Mortgagee, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Mortgagee relied upon in making the Loan |
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may no longer be relied upon. A consent by Mortgagee to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Mortgagees consent with respect to future Transfers. |
5.12 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Mortgage upon the Subject Property and Collateral. |
5.13 | RELEASE OF ASSIGNMENT. When this Mortgage has been fully released, the last such release shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Mortgagee hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Mortgage notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.14 | SUBROGATION. Mortgagee shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to the Loan Documents or by the proceeds of any loan secured by this Mortgage. |
5.15 | RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Mortgagors compliance with the terms hereof. |
5.16 | CONTRACTS. Mortgagor will deliver to Mortgagee a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Mortgagee required by any of the Loan Documents. Within twenty (20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to Mortgagee a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Mortgagee, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Mortgagee). Mortgagor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Mortgagor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Mortgagees option, the failure of Mortgagor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Mortgagor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure; or, (d) if Mortgagor or any other Person shall make a Transfer without the prior |
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written consent of Mortgagee (which consent may be withheld in Mortgagees sole discretion (except for those Transfers reasonably approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18, and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Mortgagee shall have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Mortgagor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons; |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, or the commencement of a foreclosure, and Mortgagor hereby consents to such appointment by a court of competent jurisdiction upon ex parte application, and without notice; notice being hereby expressly waived. Such receiver and his agents shall be empowered (i) to take possession of the Subject Property and any businesses conducted by Mortgagor or any other person thereon and any business assets used in connection therewith and, if the receiver deems it appropriate, to operate the same, (ii) to exclude Mortgagor and Mortgagors agents, servants, and employees from the Subject Property, (iii) to collect all Payments and the rents, issues, profits, and income from the Subject Property, (iv) to complete any construction which may be in progress, (v) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (vi) to use all stores of materials, supplies, and maintenance equipment on the Subject Property and replace such items as may be reasonably necessary at the expense of the receivership estate, (vii) to pay all taxes and assessments against the Subject Property and the Collateral, all premiums for insurance thereon, all utility and other reasonable operating expenses, and all sums due under any prior or subsequent encumbrance, and (viii) generally to do anything which Mortgagor would reasonably do in its course of business at the Subject Property if Mortgagor were in possession of the Subject |
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Property. All reasonable expenses incurred by the receiver or his agents shall constitute a part of the Secured Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys fees incurred by the receiver and by Mortgagee, together with interest thereon from the date incurred until repaid at the rate of interest applicable under the Note upon its maturity (whether by acceleration or otherwise), and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Mortgagee, any such receivership will continue until the Secured Obligations have been discharged in full, or until title to the Subject Property has passed after foreclosure sale and all applicable periods of redemption have expired; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Mortgagees sole judgment, to protect or enhance the security hereof. Mortgagee may also take possession of any and all Payments that may previously have been collected by or on behalf of Mortgagor following the Default and that remain in the possession or control of Mortgagor, whether or not commingled with other funds of Mortgagor, and together with any bank or similar accounts in which such Payments may be deposited or held; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Mortgagee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Mortgagee, without notice to or demand upon Mortgagor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Mortgagee in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Mortgagee nor any other person or entity other than Mortgagee shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Mortgagee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Mortgagee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Mortgagor or Mortgagee may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion; |
(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure sale, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the |
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following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagees credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Mortgagor and Mortgagee; and (z) Mortgagees credit bid may be (at Mortgagees sole and absolute discretion) higher or lower than any appraised value of the Subject Property; |
(i) | Upon the completion of any foreclosure of all or a portion of the Subject Property, commence an action to recover any of the Secured Obligations that remains unpaid or unsatisfied; |
(j) | Exercise any and all remedies at law, equity, or under the Note, this Mortgage or other Loan Documents for such Default. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, all proceeds of any foreclosure sale shall be applied: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under either Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee. |
6.5 | NO CURE OR WAIVER. Neither Mortgagees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Default or notice of |
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default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or limit or impair the Secured Obligations or Mortgagors liability thereof, or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the lien of or security interest created by this Mortgage. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Mortgagor agrees to pay to Mortgagee immediately and without demand all costs and expenses of any kind incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not, and appraisal fees) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Mortgagor hereby irrevocably appoints Mortgagee and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Mortgagee deems appropriate to protect Mortgagees interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Mortgage or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Mortgagee may perform any obligation of Mortgagor hereunder; provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be accountable for such funds as are actually received by Mortgagee; and (ii) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Mortgagee under this Section. |
6.8 | REMEDIES CUMULATIVE. All rights and remedies of Mortgagee provided hereunder are cumulative and are in addition to all rights and remedies provided by applicable law (including specifically that of foreclosure of this instrument as though it were a mortgage) or in any other agreements between Mortgagor and Mortgagee. No failure on the part of Mortgagee to exercise any of its rights hereunder arising upon any Default shall be construed to prejudice its rights upon the occurrence of any other or subsequent Default. No delay on the part of Mortgagee in exercising any such rights shall be construed to preclude it from the exercise thereof at any time while that Default is continuing. Mortgagee may enforce any one or more remedies or rights hereunder successively or concurrently. By accepting payment or performance of any of the Secured Obligations after its due date, Mortgagee shall not thereby waive the agreement contained herein that time is of the essence, nor shall Mortgagee waive either its right to require prompt payment or performance when due of the remainder of the Secured Obligations or its right to consider the failure to so pay or perform a Default. |
6.9 | CONFESSION OF JUDGMENT. FOR THE PURPOSE OF OBTAINING POSSESSION OF THE SUBJECT PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST |
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MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE SUBJECT PROPERTY, IN FAVOR OF MORTGAGEE, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE SUBJECT PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE SUBJECT PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE SUBJECT PROPERTY. MORTGAGEE MAY CONFESS JUDGMENT IN AN ACTION IN EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFFS SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE SUBJECT PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO MORTGAGEE. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Mortgagees acquiring any other estate in, or any other lien on, the Subject Property unless Mortgagee consents to a merger in writing. Furthermore, the assignment of the Payments and other liens, security interests, rights and remedies granted hereunder to Mortgagee, and the covenants, representations, warranties and obligations of Mortgagor which are not satisfied or discharged by any foreclosure of the Subject Property, shall survive such foreclosure and remain in force and effect thereafter, it being acknowledged and agreed that all obligations of Mortgagor and rights and remedies of Mortgagee set forth herein are contractual in nature, and such obligations, rights and remedies, and all liens assignments, security interests and other security provided to Mortgagee hereunder and under the other Loan Documents (but excluding the lien against the Subject Property or portions thereof that are foreclosed) shall not be extinguished by the subject foreclosure. |
7.3 | OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as Mortgagor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | INTENTIONALLY OMITTED. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a lien on or interest in the |
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Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Mortgage or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.11. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CHOICE OF LAW. WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, IT BEING UNDERSTOOD THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS PARAGRAPH AND TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING THEREUNDER OR HEREUNDER. |
7.10 | INCORPORATION. Exhibits A, and B, all as attached, are incorporated into this Mortgage by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept |
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delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Mortgagor: |
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST c/o KBS Capital Advisors LLC 590 Madison Avenue, 26th Floor New York, NY 10022 Attention: Mr. Charles Valentino Tel: (212) 644-6662 Fax: (212) 644-1372 E-mail: cvalentino@kbsrealty.com | |
Mortgagee: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835 | |
With a copy to: |
Wells Fargo Bank, National Association Los Angeles Loan Center 2120 East Park Place, Suite 100 El Segundo, California 90245 Attention: Eva Lopez |
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Subject Property or to Mortgagor naming Mortgagee, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Mortgage. |
7.13 | PURCHASE MONEY MORTGAGE. This Mortgage is intended to be a purchase money mortgage as defined in 42 Pa. C.S.A. §8141. |
7.14 | OPEN-END MORTGAGE. This Mortgage shall constitute an Open-End Mortgage as such term is defined in 42 Pa.C.S. §8143(f), and shall secure Future Advances and shall have lien priority in accordance with the provisions of 42 Pa.C.S. §§8143 and 8144. Notwithstanding the foregoing, to the maximum extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives its right to submit a notice to Mortgagee under 42 Pa.C.S. §8143(c). In addition to the other remedies available under the Loan Agreement and any other document evidencing the Secured Obligations, any advances made after receipt of any such notice, whether or not made pursuant to 42 Pa.C.S. §8143 and/or §8144, shall be secured hereby and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. In the event any person or entity shall submit a notice to Mortgagee under 42 Pa.C.S. §8143(b), in addition to the other remedies available under this Mortgage, the Loan Agreement and any other document evidencing the Secured Obligations, Mortgagor |
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shall have the lien or encumbrance which is the subject of such notice removed of record in accordance with this Mortgage; and any advances made by Mortgagee after receipt of any such notice whether or not made under 42 Pa.C.S. §8143(b) shall be deemed to be obligatory advances made under, shall be secured hereby, and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. By placing or accepting any such lien or encumbrance against any or all of the Subject Property, the holder thereof shall be deemed to have agreed to the maximum extent permitted by law that its lien or encumbrance shall be subject and subordinate in lien priority to this Mortgage and to any subsequent advances made under the Loan Agreement and any other document evidencing the Secured Obligations, to all accrued and unpaid interest and to all other sums secured hereby. This Mortgage is given to secure the obligations of the Mortgagor and certain of Mortgagors Affiliates under, or in respect of, the Loan Documents to which Mortgagor and its Affiliates are parties, up to that amount which is equal to the amount of the aggregate maximum permitted principal indebtedness provided under the terms of the Loan Documents and shall secure not only obligations with respect to presently existing indebtedness under the foregoing documents and agreements, but also any and all other indebtedness now owing or which may hereafter be owing by Mortgagor and its Affiliates to Mortgagee and/or Lenders, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Loan Documents, advances for the payment of taxes and assessments and municipal claims, maintenance charges, insurance premiums, costs incurred for the protection of the property or the lien of this Mortgage, expenses incurred by Mortgagee or any Lender by reason of a Default under this Mortgage, or for any other permissible purpose, whether such advances are obligatory or are to be at the option of Lenders, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all indebtedness secured hereby, including future advances, from the time of its filing for record in the recorders office of the county in which the property is located; and the lien of all present and future advances shall relate back to the date of this Mortgage. This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. The amount of principal indebtedness that may be secured by this Mortgage may increase or decrease from time to time. The maximum amount of principal indebtedness outstanding at any one time shall not exceed $372,000,000 exclusive of accrued and unpaid interest and unpaid balances of advances and other extensions of credit secured by this Mortgage made for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Subject Property within the meaning of 42 Pa. C.S.A. § 8143(f), and expenses incurred by the Mortgagee or any Lender by reason of the occurrence of a Default under this Mortgage and other costs and advances to the fullest extent permitted by the terms of 42 Pa. C.S.A. § 8144. |
SECTION 6.9 OF THIS MORTGAGE PROVIDES FOR THE REMEDY OF CONFESSION OF JUDGMENT IN EJECTMENT. IN CONNECTION THEREWITH, MORTGAGOR VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS, IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY OF OR EXECUTION UPON SUCH JUDGMENT. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND THAT COUNSEL HAS REVIEWED WITH AND EXPLAINED TO MORTGAGOR THE MEANING OF THIS WAIVER AND THE AFORESAID REMEDY.
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IN WITNESS WHEREOF, Mortgagor, intending to be legally bound, has executed this Mortgage.
MORTGAGOR | ||||||||||||
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: |
KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, | |||||||||||
a Delaware limited liability company, as Administrative Trustee | ||||||||||||
By: |
KBSII REIT ACQUISITION XXI, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS REIT PROPERTIES II, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
KBS LIMITED PARTNERSHIP II, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. | ||||||||||||
Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
CERTIFICATE OF RESIDENCE
I hereby certify that the precise residence of Mortgagee is:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Bryan Stevens, Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Bryan Stevens
Name: Bryan Stevens
Its: Senior Vice President
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On February 8, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
All the certain real property located in the County of Luzerne, Commonwealth of Pennsylvania, described as follows:
PARCEL 1:
ALL that certain parcel of land known as Lot (40B), as shown on drawing number (S-100), dated 04/25/08 last revised 05/09/08, entitled Preliminary/Final Minor Subdivision for Mericle Humboldt 40 LLC, situate in a park known as Humboldt Industrial Park - Southwest Corner, situate in the Township of Hazle, County of Luzerne, Commonwealth of Pennsylvania, bounded and described as follows to wit:
BEGINNING at a point on the southerly line of an (80.00) foot wide right of way known as Oak Ridge Road, said point being further described as being the northeasterly corner of Lot (45);
THENCE along the southerly line of said right of way (N 81°5300 E) for a distance of (911.34) feet to a point;
THENCE continuing along the southerly line of said right of way the following courses and distances:
on a curve to the left having a radius of (1040.00) feet, an arc length of (272.27) feet to a point;
(N 66°5300 E) for a distance of (315.06) feet to a point;
on a curve to the right having a radius of (960.00) feet, an arc length of (251.33) feet to a point;
(N 81°5300 E) for a distance of (176.79) feet to a point;
THENCE through lands of the grantor herein (S 21°1817 E) for a distance of (89.20) feet to a point;
THENCE through the same (N 84°5300 E) for a distance of (56.27) feet to a point;
THENCE through the same (S 14°3903 E) for a distance of (97.82) feet to a point;
THENCE through the same (S 14°5706 E) (erroneously set forth as 063 in deed of prior record) for a distance of (136.07) feet to a point;
THENCE through the same (S 08°0820 E) for a distance of (826.34) feet to a point;
THENCE through the same (S 81°5300 W) for a distance of (2014.29) feet to a point along lands now or formerly of NBTY PAH, LLC;
THENCE along the easterly line of said lands, and continuing along the easterly line of the aforementioned Lot (45) (N 08°0700 W) for a distance of (998.72) feet to a point and the PLACE OF BEGINNING.
CONTAINING approximately 48.28 acres more or less.
EXHIBIT A
BEING ALL of New Lot 40B as shown on that certain Preliminary/Final Subdivision Plan prepared by Vincent J. Stranch, P.L.S., and last revised on May 9, 2008, and recorded in the Office of the Recorder of Deeds in and for Luzerne County in Map Book 207 at Page 48.
PARCEL 2 (Appurtenant Easement Parcel):
TOGETHER WITH the irrevocable easement in, through, over and across and under the Easement Areas (as defined in the Easement Agreements , as hereinafter defined) for the purposes of (a) installing, constructing, replacing, maintaining and operating the Utilities (as defined in the Easement Agreements, as hereinafter defined) and (b) ingress, egress and regress for the purpose of access contained in those certain Easement Agreements recorded in Record Book 3002, page 229222 and Book 3002, page 229240, Luzerne County, Pennsylvania (collectively, the Easement Agreements).
Tax ID / Parcel No. 26-U6S3-001-36A-000
EXHIBIT B
NON-BORROWER MORTGAGOR RIDER
Exhibit B to Open-End Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as Administrative Agent for certain lenders, as Mortgagee, dated as of February 8, 2011.
To the extent the Mortgage secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Mortgagor, the party or parties constituting Mortgagor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Mortgagor hereby waives any right it may now or hereafter have to require Mortgagee, as a condition to the exercise of any remedy or other right against Mortgagor hereunder or under any other document executed by Mortgagor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to pursue any other right or remedy in Mortgagees power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Mortgagee by any Borrower or other person (other than Mortgagor), or otherwise to comply with the UCC (as defined in the Mortgage) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Mortgagor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Mortgagor by any Borrower or otherwise intended or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Mortgage) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Mortgagee, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Mortgagors rights of subrogation and reimbursement against the principal by operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Mortgagee to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Mortgagee, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Mortgagor further waives any and all rights and defenses that Mortgagor may have because Borrowers debt is secured by real |
EXHIBIT B
property; this means, among other things, that: (1) Mortgagee may collect from Mortgagor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Mortgagee forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing on the real property collateral, has destroyed any right Mortgagor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Mortgagor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Mortgagor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Mortgagor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Mortgagor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.. |
3. | SUBROGATION. Mortgagor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Mortgagor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Mortgagee with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Mortgagor warrants and agrees: (a) that Mortgagee would not make the Loan but for this Mortgage; (b) that Mortgagor has not relied, and will not rely, on any representations or warranties by Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Mortgagor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Mortgagor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Mortgagee shall have no duty to disclose or report to Mortgagor any information now or hereafter known to Mortgagee with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Mortgagor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Mortgagees rights hereunder shall be reinstated and revived, and the enforceability of this Mortgage shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Mortgagee is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Mortgagor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Mortgagor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Mortgagor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Mortgagor, such payment or distribution shall be held in trust and immediately paid over to Mortgagee, is hereby assigned to Mortgagee as security |
EXHIBIT B
for the Secured Obligations, and shall be held by Mortgagee in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Mortgagor warrants that all of the waivers in this Mortgage are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Mortgagor may destroy or impair rights which Mortgagor would otherwise have against Mortgagee, Borrower and other persons, or against collateral. Mortgagor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Mortgagor hereby acknowledges that: (a) the obligations undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Mortgagees consideration for entering into this transaction, Mortgagee has specifically bargained for the waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Mortgagor, and (iv) the legal consequences to Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes this Mortgage with the intent that this Mortgage and all of the informed waivers herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, MORTGAGEE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND MORTGAGEE HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS MORTGAGE AND MORTGAGEE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND MORTGAGEE TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Mortgage and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Mortgage and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Mortgagee in writing. |
Exhibit 10.39
THIRD AMENDED AND RESTATED AND CONSOLIDATED SECURED PROMISSORY NOTE
$360,000,000 |
February 25, 2011 |
FOR VALUE RECEIVED, KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, and KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company (collectively, Borrowers), HEREBY PROMISE TO PAY to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (Lender) the principal sum of Three Hundred and Sixty Million Dollars ($360,000,000), or if less, the aggregate unpaid principal amount of all disbursements disbursed by Lender pursuant to the requirements set forth in the Amended and Restated and Consolidated Loan Agreement dated as of January 27, 2011 (as amended, supplemented or restated from time to time the Loan Agreement), among Borrowers, Lender, certain other Lenders named therein or made parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, together with interest on the unpaid principal balance hereof at the rate (or rates) determined in accordance with Section 2.7 of the Loan Agreement from the date such principal is advanced until it is paid in full. It is contemplated that there will be advances and payments under this Note from time to time, but no advances or payments under this Note (including payment in full of the unpaid balance of principal hereof prior to maturity) shall affect or impair the validity or enforceability of this Note as to future advances hereunder.
This Note is one of the Notes referred to in and governed by the Loan Agreement, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity hereof and for the payment of certain additional sums to Lender upon the happening of certain stated events. Capitalized terms used in this Note without definition have the same meanings as in the Loan Agreement.
The principal amount of this Note, unless accelerated in accordance with Loan Agreement as described below, if not sooner paid, will be due and payable, together with all accrued and unpaid interest and other amounts due and unpaid under the Loan Agreement, on the Maturity Date.
This Note is secured by, among other things, the Security Documents referred to in the Loan Agreement.
Interest on the Loans is payable in arrears on the first Business Day of each month during the term of the Loan Agreement, commencing with the first Business Day of the first calendar month to begin after the date of this Note. Interest will be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of three hundred sixty (360) days. The Loan Agreement provides for the payment by Borrower of various other charges and fees, in addition to the interest charges described in the Loan Agreement, as set forth more fully in the Loan Agreement.
All payments of any amount becoming due under this Note shall be made in the manner provided in the Loan Agreement, in Dollars.
Upon and after the occurrence of a Default, unless such Default is waived as provided in the Loan Agreement, this Note may, at the option of Requisite Lenders and without further demand, notice or legal process of any kind, be declared by Administrative Agent, and in such case immediately shall become, due and payable. Upon and after the occurrence of certain Defaults, this Note shall, without any action by Lenders and without demand, notice or legal process of any kind, automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by
Borrower. Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon or agree to any subordination of Borrowers obligations hereunder without affecting or diminishing Lenders right of recourse against Borrower, which right is hereby expressly reserved.
This Note has been delivered and accepted at Irvine, California. This Note shall be interpreted in accordance with, and the rights and liabilities of the parties hereto shall be determined and governed by, the laws of the State of California.
All notices or other communications required or permitted to be given pursuant to this Note shall be given to the Borrowers or Lender at the address and in the manner provided for in the Loan Agreement.
In no contingency or event whatsoever shall interest charged in respect of the Loan evidenced hereby, however such interest may be characterized or computed, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall, at Lenders election, either (a) promptly refund such excess interest to Borrower or (b) credit such excess to the principal balance hereof. This provision shall control over every other provision of all agreements between Borrower and Lender.
Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
The limitations on personal liability of the shareholders, partners and members of Borrowers contained in Section 13.27 of the Loan Agreement shall apply to this Note.
This Note is issued in replacement of a Second Amended and Restated and Consolidated Secured Promissory Note dated February 8, 2011 in the amount of $360,000,000, (the Previous Note) previously issued by Borrowers (excluding KBSII Two Westlake Park, LLC) to Lender pursuant to the Loan Agreement and shall not be construed as a novation of the Previous Note. Aggregate amounts outstanding under the Previous Note shall be deemed outstanding under this Note.
[Signatures on Following Pages]
BORROWER | ||||||||||
KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION IX, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: |
KBS REIT PROPERTIES II, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: |
KBS LIMITED PARTNERSHIP II, | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., | |||||||||
a Maryland corporation, general partner | ||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. | ||||||||||
Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION VIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XVI, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XIX, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII GRANITE TOWER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XVIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
BORROWER | ||||||||||
KBSII CRESCENT VIII, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XI, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: |
KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, a Delaware limited liability company, as Administrative Trustee | |||||||||||
By: |
KBSII REIT ACQUISITION XXI, LLC, a Delaware limited liability company, its sole member | |||||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XXII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
Exhibit 10.40
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVERS LICENSE NUMBER.
DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Deed of Trust), made as of February 25, 2011, are KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company (Grantor), PETER S. GRAF (Trustee), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
ARTICLE 1. GRANT IN TRUST
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust and to secure the full and timely payment, performance and discharge of the Secured Obligations (as herein defined), Grantor irrevocably GRANTS, CONVEYS, ASSIGNS, BARGAINS and SELLS and has by these presents GRANTED, CONVEYED, ASSIGNED, BARGAINED and SOLD to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the County of Harris, State of Texas, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Grantor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; any and all rights of Grantor, as a declarant, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A, hereto, provided, however, that Beneficiary shall have no liability under such covenants, conditions, and restrictions unless and until Beneficiary forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Grantor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms; TO HAVE AND TO HOLD the Subject Property unto Trustee, forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND the title to the Subject Property unto Trustee against every person whomsoever lawfully claiming or to claim the same or any part thereof; |
Page 1
Loan No. 1002835
provided, however, that if Grantor shall pay (or cause to be paid) and shall perform and discharge (or cause to be performed and discharged) the Secured Obligations on or before the date same are to be paid, performed and discharged, then the liens, security interests, estates, rights and titles granted by this Deed of Trust shall terminate in accordance with the provisions hereof, otherwise same shall remain in full force and effect. A certificate or other written statement executed on behalf of Trustee or Beneficiary confirming that the Secured Obligations have not been fully and finally paid, performed or discharged shall be sufficient evidence thereof for the purpose of reliance by third parties on such fact. |
1.2 | ADDRESS. The address of the subject property is 580 Westlake Park Blvd., Houston, Texas. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. |
ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011, and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Grantor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Third Amended and Restated and Consolidated Secured Promissory note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Grantor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders (as defined in the Loan Agreement), the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement), which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or |
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interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Grantor hereby irrevocably assigns to Beneficiary all of Grantors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Grantor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiarys right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
3.2 | GRANT OF LICENSE. Beneficiary confers upon Grantor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Grantor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Grantor hereby relieves the lessees from any liability to Grantor by reason of relying upon and complying with any such notice or demand by Beneficiary. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Beneficiary and Trustee shall not directly or indirectly be liable to Grantor or any other person as a consequence of: (i) the exercise or failure to exercise by Beneficiary or Trustee, or any of their respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Beneficiary or Trustee hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Grantor arising under the Leases. |
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3.4 | REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that, to the best of Grantors knowledge: (a) Grantor has delivered to Beneficiary a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Grantor covenants and agrees at Grantors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Grantors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Beneficiary fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable efforts to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Grantor shall not, without Beneficiarys prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiarys consent hereunder, any sums received by Grantor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Grantor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Grantor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Grantor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Grantor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to
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herein as the Subject Property); together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Grantors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Grantor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Grantor with respect to the Subject Property; all advance payments of insurance premiums made by Grantor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under Article 9 of the Texas Business and Commerce Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
The filing of a financing statement covering the Collateral shall not be construed to derogate from or impair the lien or provisions of this Deed of Trust with respect to any property described herein which is real property or which the parties have agreed to treat as real property. Similarly, nothing in such financing statement shall be construed to alter any of the rights of Beneficiary under this Deed of Trust or the priority of the Beneficiarys lien created hereby, and such financing statement is declared to be for the protection of Beneficiary in the event any court shall at any time hold that notice of Beneficiarys priority of interest in any property or interests described in this Deed of Trust must, in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivision, agency or entity of the federal government, be filed in the Uniform Commercial Code records.
4.2 | REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that: (a) Grantor has, as of the date of recordation of this Deed of Trust, and will have, good title to the Collateral; (b) Grantor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Grantors principal place of business is located at the address shown in Section 7.11; and (d) Grantors legal name is exactly as set forth on the first page of this Deed of Trust and all of Grantors organizational documents or agreements delivered to Beneficiary are complete and accurate in every respect. |
4.3 | COVENANTS. Grantor agrees: (a) to execute and deliver such documents as Beneficiary deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Beneficiary prior written notice thereof; (c) to cooperate with Beneficiary in perfecting all security interests granted herein and in obtaining such agreements from third parties as Beneficiary deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Beneficiary is authorized to file financing statements in the name of Grantor to perfect Beneficiarys security interest in Collateral. |
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4.4 | RIGHTS OF BENEFICIARY. In addition to Beneficiarys rights as a Secured Party under the UCC, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Grantor: (a) give notice to any person of Beneficiarys rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Grantor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Grantor to Beneficiary unless Beneficiary shall make an express written proposal thereof under UCC §9.621, or other applicable law, and the provisions of UCC §9.620 have been satisfied. |
4.5 | RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiarys rights as a Secured Party under the UCC or otherwise at law: |
(a) | Beneficiary may (i) upon written notice, require Grantor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Grantors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Beneficiary may, for the account of Grantor and at Grantors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Grantor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Beneficiary may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Beneficiary to the payment of expenses incurred by Beneficiary in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Beneficiary toward the payment of the Secured Obligations in such order of application as Beneficiary may from time to time elect. |
Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Grantor to Beneficiary unless Beneficiary shall make an express written proposal thereof under UCC §9.621, or other applicable law, and the provisions of UCC §9.620 have been satisfied. Grantor agrees that Beneficiary shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Grantor hereby irrevocably appoints Beneficiary as Grantors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Beneficiary may, without the obligation to do so, in Beneficiarys name, or in the name of Grantor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiarys security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Grantor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Deed of Trust or any of the Loan Documents, Grantor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Grantors business and in accordance with the Loan Agreement. |
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ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Grantor represents and warrants that, except as disclosed to Beneficiary in a writing which refers to this warranty, Grantor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Deed of Trust is a first and prior lien on the Subject Property. Grantor hereby represents and warrants that all of the Subject Property is a single tax parcel, and there are no properties included in such tax parcel other than the Subject Property. Grantor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Grantors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Grantor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Grantor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligation; provided, however, Grantor shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiarys net income. |
(b) | Grantor may contest in good faith any taxes or assessments if: (i) Grantor pursues the contest diligently and in compliance with applicable laws, in a manner which Beneficiary determines is not prejudicial to Beneficiary, and does not impair the rights of Beneficiary under any of the Loan Documents; and (b) Grantor deposits with Beneficiary any funds or other forms of assurance which Beneficiary in good faith determines from time to time appropriate to protect Beneficiary from the consequences of the contest being unsuccessful. Grantors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default and in accordance with the other Loan Documents, at Beneficiarys option and upon its demand, Grantor shall, until all Secured Obligations have been paid in full, pay to Beneficiary monthly, annually or as otherwise directed by Beneficiary an amount estimated by Beneficiary to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and insurance required or requested pursuant to the Loan Documents when same are next due. If Beneficiary determines that any amounts paid by Grantor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Beneficiary shall notify Grantor of the increased amounts required to pay all amounts when due, whereupon Grantor shall pay to Beneficiary within thirty (30) days thereafter the additional amount as stated in Beneficiarys notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Beneficiary shall, unless Grantor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Beneficiary release said funds to Grantor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Grantor hereunder or under any Loan Document, Beneficiary may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Grantor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Deed of Trust, Beneficiary shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Beneficiary and the Trustee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing |
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the Secured Obligations) or at such earlier time as Beneficiary may elect, the balance of all amounts collected and in Beneficiarys possession shall be paid to Grantor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Grantor shall promptly pay and perform each Secured Obligation for which it is responsible hereunder or under the Loan Agreement when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Grantor shall immediately discharge any lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Subject to the following sentence, Grantor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property, Grantor shall, within twenty (20) calendar days of such recording or within five (5) calendar days of Beneficiarys demand, whichever occurs first: (a) pay and discharge the claim of lien; (b) effect the release thereof by recording; or (c) provide Beneficiary with other assurances which Beneficiary deems, in its sole discretion, to be satisfactory for the payment of such claim of lien and for the full and continuous protection of Beneficiary from the effect of such lien. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Grantor to Beneficiary and, at the request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Subject Property or Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Beneficiary, and/or Beneficiary may release all or any part of the proceeds to Grantor upon any conditions Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary; provided, however, in no event shall Beneficiary be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Beneficiary or its employees or agents. |
(b) | Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Beneficiary of such additional funds which Beneficiary determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Beneficiary, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Beneficiary; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Grantor since the date of this Deed of Trust; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Beneficiary may reasonably establish to protect its security. Grantor hereby acknowledges that the conditions described above |
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are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Beneficiary of such insurance or condemnation proceeds, then Beneficiary may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Beneficiary in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Beneficiary shall release such proceeds to Grantor for repair or restoration of the Subject Property without any additional requirements or conditions. |
(d) | TEXAS FINANCE CODE SECTION 307.052 COLLATERAL PROTECTION INSURANCE NOTICE: (A) GRANTOR IS REQUIRED TO: (i) KEEP THE SUBJECT PROPERTY INSURED AGAINST DAMAGE IN THE AMOUNT BENEFICIARY SPECIFIES; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (III) NAME BENEFICIARY AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS; (B) GRANTOR MUST, IF REQUIRED BY BENEFICIARY, DELIVER TO BENEFICIARY A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) IF GRANTOR FAILS TO MEET ANY REQUIREMENT LISTED IN PARAGRAPH (A) OR (B), BENEFICIARY MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF GRANTOR AT GRANTORS EXPENSE. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Grantor covenants: (a) to insure the Subject Property and Collateral against such risks as Beneficiary may require pursuant to the Loan Agreement and, at Beneficiarys request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Beneficiarys prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Beneficiary elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Grantors sole expense, Grantor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Beneficiary and Trustee hereunder against all adverse claims. Grantor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | POWERS OF BENEFICIARY. Beneficiary may, without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby and without liability therefor and without notice: (a) release all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. |
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5.10 | ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. |
(a) | Trustee accepts this trust when this Deed of Trust is delivered by Grantor to Beneficiary. Except as may be required by applicable law, Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trust hereunder and the enforcement of the rights and remedies available hereunder, and may obtain orders or decrees directing or confirming or approving acts in the execution of said trust and the enforcement of said remedies. |
(b) | Trustee shall not be required to take any action toward the execution and enforcement of the trust hereby created or to institute, appear in, or defend any action, suit, or other proceeding in connection therewith where, in his opinion, such action would be likely to involve him in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is tendered security and indemnity satisfactory to Trustee against any and all cost, expense, and liability arising therefrom. Trustee shall not be responsible for the execution, acknowledgment, or validity of the Loan Documents, or for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and Trustee makes no representation in respect thereof or in respect of the rights, remedies, and recourses of Beneficiary. |
(c) | With the approval of Beneficiary, Trustee shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Beneficiary) upon any matters arising hereunder, including the preparation, execution, and interpretation of the Loan Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his agents or attorneys, (iii) to select and employ, in and about the execution of his duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Trustee, and Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustees gross negligence or bad faith, and (iv) any and all other lawful action as Beneficiary may instruct Trustee to take to protect or enforce Beneficiarys rights hereunder. Trustee shall not be personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein granted to Trustee, upon the Subject Property for debts contracted for or liability or damages incurred in the management or operation of the Subject Property. Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. Trustee shall be entitled to reimbursement for expenses incurred by Trustee in the performance of Trustees duties hereunder and to reasonable compensation for such of Trustees services hereunder as shall be rendered. GRANTOR WILL, FROM TIME TO TIME, PAY THE COMPENSATION DUE TO TRUSTEE HEREUNDER AND REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND HOLD HARMLESS TRUSTEE AGAINST, ANY AND ALL LIABILITY AND EXPENSES WHICH MAY BE INCURRED BY TRUSTEE IN THE PERFORMANCE OF TRUSTEES DUTIES. |
(d) | All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by applicable law) and Trustee shall be under no liability for interest on any moneys received by Trustee hereunder. |
(e) | Should any deed, conveyance, or instrument of any nature be required from Grantor by any Trustee or substitute Trustee to more fully and certainly vest in and confirm to the Trustee or substitute Trustee such estates, rights, powers, and duties, then, upon request by the Trustee or substitute Trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Grantor. |
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(f) | By accepting or approving anything required to be observed, performed, or fulfilled or to be given to Trustee pursuant to the Loan Documents, including without limitation, any deed, conveyance, instrument, officers certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Trustee shall not be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness, or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or affirmation with respect thereto by Trustee. |
5.11 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Grantor shall pay Trustees fees and reimburse Trustee for expenses in the administration of this trust, including attorneys fees. Grantor shall pay to Beneficiary reasonable compensation for services rendered concerning this Deed of Trust, including without limit any statement of amounts owing under any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Grantor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Grantor under any agreement related to the Subject Property or Collateral or under this Deed of Trust; or (iii) any loss sustained by Grantor or any third party resulting from Beneficiarys failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary, and all such liability is hereby expressly waived and released by Grantor. |
(b) | GRANTOR INDEMNIFIES TRUSTEE AND BENEFICIARY AGAINST, AND HOLDS TRUSTEE AND BENEFICIARY HARMLESS FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, CAUSES OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS FEES AND OTHER LEGAL EXPENSES, COST OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH EITHER MAY SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST; (ii) BY REASON OF THE EXECUTION OF THIS DEED OF TRUST OR IN PERFORMANCE OF ANY ACT REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii) AS A RESULT OF ANY FAILURE OF GRANTOR TO PERFORM GRANTORS OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED OBLIGATION OR UNDERTAKING ON BENEFICIARYS PART TO PERFORM OR DISCHARGE ANY OF THE REPRESENTATIONS, WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS CONTAINED IN ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY AND COLLATERAL. THE ABOVE OBLIGATION OF GRANTOR TO INDEMNIFY AND HOLD HARMLESS TRUSTEE AND BENEFICIARY SHALL SURVIVE THE RELEASE AND CANCELLATION OF THE SECURED OBLIGATIONS AND THE RELEASE OR PARTIAL RELEASE OF THE LIEN OF THIS DEED OF TRUST. |
(c) | Grantor shall pay all amounts and indebtedness arising under this Section 5.11 immediately upon demand by Trustee or Beneficiary together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.12 | SUBSTITUTION OF TRUSTEES. Trustee may resign by the giving of notice of such resignation in writing or verbally to Beneficiary. If Trustee shall die, resign, or become disqualified from acting in the execution of this trust, or if, for any reason, Beneficiary shall prefer to appoint a substitute trustee or multiple substitute trustees, or successive substitute trustees or successive multiple substitute trustees, to act instead of the aforenamed Trustee, Beneficiary shall have full power to appoint a substitute trustee (or, if preferred, multiple substitute trustees) in succession who shall succeed (and if multiple substitute trustees are appointed, each of such multiple substitute trustees shall succeed) to all the estates, rights, powers, and duties of the aforenamed Trustee. Such appointment may be executed by any authorized agent of Beneficiary, and if such Beneficiary be a corporation and such appointment be executed in its behalf by any officer of such corporation, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient |
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without proof of any action by the board of directors or any superior officer of the corporation. Grantor hereby ratifies and confirms any and all acts which the aforenamed Trustee, or his successor or successors in this trust, shall do lawfully by virtue hereof. If multiple substitute Trustees are appointed, each of such multiple substitute Trustees shall be empowered and authorized to act alone without the necessity of the joinder of the other multiple substitute trustees, whenever any action or undertaking of such substitute trustees is requested or required under or pursuant to this Deed of Trust or applicable law. Any substitute Trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed, or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its or his predecessor in the rights hereunder with like effect as if originally named as Trustee herein; but nevertheless, upon the written request of Beneficiary or of the substitute Trustee, the Trustee ceasing to act shall execute and deliver any instrument transferring to such substitute Trustee, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and moneys held by such Trustee to the substitute Trustee so appointed in the Trustees place. |
5.13 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Grantor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Beneficiary in approving loan applications. |
(b) | Grantor has represented to Beneficiary, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Beneficiary making the Loan, certain facts concerning Grantors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Beneficiary has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Beneficiary in the absence of these representations and warranties. |
(d) | Beneficiary would not have made this Loan if Beneficiary did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Grantors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Grantor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Grantor. |
(f) | Beneficiary has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Grantor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Beneficiarys security for the Note. |
(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described |
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in any Loan Document; (iii) Grantors right, title and/or interest in the Loan Documents and any subsequent documents executed by Grantor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Grantor if Grantor is a partnership; (v) legal or beneficial ownership of any membership interest in Grantor if Grantor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Grantor; or (vii) legal or beneficial ownership of any of the stock in Grantor if Grantor is a corporation or in any general partner, venturer or member in Grantor that is a corporation. |
(i) | Grantor shall not make or commit to make any Transfer without Beneficiarys prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Beneficiary may predicate Beneficiarys decision to grant consent to a Transfer on such terms and conditions as Beneficiary may require, in Beneficiarys sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Beneficiarys ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Beneficiary for all costs and expenses incurred by Beneficiary in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Beneficiarys security will be impaired by the proposed Transfer, (v) payment to Beneficiary of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Beneficiarys reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Beneficiarys liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Beneficiarys consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Grantors interest shall: (i) assume all of Grantors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Grantor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Beneficiary. In the event of any Transfer without the prior written consent of Beneficiary, whether or not Beneficiary elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Beneficiary, automatically bear interest at five percent (5%) above the rate provided in the Note, but not in excess of the Maximum Lawful Rate (as defined below), from the date (or any date thereafter) of such unconsented to Transfer. Grantor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Beneficiary relied upon in making the Loan may no longer be relied upon. A consent by Beneficiary to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Beneficiarys consent with respect to future Transfers. |
5.14 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Deed of Trust upon the Subject Property and Collateral. |
5.15 | RELEASES. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Deed of Trust, the Note, and the other Loan Documents, then this conveyance shall become |
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null and void and be released by Beneficiary at Grantors request and expense, and Beneficiary shall have no further obligation to make advances under and pursuant to the provisions hereof or in the other Loan Documents. Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to release this Deed of Trust notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.16 | SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to the Loan Documents or by the proceeds of any loan secured by this Deed of Trust. |
5.17 | RIGHT OF INSPECTION. Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Grantors compliance with the terms hereof. |
5.18 | CONTRACTS. Grantor will deliver to Beneficiary a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Beneficiary required by any of the Loan Documents. Within twenty (20) days after a request by Beneficiary, Grantor shall prepare and deliver to Beneficiary a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Beneficiary, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Beneficiary). Grantor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property or Collateral, but are personal with Grantor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Beneficiarys option, the failure of Grantor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Grantor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Grantor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure, or (d) if Grantor or any other Person shall make a Transfer without the prior written consent of Beneficiary (which consent may be withheld in Beneficiarys sole discretion (except for those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.13 above). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies: |
(a) | Right to Accelerate. Beneficiary may, without notice, demand, presentment, notice of nonpayment or nonperformance, protest, notice of protest, notice of intent to accelerate, notice of acceleration, or any other notice or any other action, all of which are hereby waived by Grantor and all other parties obligated in any manner whatsoever on the Secured Obligations, declare the entire unpaid balance of the Secured Obligations immediately due and payable, and upon such declaration, the entire unpaid balance of the Secured Obligations shall be immediately due and payable. The failure to exercise any remedy available to the Beneficiary shall not be deemed to be a waiver of any rights or remedies of the Beneficiary under the Loan Documents, at law or in equity. |
(b) | Right to Perform Grantors Covenants. If Grantor has failed to keep or perform any covenant whatsoever contained in this Deed of Trust or the other Loan Documents, Beneficiary may, but shall not be obligated to any person to do so, perform or attempt to perform said covenant, and any payment made or expense incurred in the performance or attempted performance of any such covenant shall be and become a part of the Secured Obligations, and Grantor promises, upon |
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demand, to pay to Beneficiary, at the place where the Note is payable, all sums so advanced or paid by Beneficiary, with interest from the date when paid or incurred by Beneficiary at the rate of interest then applicable on the outstanding principal balance of the Note. No such payment by Beneficiary shall constitute a waiver of any Default. In addition to the liens and security interests hereof, Beneficiary shall be subrogated to all rights, titles, liens, and security interests securing the payment of any debt, claim, tax, or assessment for the payment of which Beneficiary may make an advance, or which Beneficiary may pay. |
(c) | Right of Entry. Beneficiary may, prior or subsequent to the institution of any foreclosure proceedings, enter upon the Subject Property, or any part thereof, and take exclusive possession of the Subject Property and Collateral and of all books, records, and accounts relating thereto and to exercise without interference from Grantor any and all rights which Grantor has with respect to the management, possession, operation, protection, or preservation of the Subject Property and Collateral, including without limitation the right to rent the same for the account of Grantor and to deduct from such Payments all costs, expenses, and liabilities of every character incurred by the Beneficiary in collecting such Payments and in managing, operating, maintaining, protecting, or preserving the Subject Property and Collateral and to apply the remainder of such Payments on the Secured Obligations in such manner as Beneficiary may elect. All such costs, expenses, and liabilities incurred by the Beneficiary in collecting such Payments and in managing, operating, maintaining, protecting, or preserving the Subject Property and Collateral, if not paid out of Payments as hereinabove provided, shall constitute a demand obligation owing by Grantor and shall bear interest from the date of expenditure until paid at the rate of interest then applicable on the outstanding principal balance of the Note, all of which shall constitute a portion of the Secured Obligations. If necessary to obtain the possession provided for above, the Beneficiary may invoke any and all legal remedies to dispossess Grantor, including specifically one or more actions for forcible entry and detainer, trespass to try title, and restitution. In connection with any action taken by the Beneficiary pursuant to this subsection, the Beneficiary shall not be liable for any loss sustained by Grantor resulting from any failure to let the Subject Property or Collateral, or any part thereof, or from any other act or omission of the Beneficiary in managing the Subject Property and Collateral unless such loss is caused by the willful misconduct of the Beneficiary, nor shall the Beneficiary be obligated to perform or discharge any obligation, duty, or liability under any Lease or under or by reason hereof or the exercise of rights or remedies hereunder. GRANTOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY BENEFICIARY FOR, AND TO HOLD HARMLESS BENEFICIARY FROM, ANY AND ALL LIABILITY, LOSS, OR DAMAGE, WHICH MAY OR MIGHT BE INCURRED BY BENEFICIARY UNDER ANY SUCH LEASE OR UNDER OR BY REASON HEREOF OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER, AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST BENEFICIARY BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS, OR AGREEMENTS CONTAINED IN ANY SUCH LEASE. Should Beneficiary incur any such liability, the amount thereof, including without limitation costs, expenses, and reasonable attorneys fees, together with interest thereon from the date of expenditure until paid at the rate of interest then applicable on the outstanding principal balance of the Note, shall be secured hereby, and Grantor shall reimburse the Beneficiary therefor immediately upon demand. Nothing in this subsection shall impose any duty, obligation, or responsibility upon Beneficiary for the control, care, management, leasing, or repair of the Subject Property and Collateral, nor for the carrying out of any of the terms and conditions of any such Lease; nor shall it operate to make Beneficiary responsible or liable for any waste committed on the Subject Property and Collateral by the tenants or by any other parties, or for any Hazardous Materials on or under the Subject Property or Collateral, or for any dangerous or defective condition of the Subject Property or Collateral or for any negligence in the management, leasing, upkeep, repair, or control of the Subject Property or Collateral resulting in loss or injury or death to any tenant, licensee, employee, or stranger. Grantor hereby assents to, ratifies, and confirms any and all actions of Beneficiary with respect to the Subject Property and Collateral taken under this subsection. |
The remedies in this subsection are in addition to other remedies available to the Beneficiary and the exercise of the remedies in this subsection shall not be deemed to be an election of nonjudicial or
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judicial remedies otherwise available to the Beneficiary. The remedies in this Section 6.2 are available under and governed by the real property laws of Texas and are not governed by the personal property laws of Texas, including but not limited to, the power to dispose of personal property in a commercially reasonable manner under Section 9.610 of the UCC. No action by Beneficiary, taken pursuant to this subsection, shall be deemed to be an election to dispose of personal property under Section 9.621 of the UCC. Any receipt of consideration received by Beneficiary pursuant to this subsection shall be immediately credited against the Secured Obligations (in the inverse order of maturity) and the value of said consideration shall be treated like any other payment against the Secured Obligations.
(d) | Foreclosure-Power of Sale. Beneficiary may request Trustee to proceed with foreclosure under the power of sale which is hereby conferred, such foreclosure to be accomplished in accordance with the following provisions: |
(i) | Public Sale. Trustee is hereby authorized and empowered, and it shall be Trustees special duty, upon such request of Beneficiary, to sell the Subject Property and Collateral, or any part thereof, at public auction to the highest bidder for cash, with or without having taken possession of same. Any such sale (including notice thereof) shall comply with the applicable requirements, at the time of the sale, of Section 51.002 of the Texas Property Code or, if and to the extent such statute is not then in force, with the applicable requirements, at the time of the sale, of the successor statute or statutes, if any, governing sales of Texas real property under powers of sale conferred by deeds of trust. If there is no statute in force at the time of the sale governing sales of Texas real property under powers of sale conferred by deeds of trust, such sale shall comply with applicable law, at the time of the sale, governing sales of Texas real property under powers of sale conferred by deeds of trust. |
(ii) | Right to Require Proof of Financial Ability and/or Cash Bid. At any time during the bidding, the Trustee may require a bidding party (A) to disclose its full name, state and city of residence, occupation, and specific business office location, and the name and address of the principal the bidding party is representing (if applicable), and (B) to demonstrate reasonable evidence of the bidding partys financial ability (or, if applicable, the financial ability of the principal of such bidding party), as a condition to the bidding party submitting bids at the foreclosure sale. If any such bidding party (the Questioned Bidder) declines to comply with the Trustees requirement in this regard, or if such Questioned Bidder does respond but the Trustee, in Trustees sole and absolute discretion, deems the information or the evidence of the financial ability of the Questioned Bidder (or, if applicable, the principal of such bidding party) to be inadequate, then the Trustee may continue the bidding with reservation; and in such event (1) the Trustee shall be authorized to caution the Questioned Bidder concerning the legal obligations to be incurred in submitting bids, and (2) if the Questioned Bidder is not the highest bidder at the sale, or if having been the highest bidder the Questioned Bidder fails to deliver the cash purchase price payment promptly to the Trustee, all bids by the Questioned Bidder shall be null and void. The Trustee may, in Trustees sole and absolute discretion, determine that a credit bid may be in the best interest of the Grantor and Beneficiary, and elect to sell the Mortgaged Property for credit or for a combination of cash and credit; provided, however, that the Trustee shall have no obligation to accept any bid except an all cash bid. In the event the Trustee requires a cash bid and cash is not delivered within a reasonable time after conclusion of the bidding process, as specified by the Trustee, but in no event later than 3:45 p.m. local time on the day of sale, then said contingent sale shall be null and void, the bidding process may be recommenced, and any subsequent bids or sale shall be made as if no prior bids were made or accepted. |
(iii) | Sale Subject to Unmatured Indebtedness. In addition to the rights and powers of sale granted under the preceding provisions of this subsection, if default is made in the payment of any portion of the Secured Obligations, Beneficiary may, at Beneficiarys option, at once or at any time thereafter while any matured portion remains unpaid, without declaring the entire Secured Obligations to be due and payable, orally or in writing direct Trustee to enforce this trust and to sell the Subject Property and Collateral subject to such unmatured Secured |
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Obligations and to the rights, powers, liens, security interests, and assignments securing or providing recourse for payment of such unmatured Secured Obligations, in the same manner, all as provided in the preceding provisions of this subsection. Sales made without maturing the Secured Obligations may be made hereunder whenever there is a default in the payment of any portion of the Secured Obligations, without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this subsection, the unmatured balance of the Secured Obligations or the rights, powers, liens, security interests, and assignments securing or providing recourse for payment of the Secured Obligations. |
(iv) | Partial Foreclosure. Sale of a part of the Subject Property or Collateral shall not exhaust the power of sale, but sales may be made from time to time until the Secured Obligations is paid, performed and discharged in full. It is intended by each of the foregoing provisions of this subsection that Trustee may, after any request or direction by Beneficiary, sell not only the Subject Property, but also the Collateral and other interests constituting security for the Loan under the Loan Documents, or any part thereof, along with the Subject Property and Collateral or any part thereof, as a unit and as a part of a single sale, or may sell at any time or from time to time any part or parts of the Subject Property and Collateral separately from the remainder of the Subject Property and Collateral. It shall not be necessary to have present or to exhibit at any sale any of the Subject Property and Collateral. |
(v) | Trustees Deeds. After any sale under this subsection, Trustee shall make good and sufficient deeds, assignments, and other conveyances to the purchaser or purchasers thereunder in the name of Grantor, conveying the Subject Property and Collateral or any part thereof so sold to the purchaser or purchasers with general warranty of title by Grantor. It is agreed that in any deeds, assignments or other conveyances given by Trustee, any and all statements of fact or other recitals therein made as to the identity of Beneficiary, the occurrence or existence of any Default, the notice of intention to accelerate, or acceleration of, the maturity of the Secured Obligations, the request to sell, notice of sale, time, place, terms and manner of sale, and receipt, distribution, and application of the money realized therefrom, the due and proper appointment of a substitute trustee, and without being limited by the foregoing, any other act or thing having been duly done by or on behalf of Beneficiary or by or on behalf of Trustee, shall be taken by all courts of law and equity as prima facie evidence that such statements or recitals state true, correct, and complete facts and are without further question to be so accepted, and Grantor does hereby ratify and confirm any and all acts that Trustee may lawfully do in the premises by virtue hereof. |
(e) | Beneficiarys Judicial Remedies. Beneficiary, or Trustee, upon written request of Beneficiary, may proceed by suit or suits, at law or in equity, to enforce the payment, performance and discharge of the Secured Obligations in accordance with the terms hereof, of the Note, and the other Loan Documents, to foreclose the liens and security interests of this Deed of Trust as against all or any part of the Subject Property and Collateral, and to have all or any part of the Subject Property and Collateral sold under the judgment or decree of a court of competent jurisdiction. This remedy shall be cumulative of any other nonjudicial remedies available to the Beneficiary with respect to the Loan Documents. Proceeding with a request or receiving a judgment for legal relief shall not be or be deemed to be an election of remedies or bar any available nonjudicial remedy of the Beneficiary. |
(f) | Beneficiarys Right to Appointment of Receiver. Beneficiary, as a matter of right and without regard to the sufficiency of the security for payment, performance and discharge of the Secured Obligations, without notice to Grantor and without any showing of insolvency, fraud, or mismanagement on the part of Grantor, and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment of a receiver, shall be entitled to the appointment of a receiver or receivers of the Subject Property and Collateral or any part thereof, and of the Payments, and Grantor hereby irrevocably consents to the appointment of a receiver or receivers. Any receiver appointed pursuant to the provisions of this subsection shall have the usual powers and duties of receivers in such matters. |
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(g) | Beneficiarys UCC Remedies. The Beneficiary may exercise its rights of enforcement with respect to the Collateral under the UCC, and in conjunction with, in addition to or in substitution for the rights and remedies under the UCC the Beneficiary may, and Grantor agrees, as follows: (i) without demand or notice to Grantor, enter upon the Subject Property to take possession of, assemble, receive, and collect the Collateral, or any part thereof, or to render it unusable; (ii) require Grantor to assemble the Collateral and make it available at a place Beneficiary designates which is mutually convenient to allow Beneficiary to take possession or dispose of the Collateral; (iii) written notice mailed to Grantor as provided herein at least ten (10) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; (iv) any sale made pursuant to the provisions of this subsection shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of the Subject Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Collateral hereunder as is required for such sale of the Subject Property under power of sale, and such sale shall be deemed to be pursuant to a security agreement covering both real and personal property under Section 9.604 of the UCC; (v) in the event of a foreclosure sale, whether made by the Trustee under the terms hereof, or under judgment of a court, the Collateral and the Subject Property may, at the option of the Beneficiary, be sold as a whole; (vi) it shall not be necessary that the Beneficiary take possession of the Collateral, or any part thereof, prior to the time that any sale pursuant to the provisions of this subsection is conducted, and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; (vii) prior to application of proceeds of disposition of the Collateral to the Secured Obligations, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like, and the reasonable attorneys fees and legal expenses incurred by the Beneficiary; (viii) after notification, if any, hereafter provided in this subsection, Beneficiary may sell, lease, or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at Beneficiarys offices or elsewhere, for cash, on credit, or for future delivery. Upon the request of Beneficiary, Grantor shall assemble the Collateral and make it available to Beneficiary at any place designated by Beneficiary that is reasonably convenient to Grantor and Beneficiary. Grantor agrees that Beneficiary shall not be obligated to give more than ten (10) days written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters. Grantor shall be liable for all expenses of retaking, holding, preparing for sale, or the like, and all attorneys fees, legal expenses, and all other costs and expenses incurred by Beneficiary in connection with the collection of the Secured Obligations and the enforcement of Beneficiarys rights under the Loan Documents. Beneficiary shall apply the proceeds of the sale of the Collateral against the Secured Obligations in accordance with the requirements of this Deed of Trust. Grantor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay, perform and discharge the Secured Obligations in full. Grantor waives all rights of marshalling in respect of the Personalty; (ix) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder, the nonpayment of the Secured Obligations, the occurrence of any Default, the Beneficiary having declared all or a portion of such Secured Obligations to be due and payable, the notice of time, place, and terms of sale and of the properties to be sold having been duly given, or any other act or thing having been duly done by Beneficiary, shall be taken as prima facie evidence of the truth of the facts so stated and recited; and (x) Beneficiary may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Beneficiary, including the sending of notices and the conduct of the sale, but in the name and on behalf of Beneficiary. |
(h) | Rights Relating to Leases and Rents. Grantor has, pursuant to Article 3 of this Deed of Trust, assigned to Beneficiary all Payments under each of the Leases covering all or any portion of the Subject Property. Beneficiary, or Trustee on Beneficiarys behalf, may at any time, and without notice, either in person, by agent, or by receiver to be appointed by a court, enter and take possession of the Subject Property or any part thereof, and in its own name, sue for or otherwise collect the Payments. All Payments collected by Beneficiary, or Trustee acting on Beneficiarys behalf, shall be applied as provided for in this Deed of Trust; provided, however, that if the costs, |
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expenses, and attorneys fees shall exceed the amount of Payments collected, the excess shall be added to the Secured Obligations, shall bear interest at the rate of interest then applicable on the outstanding principal balance of the Note, and shall be immediately due and payable. The entering upon and taking possession of the Subject Property, the collection of Payments, and the application thereof as aforesaid shall not cure or waive any Default or notice of default, if any, hereunder nor invalidate any act done pursuant to such notice, except to the extent any such Default is fully cured. Failure or discontinuance by Beneficiary, or Trustee on Beneficiarys behalf, at any time or from time to time, to collect said Payments shall not in any manner impair the subsequent enforcement by Beneficiary, or Trustee on Beneficiarys behalf, of the right, power and authority herein conferred upon it. Nothing contained herein, nor the exercise of any right, power, or authority herein granted to Beneficiary, or Trustee on Beneficiarys behalf, shall be, or shall be construed to be, an affirmation by it of any tenancy, lease, or option, nor an assumption of liability under, nor the subordination of, the lien of this Deed of Trust, to any such tenancy, lease, or option, nor an election of judicial relief, if any such relief is requested or obtained as to Leases or Payments, with respect to the Subject Property or any other collateral given by Grantor to Beneficiary. In addition, from time to time Beneficiary may elect, and notice hereby is given to each lessee under any Lease, to subordinate the lien of this Deed of Trust to any Lease by unilaterally executing and recording an instrument of subordination, and upon such election the lien of this Deed of Trust shall be subordinate to the Lease identified in such instrument of subordination; provided, however, in each instance such subordination will not affect or be applicable to, and expressly excludes any lien, charge, encumbrance, security interest, claim, easement, restriction, option, covenant and other rights, titles, interests or estates of any nature whatsoever with respect to all or any portion of the Subject Property and Collateral to the extent that the same may have arisen or intervened during the period between the recordation of this Deed of Trust and the execution of the Lease identified in such instrument of subordination. |
(i) | Other Rights. Beneficiary (i) may surrender the insurance policies maintained pursuant hereto or the other Loan Documents or any part thereof, and upon receipt shall apply the unearned premiums as a credit on the Secured Obligations, in accordance herewith, and, in connection therewith, Grantor hereby appoints Beneficiary as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable) for Grantor to collect such premiums; and (ii) apply the reserve for impositions, if any, required by the provisions of this Deed of Trust, toward payment of the Secured Obligations; and (iii) shall have and may exercise any and all other rights and remedies which Beneficiary may have at law or in equity, or by virtue of any Loan Document or under the UCC, or otherwise. |
(j) | Beneficiary as Purchaser. Beneficiary may be the purchaser of the Subject Property and Collateral or any part thereof, at any sale thereof, whether such sale be under the power of sale herein vested in Trustee or upon any other foreclosure of the liens and security interests hereof, or otherwise, and Beneficiary shall, upon any such purchase, acquire good title to the Subject Property and Collateral so purchased, free of the liens and security interests hereof, unless the sale was made subject to an unmatured portion of the Secured Obligations. The Beneficiary, as purchaser, shall be treated in the same manner as any third party purchaser and the proceeds of the Beneficiarys purchase shall be applied in accordance with the requirements of this Deed of Trust. |
(k) | Possession After Foreclosure. If the liens or security interests hereof shall be foreclosed by power of sale granted herein, by judicial action, or otherwise, the purchaser at any such sale shall receive, as an incident to purchasers ownership, immediate possession of the property purchased, and if Grantor or Grantors successors shall hold possession of said property or any part thereof subsequent to foreclosure, Grantor and Grantors successors shall be considered as tenants at sufferance of the purchaser at foreclosure sale (without limitation of other rights or remedies, at a reasonable rental per day, due and payable daily, based upon the value of the portion of the Subject Property and Collateral so occupied or possessed and sold to such purchaser), and anyone occupying or possessing such portion of the Subject Property and Collateral, after demand is made for possession thereof, shall be guilty of forcible detainer and shall be subject to eviction and removal, forcible or otherwise, with or without process of law, and all damages by reason thereof are hereby expressly waived. |
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(l) | Abandonment of Sale. In the event a foreclosure hereunder is commenced by Trustee in accordance with subsection (d) hereof, at any time before the sale, Trustee may abandon the sale, and Beneficiary may then institute suit for the collection of the Secured Obligations and for the foreclosure of the liens and security interests hereof and of the Loan Documents. If Beneficiary should institute a suit for the collection of the Secured Obligations and for a foreclosure of the liens and security interests hereof, Beneficiary may, at any time before the entry of a final judgment in said suit, dismiss the same and require Trustee to sell the Subject Property and Collateral or any part thereof in accordance with the provisions of this Deed of Trust. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. The proceeds from any sale, lease, or other disposition made pursuant to Section 6.2, or the proceeds from the surrender of any insurance policies pursuant hereto, or any Payments collected by Beneficiary from the Subject Property and Collateral, or the reserve for impositions, if any, required by the provisions of this Deed of Trust or sums received pursuant to a condemnation or proceeds from insurance which Beneficiary elects to apply to the Secured Obligations, shall be applied by Trustee, or by Beneficiary, as the case may be, to the Secured Obligations in the following order and priority: (i) to the payment of all expenses of advertising, selling, disposing and conveying the Subject Property and Collateral or part thereof, and/or prosecuting or otherwise collecting Payments, proceeds, premiums, or other sums including reasonable attorneys fees and a reasonable fee or commission to Trustee; (ii) to the remainder of the Secured Obligations; (iii) the balance, if any and to the extent applicable, remaining after the full and final payment, performance and discharge of the Secured Obligations to the holder or beneficiary of any inferior liens or security interests covering the Subject Property and Collateral, if any, in order of the priority of such inferior liens or security interests (Trustee and Beneficiary shall hereby be entitled to rely exclusively upon a commitment for title insurance or search of applicable uniform commercial code filing office records issued to determine such priority); and (iv) the cash balance, if any, to the Grantor. The application of proceeds of sale or other proceeds as otherwise provided herein shall be deemed to be a payment of the Secured Obligations like any other payment. The balance of the Secured Obligations remaining unpaid, if any, shall remain fully due and owing in accordance with the terms of the Note or the other Loan Documents. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. |
6.5 | NO CURE OR WAIVER. Neither Beneficiarys nor Trustees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Grantor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of or security interests created by this Deed of Trust. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Grantor agrees to pay to Beneficiary immediately and without demand all costs and expenses incurred by Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. In addition, Grantor shall pay to Trustee all Trustees fees hereunder and shall reimburse Trustee for all expenses incurred in the administration of this trust, including, without limitation, any attorneys fees. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Grantor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems |
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appropriate to protect Beneficiarys interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiarys security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Beneficiary may perform any obligation of Grantor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Grantor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Beneficiary under this Section. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Grantor which apply to this Deed of Trust and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Beneficiarys acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. |
7.3 | OBLIGATIONS OF GRANTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as Grantor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | RECOURSE TO SEPARATE PROPERTY. Any married person who executes this Deed of Trust as a Grantor agrees that any money judgment which Beneficiary or Trustee obtains pursuant to the terms of this Deed of Trust or any other obligation of that married person secured by this Deed of Trust may be collected by execution upon that persons separate property, and any community property of which that person is a manager. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Grantor, for itself and for all parties claiming through or under Grantor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property, which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Deed of Trust or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Beneficiary shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 6.1. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively |
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constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | TEXAS LAW. This Deed of Trust shall be construed in accordance with the laws of the State of Texas, except to the extent that federal laws preempt the laws of the State of Texas. |
7.10 | INCORPORATION. Exhibit A and Exhibit B, as attached, are incorporated into this Deed of Trust by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Grantor: |
KBSII Two Westlake Park, LLC c/o KBS Capital Advisors LLC 620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660 Attention: Rodney Richerson, Regional Vice President, Asset Management Telephone: (949) 417-6515 Telecopier: (949) 417-6518 | |
Trustee: |
Peter S. Graf 2626 Howell Street, 10th Floor Dallas, Texas 75204 (w/ reference to Loan #1002835 and Beneficiary AU #02955) | |
Beneficiary: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #1002835 | |
With a copy to: |
Wells Fargo Bank, National Association Disbursement and Operations Center 2120 East Park Place, Suite 100 El Segundo, CA 90245 Attention: Eva Lopez |
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Grantor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Grantor naming Beneficiary, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Grantor to perform its obligations to Beneficiary under the Note or the Loan Agreement.
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7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of directors, officers, partners and members of Grantor contained in Section 13.27 of the Loan Agreement shall apply to this Deed of Trust. |
7.13 | INTEREST PROVISIONS. |
(a) | Savings Clause. It is expressly stipulated and agreed to be the intent of Grantor and Beneficiary at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the Note or the Related Indebtedness (or applicable United States federal law to the extent that it permits Beneficiary to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to the Note, any of the other Loan Documents or any other communication or writing by or between Grantor and Beneficiary related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Beneficiarys exercise of the option to accelerate the maturity of the Note and/or the Related Indebtedness, or (iii) Grantor will have paid or Beneficiary will have received by reason of any voluntary prepayment by Grantor of the Note and/or the Related Indebtedness, then it is Grantors and Beneficiarys express intent that all amounts charged in excess of the Maximum Lawful Rate shall be automatically cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Beneficiary shall be credited on the principal balance of the Note and/or the Related Indebtedness (or, if the Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Grantor), and the provisions of the Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Note has been paid in full before the end of the stated term of the Note, then Grantor and Beneficiary agree that Beneficiary shall, with reasonable promptness after Beneficiary discovers or is advised by Grantor that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to Grantor and/or credit such excess interest against the Note and/or any Related Indebtedness then owing by Grantor to Beneficiary. Grantor hereby agrees that as a condition precedent to any claim seeking usury penalties against Beneficiary, Grantor will provide written notice to Beneficiary, advising Beneficiary in reasonable detail of the nature and amount of the violation, and Beneficiary shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Grantor or crediting such excess interest against the Note and/or the Related Indebtedness then owing by Grantor to Beneficiary. All sums contracted for, charged or received by Beneficiary for the use, forbearance or detention of any debt evidenced by the Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of the Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Note and/or the Related Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to the Note and/or the Related Indebtedness for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Note and/or the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Beneficiary to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. |
(b) | Definitions. As used herein, the term Maximum Lawful Rate shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Beneficiary in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Beneficiary to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as herein defined) made in connection with the transaction evidenced by the Note and the other Loan Documents. As used herein, the term Charges shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Beneficiary in connection with the |
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transactions relating to the Note and the other Loan Documents, which are treated as interest under applicable law. As used herein, the term Related Indebtedness shall mean any and all debt paid or payable by Grantor to Beneficiary pursuant to the Loan Documents or any other communication or writing by or between Grantor and Beneficiary related to the transaction or transactions that are the subject matter of the Loan Documents, except such debt which has been paid or is payable by Grantor to Beneficiary under the Note. |
(c) | Ceiling Election. To the extent that Beneficiary is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on the Note and/or the Related Indebtedness, Beneficiary will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Beneficiary to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Beneficiary will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Beneficiary may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Grantor as provided by applicable law now or hereafter in effect. |
7.14 | DEFICIENCY. |
(a) | In the event an interest in any of the Subject Property and Collateral is foreclosed upon pursuant to a judicial or nonjudicial foreclosure sale, Grantor agrees as follows. Notwithstanding the provisions of Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as the same may be amended from time to time), and to the extent permitted by law, Grantor agrees that Beneficiary shall be entitled to seek a deficiency judgment from Grantor and any other party obligated on the Note equal to the difference between the amount owing on the Note and the amount for which the Subject Property and Collateral was sold pursuant to judicial or nonjudicial foreclosure sale. Grantor expressly recognizes that this section constitutes a waiver of the above-cited provisions of the Texas Property Code which would otherwise permit Grantor and other persons against whom recovery of deficiencies is sought or any guarantor independently (even absent the initiation of deficiency proceedings against them) to present competent evidence of the fair market value of the Subject Property and Collateral as of the date of the foreclosure sale and offset against any deficiency the amount by which the foreclosure sale price is determined to be less than such fair market value. Grantor further recognizes and agrees that this waiver creates an irrebuttable presumption that the foreclosure sale price is equal to the fair market value of the Subject Property and Collateral for purposes of calculating deficiencies owed by Grantor, any guarantor, and others against whom recovery of a deficiency is sought. |
(b) | Alternatively, in the event the waiver provided for in subsection (a) above is determined by a court of competent jurisdiction to be unenforceable, the following shall be the basis for the finder of facts determination of the fair market value of the Subject Property and Collateral as of the date of the foreclosure sale in proceedings governed by Sections 51.003, 51.004 and 51.005 of the Texas Property Code (as amended from time to time): (i) the Subject Property and Collateral shall be valued in an as is condition as of the date of the foreclosure sale, without any assumption or expectation that the Subject Property and Collateral will be repaired or improved in any manner before a resale of the Subject Property and Collateral after foreclosure; (ii) the valuation shall be based upon an assumption that the foreclosure purchaser desires a resale of the Subject Property and Collateral for cash promptly (but no later than twelve (12) months) following the foreclosure sale; (iii) all reasonable closing costs customarily borne by the seller in commercial real estate transactions should be deducted from the gross fair market value of the Subject Property and Collateral, including, without limitation, brokerage commissions, title insurance, a survey of the Subject Property, tax prorations, attorneys fees, and marketing costs; (iv) the gross fair market value of the Subject Property and Collateral shall be further discounted to account for any estimated holding costs associated with maintaining the Subject Property and Collateral pending sale, including, without limitation, utilities expenses, property management fees, taxes and assessments (to the extent not accounted for in (iii) above), and other maintenance, operational and ownership expenses; and (v) |
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any expert opinion testimony given or considered in connection with a determination of the fair market value of the Subject Property and Collateral must be given by persons having at least five (5) years experience in appraising property similar to the Subject Property and Collateral and who have conducted and prepared a complete written appraisal of the Subject Property and Collateral taking into consideration the factors set forth above. |
7.15 | ENTIRE AGREEMENT; AMENDMENT. THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Deed of Trust and the Loan Documents may be amended or waived only by an instrument in writing signed by the Grantor and Beneficiary. |
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IN WITNESS WHEREOF, Grantor has executed this Deed of Trust as of the day and year set forth above.
GRANTOR | ||||||||||
KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XXII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
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EXHIBIT A
Loan No. 1002835
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company, as Grantor, to PETER S. GRAF, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and the Lenders, as Beneficiary, dated as of February 25, 2011.
TRACT ONE (FEE SIMPLE):
All that certain 5.3681 acres of land out of Restricted Reserve A, Westlake Park Subdivision, Section One according to the plat thereof filed at Volume 316, Page 101 Harris County Map Records and being more particularly described by metes and bounds as follows:
BEGINNING at a found angle iron in the south right-of-way line of Grisby Road (80 feet wide) at its intersection with the east line of Barkers Landing, Section One according to the plat thereof filed at Volume 251, Page 103 Harris County Map Records;
THENCE S 88 degrees 49 minutes 29 seconds E - 616.03 feet, with said south right-of-way line to a set 5/8 inch iron rod with cap for corner;
THENCE S 01 degrees 10 minutes 31 seconds W - 100.00 feet to a found 5/8 inch iron rod for angle point;
THENCE S 46 degrees 44 minutes 49 seconds W - 213.69 feet to a found 5/8 inch iron rod for angle point;
THENCE S 01 degrees 44 minutes 49 seconds W - 201.81 feet to a found 5/8 inch iron rod for corner;
THENCE N 88 degrees 49 minutes 29 seconds W - 234.92 feet to a found X in concrete for corner;
THENCE N 01 degrees 09 minutes 09 seconds E - 10.07 feet to a found X in concrete for corner;
THENCE N 88 degrees 50 minutes 51 seconds W - 178.33 feet to a found 5/8 inch iron rod with cap for corner;
THENCE S 01 degrees 09 minutes 09 seconds W - 10.00 feet to a found 5/8 inch iron rod with cap for corner;
THENCE N 88 degrees 49 minutes 29 seconds W - 48.00 feet to a found 5/8 inch iron rod for corner;
THENCE N 01 degrees 09 minutes 09 seconds E - 450.38 feet, with the aforementioned east line of Barkers Landing, Section One to a found 5/8 inch iron rod for angle point;
THENCE N 01 degrees 44 minutes 49 seconds E - 1.00 feet, continuing with said east line to the POINT OF BEGINNING, containing 5.3681 acres (233,833 square feet) of land more or less.
COMMON AREA TRACT (NON-EXCLUSIVE EASEMENT):
All easements and rights appurtenant to Tract One as set forth and described in Declaration of Protective Covenants filed for record under County Clerks File No. G687785, as amended under G933718, H707652, re-recorded in H707653, H755367, K565423, K819292, re-recorded in K922237, P755375 and S913626 of the Official Public Records of Real Property of Harris County, Texas.
EXHIBIT A
Loan No. 1002835
TRACT TWO (NON-EXCLUSIVE EASEMENT):
Non-exclusive easement for vehicular and pedestrian access and for parking as set out in Garage Agreement dated October 20, 1982, filed for record on November 24, 1982, filed for record under County Clerks File No(s). H710574 of the Official Public Records of Real Property of Harris County, Texas, by and between Two Westlake Park and Westlake Three Limited, and more particularly described by metes and bounds as follows:
All that certain 4.537 acres of land out of the Joel Wheaton Survey, A-80 and being more particularly described by metes and bounds as follows:
Commencing at the north property corner of that certain property described in the certain Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited partnership, and Exxon Corporation, a New Jersey corporation, as recorded in No. G-376617 of the Clerks File of Harris County, Texas; said north corner also being in the south line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W along the south line of Interstate Highway 10, 1,423.03 feet to a point for corner; Thence S 01 degrees 44 minutes 49 seconds W, 782.58 feet to a point for corner; Thence S 01 degrees 09 minutes 09 seconds W, 450.38 feet to a point for corner and the Place of Beginning of the tract herein described;
Thence S 88 degrees 49 minutes 29 seconds E, 48.00 feet to a point for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 10.00 feet to a point for corner;
Thence S 88 degrees 50 minutes 51 seconds E, 178.33 feet to a point for corner;
Thence S 01 degrees 09 minutes 09 seconds W, 10.07 feet to a point for corner;
Thence S 88 degrees 49 minutes 29 seconds E, 329.31 feet to a point for corner;
Thence S 01 degrees 09 minutes 09 seconds W, 352.47 feet to a point for corner;
Thence N 88 degrees 49 minutes 29 seconds W, 555.65 feet to a point for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 352.47 feet to a point for corner and the Place of Beginning containing 4.537 acres of land, more or less.
TRACT THREE (NON-EXCLUSIVE EASEMENT):
Non-exclusive right-of-way and easement for vehicular and pedestrian access as set out in Roadway Agreement dated October 7, 1982, filed for record on November 22, 1982 filed for record under County Clerks File No. H707658 of the Official Public Records of Real Property of Harris County, Texas, by and between Westlake Two Limited, Westlake Three Limited and Owedeco Ltd., upon the four parcels of land out of the Joel Wheaton Survey, Abstract No. 80, in Harris County, Texas and designated as Parcels One, Two, Three and Four and containing 0.815 acres, 0.086 acres, 0.313 acres and 0.189 acres, and more particularly described by metes and bounds as follows:
Parcel One:
Being a tract of land containing 0.815 acres out of the Joel Wheaton Survey, Abstract 80 in Harris County, Texas, and being more particularly described by metes and bounds as follows:
Commencing at the North property corner of that certain property described in the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in Harris County Clerks File No. G-376617, same being on the South right-way line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W, along said South right-of-way line 1428.03 feet to a point for corner; Thence S 01 degrees 44 minutes 49 seconds W, 782.58 feet to a point for corner; Thence S 01 degrees 09 minutes 09 seconds W, 450.38 feet to a 5/8-inch iron rod for corner, and being the Place of Beginning for the tract herein described;
Thence S 88 degrees 49 minutes 29 seconds E, 35.00 feet to a point for corner;
2
EXHIBIT A
Loan No. 1002835
Thence S 01 degrees 09 minutes 09 seconds W, 323.47 feet to a point for corner;
Thence S 43 degrees 50 minutes 10 seconds E, 9.90 feet to a point for corner;
Thence S 88 degrees 49 minutes 29 seconds E, 190.90 feet to a point for corner;
Thence N 46 degrees 09 minutes 50 seconds E, 14.14 feet to a point for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 214.55 feet to a point for corner at the beginning of a curve to the right;
Thence along the arc of a curve to the right, having a chord of N 05 degrees 26 minutes 24 seconds E, 45.74 feet, a radius of 305.89 feet, a central angle of 08 degrees 34 minutes 30 seconds, a distance of 45.78 feet to a point for corner at the beginning of a curve to the left;
Thence along the arc of a curve to the left, having a chord of N 05 degrees 26 minutes 24 seconds E, 40.50 feet, a radius of 270.89 feet, a central angle of 08 degrees 34 minutes 30 seconds, a distance of 40.54 feet to a point for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 19.92 feet to a point for corner;
Thence S 88 degrees 49 minutes 29 seconds E, 35.00 feet to a point for corner;
Thence S 01 degrees 09 minutes 09 seconds W, 19.91 feet to a point for corner at the beginning of a curve to the right;
Thence along the arc of a curve to the right, having a chord of S 05 degrees 26 minutes 24 seconds W, 45.74 feet, a radius of 305.89 feet, a central angle of 08 degrees 34 minutes 30 seconds, a distance of 45.78 feet to a point for corner at the beginning of a curve to the left;
Thence along the arc of a curve to the left, having a chord of S 05 degrees 26 minutes 24 seconds W, 40.50 feet, a radius of 270.89 feet, a central angle of 08 degrees 34 minutes 30 seconds, a distance of 40.54 feet to a point for corner;
Thence S 01 degrees 09 minutes 09 seconds W, 214.56 feet to a point for corner;
Thence S 43 degrees 50 minutes 10 seconds E, 14.14 feet to a point for corner;
Thence S 88 degrees 49 minutes 29 seconds E, 249.12 feet to a point for corner at the beginning of a curve to the left;
Thence along the arc of a curve to the left, having a chord of N 88 degrees 10 minutes 17 seconds E, 18.66 feet, a radius of 178.00 feet, a central angle of 06 degrees 00 minutes 28 seconds, a distance of 18.66 feet to a point for corner;
Thence S 01 degrees 09 minutes 09 seconds W, 22.98 feet to a point for corner;
Thence N 88 degrees 49 minutes 29 seconds W, 555.65 feet to a 5/8 inch iron rod for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 352.47 feet to the Place of Beginning; containing 0.815 acres of land, more or less.
Parcel Two:
Being a tract of land containing 0.086 acres out of the Joel Wheaton Survey, Abstract 80 in Harris County, Texas, and being more particularly described by metes and bounds as follows:
Commencing at the North property corner of that certain property described in the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in Harris County Clerks File No. G-376617, same being on the South right-of-way line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W, along said South right-of-way line 1,428.03 feet to a point for corner;
3
EXHIBIT A
Loan No. 1002835
Thence South 01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron rod for corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a 5/8-inch iron rod for corner; Thence S 88 degrees 49 minutes 29 seconds E, 651.85 feet to a point for corner; Thence N 31 degrees 26 minutes 44 seconds E, 18.49 feet to a point for corner, and being the Place of Beginning for the tract herein described;
Thence N 31 degrees 26 minutes 44 seconds E, 171.54 feet to a point for corner;
Thence S 58 degrees 33 minutes 16 seconds E, 22.00 feet to a point for corner;
Thence S 31 degrees 26 minutes 44 seconds W, 75.18 feet to a point for corner at the beginning of a curve to the right;
Thence along the arc of a curve to the right, having a chord of S 44 degrees 18 minutes 26 seconds W, 98.83 feet, a radius of 222.00 feet, a central angle of 25 degrees 43 minutes 24 seconds, a distance of 99.67 feet to the Place of Beginning; containing 0.086 acres of land, more or less.
Parcel Three:
Being a tract of land containing 0.313 acres out of the Joel Wheaton Survey, Abstract 80 in Harris County, Texas, and being more particularly described by metes and bounds as follows:
Commencing at the North property corner of that certain property described in the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in Harris County Clerks File No. G-376617, same being on the South right-of-way line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W, along said South right-of-way line 1428.03 feet to a point for corner; Thence S 01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron rod for corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a 5/8-inch iron rod for corner and being the Place of Beginning for the tract herein described;
Thence S 88 degrees 49 minutes 29 seconds E, 633.36 feet to a point for corner on the arc of a curve to the right;
Thence along the arc of a curve to the right, having a chord of S 78 degrees 18 minutes 49 seconds W, 98.83 feet, a radius of 222.00 feet, a central angle of 25 degrees 43 minutes 24 seconds, a distance of 99.67 feet to a point for corner;
Thence N 88 degrees 49 minutes 29 seconds W, 495.02 feet to a point for corner;
Thence S 36 degrees 03 minutes 48 seconds W, 12.20 feet to a point for corner;
Thence N 88 degrees 50 minutes 51 seconds W, 35.00 feet to a point for corner;
Thence N 01 degrees 09 minutes 09 seconds E, 32.02 feet to the Place of Beginning; containing 0.313 acres of land, more or less.
Parcel Four:
Being a tract of land containing 0.189 acres out of the Joel Wheaton Survey, Abstract 80 in Harris County, Texas, and being more particularly described by metes and bounds as follows:
Commencing at the North property corner of that certain property described in the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in Harris County Clerks File No.G-376617, same being on the South right-of-way line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W, along said South right-of-way line 1,428.03 feet to a point for corner; Thence S 01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron rod for corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a 5/8-inch iron rod for corner; Thence S 88 degrees 49 minutes 29 seconds E, 555.65 feet to a point for corner and being the Place of Beginning for the tract herein described;
4
EXHIBIT A
Loan No. 1002835
Thence N 01 degrees 09 minutes 09 seconds E, 22.98 feet to a point for corner on the arc of a curve to the left;
Thence along the arc of a curve to the left, having a chord of N 58 degrees 18 minutes 23 seconds E, 160.85 feet, a radius of 178.00 feet, a central angle of 53 degrees 43 minutes 19 seconds, a distance of 166.90 feet to a point for corner;
Thence N 31 degrees 26 minutes 44 seconds E, 106.21 feet to a point for corner;
Thence S 55 degrees 52 minutes 49 seconds E, 44.01 feet to a point for corner;
Thence S 31 degrees 26 minutes 44 seconds W, 30.00 feet to a point for corner;
Thence N 58 degrees 33 minutes 16 seconds W, 22.00 feet to a point for corner;
Thence S 31 degrees 26 minutes 44 seconds W, 171.54 feet to a point for corner on the arc of a curve to the right;
Thence along the arc of a curve to the right, having a chord of S 61 degrees 18 minutes 37 seconds W, 32.07 feet, a radius of 222.00 feet, a central angle of 08 degrees 17 minutes 00 seconds, a distance of 32.09 feet to a point for corner;
Thence N 88 degrees 49 minutes 29 seconds W, 77.71 feet to the Place of Beginning; containing 0.189 acres of land, more or less.
Note: The Company is prohibited from insuring the area or quantity of the land described herein. Any statement in the above legal description of the area or quantity of land is not a representation that such area or quantity is correct, but is made only for informational and/or identification purposes and does not override Item 2 of Schedule B hereof.
5
EXHIBIT B
Loan No. 1002835
EXHIBIT B
NON-BORROWER GRANTOR RIDER
Exhibit B to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company, as Grantor, to PETER S. GRAF, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and the Lenders, as Beneficiary, dated as of February 25, 2011.
To the extent the Deed of Trust secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Grantor, the party or parties constituting Grantor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Grantor hereby waives any right it may now or hereafter have to require Beneficiary, as a condition to the exercise of any remedy or other right against Grantor hereunder or under any other document executed by Grantor in connection with any Secured Obligations: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Beneficiary by Grantor or any Borrower or other person; (b) to pursue any other right or remedy in Beneficiarys power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Beneficiary by any Borrower or other person (other than Grantor), or otherwise to comply with the UCC (as modified or recodified from time to time) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligations or any collateral (other than the Subject Property) for any Secured Obligations. |
2. | DEFENSES. Grantor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligations, by any Borrower or other person, for purposes other than the purposes represented to Grantor by any Borrower or otherwise intended or understood by Grantor or any Borrower; (d) any act or omission by Beneficiary which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligations; (e) the unenforceability or invalidity of any collateral assignment (other than this Deed of Trust) or guaranty with respect to any Secured Obligations, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligations; (f) any failure of Beneficiary to marshal assets in favor of Grantor or any other person; (g) any modification of any Secured Obligations, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Beneficiary; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Beneficiary to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Beneficiary, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Grantor further waives any and all rights and defenses that Grantor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Beneficiary may collect from Grantor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Beneficiary forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Beneficiary may collect |
EXHIBIT B
Loan No. 1002835
from Grantor even if Beneficiary, by foreclosing on the real property collateral, has destroyed any right Grantor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Grantor may have because Borrowers debt is secured by real property. Without limiting the generality of the foregoing or any other provision hereof, Grantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Grantor. Without limiting any other provision hereof, the rights and defenses being waived by Grantor include any rights or defenses under and pursuant to (x) Rule 31 of the Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code, and Chapter 34 of the Texas Business and Commerce Code, as such are amended or succeeded from time to time; and (y) under Sections 51.003, 51.004 and 51.005 of the Texas Property Code, as such are amended or succeeded from time to time. Grantor hereby expressly waives any claim of fraudulent inducement to execute this Deed of Trust and further disclaims any reliance on statements or representations of Beneficiary in waiving such a claim. |
3. | SUBROGATION. Grantor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligations; (b) any right to enforce any remedy Grantor may now or hereafter have against any Borrower that relates to any Secured Obligations; and (c) any right to participate in any collateral now or hereafter assigned to Beneficiary with respect to any Secured Obligations. |
4. | BORROWER INFORMATION. Grantor warrants and agrees: (a) that Beneficiary would not make the Loan but for this Deed of Trust; (b) that Grantor has not relied, and will not rely, on any representations or warranties by Beneficiary to Grantor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligations from sources other than the Subject Property; (c) that Grantor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Grantor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Beneficiary shall have no duty to disclose or report to Grantor any information now or hereafter known to Beneficiary with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Grantor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Beneficiarys rights hereunder shall be reinstated and revived, and the enforceability of this Deed of Trust shall continue, with respect to any amount at any time paid on account of any Secured Obligations which Beneficiary is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Grantor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Grantor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Grantor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Grantor, such payment or distribution shall be held in trust and immediately paid over to Beneficiary, is hereby assigned to Beneficiary as security for the Secured Obligations, and shall be held by Beneficiary in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Grantor warrants that all of the waivers in this Deed of Trust are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Grantor may destroy or impair rights which Grantor would otherwise have against Beneficiary, Borrower and other persons, or against collateral. Grantor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of |
2
EXHIBIT B
Loan No. 1002835
competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Grantor hereby acknowledges that: (a) the obligations undertaken by Grantor in this Deed of Trust are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Beneficiarys consideration for entering into this transaction, Beneficiary has specifically bargained for the waiver and relinquishment by Grantor of all such defenses, and (d) Grantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Grantor does hereby represent and confirm to Beneficiary that Grantor is fully informed regarding, and that Grantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Grantor, and (iv) the legal consequences to Grantor of waiving such defenses. Grantor acknowledges that Grantor makes this Deed of Trust with the intent that this Deed of Trust and all of the informed waivers herein shall each and all be fully enforceable by Beneficiary, and that Beneficiary is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | DISCLOSURE OF INFORMATION; PARTICIPATIONS. Grantor understands and agrees that Beneficiary may elect, at any time, to sell, assign, or participate all or any part of Beneficiarys interest in the Loan, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Beneficiarys sole discretion. Grantor further agrees that Beneficiary may disseminate to any such potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Beneficiary with respect to: (a) the Subject Property and Collateral and its operation; (b) any party connected with the Loan (including, without limitation, the Grantor, the Borrower, any partner of Borrower and any guarantor); and/or (c) any lending relationship other than the Loan which Beneficiary may have with any party connected with the Loan. |
10. | INTEGRATION; INTERPRETATION. This Deed of Trust and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Deed of Trust and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Beneficiary in writing. |
3
STATE OF CALIFORNIA
COUNTY OF Orange SS.
On February 22, 2011 before me, K. Godin, Notary Public, personally appeared Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature /s/ K. Godin
My commission expires June 5, 2013.
Exhibit 10.41
FOURTH AMENDED AND RESTATED AND CONSOLIDATED SECURED PROMISSORY NOTE
$360,000,000 |
March 10, 2011 |
FOR VALUE RECEIVED, KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company, KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company, KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company, KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company, KBSII CRESCENT VIII, LLC, a Delaware limited liability company, KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company, KBSII GRANITE TOWER, LLC, a Delaware limited liability company, KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company, KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware statutory trust, KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company, and KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company (collectively, Borrowers), HEREBY PROMISE TO PAY to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (Lender) the principal sum of Three Hundred and Sixty Million Dollars ($360,000,000), or if less, the aggregate unpaid principal amount of all disbursements disbursed by Lender pursuant to the requirements set forth in the Amended and Restated and Consolidated Loan Agreement dated as of January 27, 2011 (as amended, supplemented or restated from time to time the Loan Agreement), among Borrowers, Lender, certain other Lenders named therein or made parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, together with interest on the unpaid principal balance hereof at the rate (or rates) determined in accordance with Section 2.7 of the Loan Agreement from the date such principal is advanced until it is paid in full. It is contemplated that there will be advances and payments under this Note from time to time, but no advances or payments under this Note (including payment in full of the unpaid balance of principal hereof prior to maturity) shall affect or impair the validity or enforceability of this Note as to future advances hereunder.
This Note is one of the Notes referred to in and governed by the Loan Agreement, which Loan Agreement, among other things, contains provisions for the acceleration of the maturity hereof and for the payment of certain additional sums to Lender upon the happening of certain stated events. Capitalized terms used in this Note without definition have the same meanings as in the Loan Agreement.
The principal amount of this Note, unless accelerated in accordance with Loan Agreement as described below, if not sooner paid, will be due and payable, together with all accrued and unpaid interest and other amounts due and unpaid under the Loan Agreement, on the Maturity Date.
This Note is secured by, among other things, the Security Documents referred to in the Loan Agreement.
Interest on the Loans is payable in arrears on the first Business Day of each month during the term of the Loan Agreement, commencing with the first Business Day of the first calendar month to begin after the date of this Note. Interest will be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of three hundred sixty (360) days. The Loan Agreement provides for the payment by Borrower of various other charges and fees, in addition to the interest charges described in the Loan Agreement, as set forth more fully in the Loan Agreement.
All payments of any amount becoming due under this Note shall be made in the manner provided in the Loan Agreement, in Dollars.
Upon and after the occurrence of a Default, unless such Default is waived as provided in the Loan Agreement, this Note may, at the option of Requisite Lenders and without further demand, notice or legal process of any kind, be declared by Administrative Agent, and in such case immediately shall become, due and payable. Upon and after the occurrence of certain Defaults, this Note shall, without any action by Lenders and without demand, notice or legal process of any kind, automatically and immediately become due and payable.
Demand, presentment, protest and notice of nonpayment and protest, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor are hereby waived by Borrower. Subject to the terms of the Loan Agreement, Lender may extend the time of payment of this Note, postpone the enforcement hereof, grant any indulgences, release any party primarily or secondarily liable hereon or agree to any subordination of Borrowers obligations hereunder without affecting or diminishing Lenders right of recourse against Borrower, which right is hereby expressly reserved.
This Note has been delivered and accepted at Irvine, California. This Note shall be interpreted in accordance with, and the rights and liabilities of the parties hereto shall be determined and governed by, the laws of the State of California.
All notices or other communications required or permitted to be given pursuant to this Note shall be given to the Borrowers or Lender at the address and in the manner provided for in the Loan Agreement.
In no contingency or event whatsoever shall interest charged in respect of the Loan evidenced hereby, however such interest may be characterized or computed, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall, at Lenders election, either (a) promptly refund such excess interest to Borrower or (b) credit such excess to the principal balance hereof. This provision shall control over every other provision of all agreements between Borrower and Lender.
Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.
The limitations on personal liability of the shareholders, partners and members of Borrowers contained in Section 13.27 of the Loan Agreement shall apply to this Note.
This Note is issued in replacement of a Third Amended and Restated and Consolidated Secured Promissory Note dated February 25, 2011 in the amount of $360,000,000, (the Previous Note) previously issued by Borrowers (excluding KBSII Torrey Reserve West, LLC) to Lender pursuant to the Loan Agreement and shall not be construed as a novation of the Previous Note. Aggregate amounts outstanding under the Previous Note shall be deemed outstanding under this Note.
[Signatures on Following Pages]
BORROWER | ||||||||||
KBSII HARTMAN BUSINESS CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION IX, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII 2500 REGENT BOULEVARD, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII PLANO BUSINESS PARK, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION VIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII NATIONAL CITY TOWER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XVI, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII GATEWAY CORPORATE CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XIX, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII GRANITE TOWER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XVIII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on Next Page]
BORROWER | ||||||||||
KBSII HORIZON TECH CENTER, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
BORROWER | ||||||||||
KBSII CRESCENT VIII, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XI, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
KBSII I-81 INDUSTRIAL PORTFOLIO TRUST, a Delaware Statutory Trust | ||||||||||||
By: |
KBSII I-81 INDUSTRIAL PORTFOLIO, LLC, a Delaware limited liability company, as Administrative Trustee | |||||||||||
By: |
KBSII REIT ACQUISITION XXI, LLC, a Delaware limited liability company, its sole member | |||||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
[Signatures Continue on the Next Page]
KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION XXII, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION X, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
Exhibit 10.42
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
Real Estate Group (AU #02955)
2030 Main Street, Suite 800
Irvine, CA 92614
Attn: Jeri Gehrer
Loan No. 1002835
THIS DEED OF TRUST SECURES A NOTE WHICH PROVIDES FOR A VARIABLE INTEREST RATE
DEED OF TRUST
WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (Deed of Trust), made as of March 10, 2011, are KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company (Trustor), AMERICAN SECURITIES COMPANY, a California corporation (Trustee), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain additional lenders (Beneficiary).
ARTICLE 1. GRANT IN TRUST
1.1 | GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the City of San Diego, County of San Diego, State of California, described on Exhibit A attached hereto, together with all right, title, interest, and privileges of Trustor in and to all streets, ways, roads, and alleys used in connection with or pertaining to such real property and any improvements thereon, all development rights or credits, air rights, water, water rights and water stock related to the real property, all timber, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all licenses, appurtenances, reversions, remainders, easements, rights and rights of way appurtenant or related thereto; any and all rights of Trustor, as a declarant or otherwise, under any covenants, conditions, and restrictions now or hereafter pertaining to the real property described on Exhibit A hereto, provided, however, that Beneficiary shall have no liability under such covenants, conditions, and restrictions unless and until Beneficiary forecloses on the real property; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the Improvements); all interest or estate which Trustor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing (all of the foregoing being collectively referred to as the Subject Property). The listing of specific rights or property shall not be interpreted as a limit of general terms. |
1.2 | ADDRESS. The address of the Subject Property is: 3390, 3394 and 3398 Carmel Mountain Road, San Diego, California. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. |
Loan No. 1002835
ARTICLE 2. OBLIGATIONS SECURED
2.1 | OBLIGATIONS SECURED. Trustor makes this Deed of Trust for the purpose of securing the following obligations (Secured Obligations): |
(a) | Payment to Beneficiary and Lenders (as defined in the Loan Agreement (as defined below)) of all sums at any time owing under one or more secured promissory notes (initially dated January 27, 2011 and maturing on January 27, 2016 (subject to extension in accordance with the Loan Agreement referenced below)) made in the aggregate principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the Loan) executed by Trustor and certain other parties, as borrowers (Borrowers), from time to time in connection with the Loan Agreement, and payable to the order of one or more Lenders, including, without limitation (i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement in connection with an increase of the Loan to a maximum principal amount of Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any replacement Note executed pursuant to Section 3.4 of the Loan Agreement in connection with the joinder of additional Borrowers to the Loan Agreement including, without limitation, that certain Fourth Amended and Restated and Consolidated Secured Promissory Note of even date herewith (collectively, as the same may be amended, restated or replaced from time to time, the Note); and |
(b) | Payment and performance of all covenants and obligations of Trustor under this Deed of Trust; and |
(c) | Payment and performance of all covenants and obligations on the part of Borrowers under that certain Amended and Restated and Consolidated Loan Agreement (as the same may be amended, restated or replaced from time to time, Loan Agreement), dated January 27, 2011, by and among Borrowers, Beneficiary, and Lenders, the Hazardous Materials Indemnity Agreement (as defined in the Loan Agreement), and all other Loan Documents as defined in the Loan Agreement; and |
(d) | Payment and performance of all covenants and obligations, if any, of any rider attached as an Exhibit to this Deed of Trust; and |
(e) | Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and |
(f) | Payment and performance of all covenants and obligations of Borrowers (or any of them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such terms are defined in the Loan Agreement), which agreement is evidenced by a writing that recites it is secured by this Deed of Trust; and |
(g) | All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. |
2.2 | OBLIGATIONS. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges (if any), late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. |
2.3 | INCORPORATION. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject |
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Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreement may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. |
ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS
3.1 | ASSIGNMENT. Trustor hereby irrevocably assigns to Beneficiary all of Trustors right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof (Leases); and (b) the rents, revenue, income, issues, deposits and profits of the Subject Property, including, without limitation, all parking income and all amounts payable and all rights and benefits accruing to Trustor under the Leases (Payments). The term Leases shall also include all guarantees of and security for the lessees performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiarys right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. |
3.2 | GRANT OF LICENSE. Beneficiary confers upon Trustor a license (License) to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Trustor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying with any such notice or demand by Beneficiary. |
3.3 | EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Beneficiary and Trustee shall not directly or indirectly be liable to Trustor or any other person as a consequence of: (i) the exercise or failure to exercise by Beneficiary or Trustee, or any of their respective employees, agents, contractors or subcontractors, any of the rights, remedies or powers granted to Beneficiary or Trustee hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. |
3.4 | REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that, to the best of Trustors knowledge: (a) Trustor has delivered to Beneficiary a rent roll that, as of the date hereof, contains a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessors interests under any of the Leases has been transferred or assigned. |
3.5 | COVENANTS. Trustor covenants and agrees at Trustors sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all appropriate remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the |
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lessee or of the lessor; (c) exercise Trustors best efforts to keep all portions of the Subject Property that are capable of being leased leased at rental rates pursuant to the terms of the Loan Agreement; (d) deliver to Beneficiary fully executed, copies of each and every Lease that it is required to deliver in accordance with the Loan Agreement; and (e) execute and record such additional assignments of any Lease or, if required by the terms of the Loan Agreement, use commercially reasonable effort to obtain specific subordinations (or subordination, attornment and non-disturbance agreements executed by the lessor and lessee) of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Trustor shall not, without Beneficiarys prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) to the extent prohibited by the terms of the Loan Agreement, enter into any Leases after the date hereof; (ii) execute any other assignment relating to any of the Leases; (iii) to the extent prohibited by the terms of the Loan Agreement, discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rentals one (1) month in advance of the time when it becomes due; (iv) to the extent prohibited by the terms of the Loan Agreement, terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder; (v) to the extent prohibited by the terms of the Loan Agreement, consent to any assignment or subletting by any lessee; or (vi) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiarys consent hereunder, any sums received by Trustor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as set forth in the Loan Agreement. |
3.6 | ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Trustor, and use its best efforts to obtain such estoppel certificates executed by each of the lessees, in each case in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessees most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Trustor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. |
ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING
4.1 | SECURITY INTEREST. Trustor hereby grants and assigns to Beneficiary as of the date hereof a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Trustor now or at any time hereafter has any interest (collectively, the Collateral): |
All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property and embedded software included therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements; together with all rents (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, licenses, agreements, (including, without limitation, all acquisition agreements with respect to the Subject Property); all of Trustors rights under any Swap Agreement, including, without limitation, the Existing Swap; all Contracts referenced in Section 5.18 below (including property management and leasing agreements), architects agreements, and/or construction agreements with respect to the completion of any improvements on the Subject Property), general intangibles, chattel paper (whether electronic or tangible), instruments, documents, promissory notes, drafts, letters of credit, letter of credit rights, supporting obligations, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Subject Property or any business now or hereafter conducted thereon by Trustor; all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other
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Loan No. 1002835
security now or hereafter made with or given to utility companies by Trustor with respect to the Subject Property; all advance payments of insurance premiums made by Trustor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files to the extent relating to any of the foregoing.
As to all of the above described personal property which is or which hereafter becomes a fixture under applicable law, this Deed of Trust constitutes a fixture filing under the California Uniform Commercial Code, as amended or recodified from time to time (UCC), and is acknowledged and agreed to be a construction mortgage under the UCC.
4.2 | REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants that: (a) Trustor has, as of the date of recordation of this Deed of Trust, and will have, good title to the Collateral; (b) Trustor has not previously assigned or encumbered the Collateral, and no financing statement covering any of the Collateral has been delivered to any other person or entity; (c) Trustors principal place of business is located at the address shown in Section 7.11; and (d) Trustors legal name is exactly as set forth on the first page of this Deed of Trust and all of Trustors organizational documents or agreements delivered to Beneficiary are complete and accurate in every respect. |
4.3 | COVENANTS. Trustor agrees: (a) to execute and deliver such documents as Beneficiary deems necessary to create, perfect and continue the security interests contemplated hereby; (b) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Beneficiary prior written notice thereof; (c) to cooperate with Beneficiary in perfecting all security interests granted herein and in obtaining such agreements from third parties as Beneficiary deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder; and (d) that Beneficiary is authorized to file financing statements in the name of Trustor to perfect Beneficiarys security interest in Collateral. |
4.4 | RIGHTS OF BENEFICIARY. In addition to Beneficiarys rights as a Secured Party under the UCC, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Beneficiarys rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Trustor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC §9620, or other applicable law. |
4.5 | RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiarys rights as a Secured Party under the UCC or otherwise at law: |
(a) | Beneficiary may (i) upon written notice, require Trustor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, lease, license and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Trustors expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become the purchaser at any such sales; |
(b) | Beneficiary may, for the account of Trustor and at Trustors expense: (i) operate, use, consume, sell, lease, license or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect |
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Loan No. 1002835
to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Trustor in connection with or on account of any or all of the Collateral; and |
(c) | In disposing of Collateral hereunder, Beneficiary may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral may be applied by Beneficiary to the payment of expenses incurred by Beneficiary in connection with the foregoing, including reasonable attorneys fees, and the balance of such proceeds may be applied by Beneficiary toward the payment of the Secured Obligations in such order of application as Beneficiary may from time to time elect. |
Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Trustor shall make an express written election of said remedy under UCC §9620, or other applicable law. Trustor agrees that Beneficiary shall have no obligation to process or prepare any Collateral for sale or other disposition.
4.6 | POWER OF ATTORNEY. Trustor hereby irrevocably appoints Beneficiary as Trustors attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Beneficiary may, without the obligation to do so, in Beneficiarys name, or in the name of Trustor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiarys security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Trustor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. |
4.7 | POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section or the other Loan Documents (as defined in the Loan Agreement), so long as no Default exists under this Deed of Trust or any of the Loan Documents, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Trustors business and in accordance with the Loan Agreement. |
ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES
5.1 | TITLE. Trustor represents and warrants that, except as disclosed to Beneficiary in a writing which refers to this warranty, Trustor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Deed of Trust is a first and prior lien on the Subject Property. Trustor hereby represents and warrants that all of the Subject Property is a single tax parcel, and there are no properties included in such tax parcel other than the Subject Property. Trustor further covenants and agrees that it shall not cause all or any portion of the Subject Property to be replatted or for any lots or boundary lines to be adjusted, changed or altered for either ad valorem tax purposes or otherwise, and shall not consent to the assessment of the Subject Property in more than one tax parcel or in conjunction with any property other than the Subject Property. |
5.2 | TAXES AND ASSESSMENTS. |
(a) | Subject to Trustors rights to contest in good faith payment of taxes as provided in Section 5.2(b) below, Trustor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Trustor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligation; provided, however, Trustor shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiarys net income. |
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(b) | Trustor may contest in good faith any taxes or assessments if: (i) Trustor pursues the contest diligently and in compliance with applicable laws, in a manner which Beneficiary determines is not prejudicial to Beneficiary, and does not impair the rights of Beneficiary under any of the Loan Documents; and (b) Trustor deposits with Beneficiary any funds or other forms of assurance which Beneficiary in good faith determines from time to time appropriate to protect Beneficiary from the consequences of the contest being unsuccessful. Trustors compliance with this Section shall operate to prevent such claim, demand, levy or assessment from becoming a Default. |
5.3 | TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default, at Beneficiarys option and upon its demand, Trustor shall, until all Secured Obligations have been paid in full, pay to Beneficiary monthly, annually or as otherwise directed by Beneficiary an amount estimated by Beneficiary to be equal to: (a) all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or may become a lien upon the Subject Property or Collateral and will become due for the tax year during which such payment is so directed; and (b) premiums for fire, hazard and insurance required or requested pursuant to the Loan Documents when same are next due. If Beneficiary determines that any amounts paid by Trustor are insufficient for the payment in full of such taxes, assessments, levies, charges and/or insurance premiums, Beneficiary shall notify Trustor of the increased amounts required to pay all amounts when due, whereupon Trustor shall pay to Beneficiary within thirty (30) days thereafter the additional amount as stated in Beneficiarys notice. All sums so paid shall not bear interest, except to the extent and in any minimum amount required by law; and Beneficiary shall, unless Trustor is otherwise in Default hereunder or under any Loan Document, apply said funds to the payment of, or at the sole option of Beneficiary release said funds to Trustor for the application to and payment of, such sums, taxes, assessments, levies, charges, and insurance premiums. Upon Default by Trustor hereunder or under any Loan Document, Beneficiary may apply all or any part of said sums to any Secured Obligation and/or to cure such Default, in which event Trustor shall be required to restore all amounts so applied, as well as to cure any other events or conditions of Default not cured by such application. Upon assignment of this Deed of Trust, Beneficiary shall have the right to assign in writing all amounts collected and in its possession to its assignee whereupon Beneficiary and the Trustee shall be released from all liability with respect thereto. Within ninety-five (95) days following full repayment of the Secured Obligations (other than full repayment of the Secured Obligations as a consequence of a foreclosure or conveyance in lieu of foreclosure of the liens and security interests securing the Secured Obligations) or at such earlier time as Beneficiary may elect, the balance of all amounts collected and in Beneficiarys possession shall be paid to Trustor and no other party shall have any right or claim thereto. |
5.4 | PERFORMANCE OF SECURED OBLIGATIONS. Trustor shall promptly pay and perform each Secured Obligation when due. |
5.5 | LIENS, ENCUMBRANCES AND CHARGES. Trustor shall immediately discharge any lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Subject to the following sentence, Trustor shall pay when due all obligations secured by or which may become liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or Collateral, or any interest therein, whether senior or subordinate hereto. If a claim of lien is recorded which affects the Subject Property or a bonded stop notice is served upon Beneficiary, Trustor shall, within twenty (20) calendar days of such recording or service or within five (5) calendar days of Beneficiarys demand, whichever occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Beneficiary a surety bond in sufficient form and amount; or (c) provide Beneficiary with other assurances which Beneficiary deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Beneficiary from the effect of such lien or bonded stop notice. |
5.6 | DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. |
(a) | The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Trustor to Beneficiary and, at the request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest |
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in, the Subject Property or Collateral; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property or Collateral; (iii) all proceeds of any insurance policies (whether or not expressly required by Beneficiary to be maintained by Trustor, including, without limitation, earthquake insurance, environmental insurance and terrorism insurance, if any) payable by reason of loss sustained to all or any part of the Subject Property or Collateral; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law and Section 5.6(b) below, and without regard to any requirement contained in Section 5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any such order acceptable to Beneficiary, and/or Beneficiary may release all or any part of the proceeds to Trustor upon any conditions Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary; provided, however, in no event shall Beneficiary be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Beneficiary or its employees or agents. |
(b) | Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Beneficiary of such additional funds which Beneficiary determines are needed to pay all costs of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Beneficiary, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (bb) of the continuation of Leases acceptable to and required by Beneficiary; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred; (dd) that there has been no material adverse change in the financial condition or credit of Trustor since the date of this Deed of Trust; (ee) no Default shall have occurred, and (ff) of the satisfaction of any additional conditions that Beneficiary may reasonably establish to protect its security. Trustor hereby acknowledges that the conditions described above are reasonable, and, if such conditions have not been satisfied within sixty (60) days of receipt by Beneficiary of such insurance or condemnation proceeds, then Beneficiary may apply such insurance or condemnation proceeds to pay the Secured Obligations in such order and amounts as Beneficiary in its sole discretion may choose. |
(c) | Notwithstanding the foregoing provisions of this Section 5.6, if the insurance or condemnation proceeds equal $1,000,000 or less, Beneficiary shall release such proceeds to Trustor for repair or restoration of the Subject Property without any additional requirements or conditions. |
5.7 | MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions of the Loan Agreement, Trustor covenants: (a) to insure the Subject Property and Collateral against such risks as Beneficiary may require pursuant to the Loan Agreement and, at Beneficiarys request (but not more than fifteen (15) days prior to the termination date of any existing coverage), to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies providing such insurance; (b) to keep the Subject Property and Collateral in good condition and repair; (c) not to remove or demolish the Subject Property or Collateral or any part thereof, not to alter, restore or add to the Subject Property or Collateral and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Beneficiarys prior written consent or as provided in the Loan Agreement; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property and Collateral, or any part thereof which may be damaged or destroyed, without regard to whether Beneficiary elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which |
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affect the Subject Property or Collateral and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property or Collateral; and (g) to do all other acts which from the character or use of the Subject Property or Collateral may be reasonably necessary to maintain and preserve its value. |
5.8 | DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Trustors sole expense, Trustor shall protect, preserve and defend the Subject Property and Collateral and title to and right of possession of the Subject Property and Collateral, the security hereof and the rights and powers of Beneficiary and Trustee hereunder against all adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property or Collateral and of any condemnation offer or action. |
5.9 | POWERS OF BENEFICIARY. Beneficiary may, without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby and without liability therefor and without notice: (a) release all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. |
5.10 | ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. |
(a) | Trustee accepts this trust when this Deed of Trust is recorded. Except as may be required by applicable law, Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trust hereunder and the enforcement of the rights and remedies available hereunder, and may obtain orders or decrees directing or confirming or approving acts in the execution of said trust and the enforcement of said remedies. |
(b) | Trustee shall not be required to take any action toward the execution and enforcement of the trust hereby created or to institute, appear in, or defend any action, suit, or other proceeding in connection therewith where, in his opinion, such action would be likely to involve him in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is tendered security and indemnity satisfactory to Trustee against any and all cost, expense, and liability arising therefrom. Trustee shall not be responsible for the execution, acknowledgment, or validity of the Loan Documents, or for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and Trustee makes no representation in respect thereof or in respect of the rights, remedies, and recourses of Beneficiary. |
(c) | With the approval of Beneficiary, Trustee shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Beneficiary) upon any matters arising hereunder, including the preparation, execution, and interpretation of the Loan Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his agents or attorneys, (iii) to select and employ, in and about the execution of his duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Trustee, and Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustees gross negligence or bad faith, and (iv) any and all other lawful action as Beneficiary may instruct Trustee to take to protect or enforce Beneficiarys rights hereunder. Trustee shall not be personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein granted to Trustee, upon the Subject Property for debts contracted for or liability or damages incurred in the management or operation of the Subject Property. Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. Trustee shall be entitled to reimbursement for expenses incurred by Trustee |
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in the performance of Trustees duties hereunder and to reasonable compensation for such of Trustees services hereunder as shall be rendered. TRUSTOR WILL, FROM TIME TO TIME, PAY THE COMPENSATION DUE TO TRUSTEE HEREUNDER AND REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND HOLD HARMLESS TRUSTEE AGAINST, ANY AND ALL LIABILITY AND EXPENSES WHICH MAY BE INCURRED BY TRUSTEE IN THE PERFORMANCE OF TRUSTEES DUTIES. |
(d) | All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by applicable law) and Trustee shall be under no liability for interest on any moneys received by Trustee hereunder. |
(e) | Should any deed, conveyance, or instrument of any nature be required from Trustor by any Trustee or substitute Trustee to more fully and certainly vest in and confirm to the Trustee or substitute Trustee such estates, rights, powers, and duties, then, upon request by the Trustee or substitute Trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Trustor. |
(f) | By accepting or approving anything required to be observed, performed, or fulfilled or to be given to Trustee pursuant to the Loan Documents, including without limitation, any deed, conveyance, instrument, officers certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Trustee shall not be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness, or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or affirmation with respect thereto by Trustee. |
5.11 | COMPENSATION; EXCULPATION; INDEMNIFICATION. |
(a) | Trustor shall pay Trustees fees and reimburse Trustee for expenses in the administration of this trust, including attorneys fees. Trustor shall pay to Beneficiary reasonable compensation for services rendered concerning this Deed of Trust, including without limit any statement of amounts owing under any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Trustor under any agreement related to the Subject Property or Collateral or under this Deed of Trust; or (iii) any loss sustained by Trustor or any third party resulting from Beneficiarys failure (whether by malfeasance, nonfeasance or refusal to act) to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission (regardless of whether same constitutes negligence) of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary, and all such liability is hereby expressly waived and released by Trustor. |
(b) | TRUSTOR INDEMNIFIES TRUSTEE AND BENEFICIARY AGAINST, AND HOLDS TRUSTEE AND BENEFICIARY HARMLESS FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, CAUSES OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS FEES AND OTHER LEGAL EXPENSES, COST OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH EITHER MAY SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST; (ii) BY REASON OF THE EXECUTION OF THIS DEED OF TRUST OR IN PERFORMANCE OF ANY ACT REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii) AS A RESULT OF ANY FAILURE OF TRUSTOR TO PERFORM TRUSTORS OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED OBLIGATION OR UNDERTAKING ON BENEFICIARYS PART TO PERFORM OR DISCHARGE ANY OF THE REPRESENTATIONS, WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS CONTAINED IN ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY. THE ABOVE OBLIGATION OF TRUSTOR TO INDEMNIFY AND HOLD HARMLESS TRUSTEE AND BENEFICIARY SHALL |
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SURVIVE THE RELEASE AND CANCELLATION OF THE SECURED OBLIGATIONS AND THE RELEASE AND RECONVEYANCE OR PARTIAL RELEASE AND RECONVEYANCE OF THIS DEED OF TRUST. |
(c) | Trustor shall pay all amounts and indebtedness arising under this Section 5.11 immediately upon demand by Trustee or Beneficiary together with interest thereon from the date the indebtedness arises at the rate of interest then applicable to the principal balance of the Note as specified therein. |
5.12 | SUBSTITUTION OF TRUSTEES. From time to time, by a writing, signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Subject Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Trustee or any successor. Such writing shall set forth any information required by law. The recordation of such instrument of substitution shall discharge Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Trustee herein. A writing recorded pursuant to the provisions of this Section 5.12 shall be conclusive proof of the proper substitution of such new Trustee. |
5.13 | DUE ON SALE OR ENCUMBRANCE. The terms Loan and Loan Documents have the meaning given them in the Loan Agreement described in Section 2.1. Trustor represents, agrees and acknowledges that: |
(a) | Improvement and operation of real property is a highly complex activity which requires substantial knowledge of law and business conditions and practices, and an ability to control, coordinate and schedule the many factors affecting such improvement and operation. Experience, financial stability, managerial ability and a good reputation in the business community enhance an owners and operators ability to obtain market rents and to induce cooperation in scheduling and are taken into account by Beneficiary in approving loan applications. |
(b) | Trustor has represented to Beneficiary, not only in the representations and warranties contained in the Loan Documents, but also in its initial loan application and in all of the negotiations connected with Beneficiary making the Loan, certain facts concerning Trustors financial stability, managerial and operational ability, reputation, skill, and creditworthiness. Beneficiary has relied upon these representations and warranties as a substantial and material consideration in its decision to make the Loan. |
(c) | The conditions and terms provided in the Loan Agreement were induced by these representations and warranties and would not have been made available by Beneficiary in the absence of these representations and warranties. |
(d) | Beneficiary would not have made this Loan if Beneficiary did not have the right to sell, transfer, assign, or grant participations in the Loan and in the Loan Documents, and that such participations are dependent upon the potential participants reliance on such representations and warranties. |
(e) | Trustors financial stability and managerial and operational ability and that of those persons or entities having a direct or beneficial interest in Trustor are a substantial and material consideration to any third parties who have entered or will enter into agreements with Trustor. |
(f) | Beneficiary has relied upon the skills and services offered by such third parties and the provision of such skills and services is jeopardized if Trustor breaches its covenants contained below regarding Transfers. |
(g) | A transfer of possession of or title to the Subject Property, or a change in the person or entity operating, developing, constructing or managing the Subject Property, would substantially increase the risk of Default under the Loan Documents and significantly and materially impair and reduce Beneficiarys security for the Note. |
(h) | As used herein, the term Transfer shall mean each of the following actions or events: the sale, transfer, assignment, lease as a whole, encumbrance, hypothecation, mortgage or pledge in any |
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manner whatsoever, whether voluntarily, involuntarily or by operation of law of: (i) the Subject Property or Collateral or any interest therein; (ii) title to any other security more specifically described in any Loan Document; (iii) Trustors right, title and/or interest in the Loan Documents and any subsequent documents executed by Trustor in connection therewith; (iv) legal or beneficial ownership of any partnership interest in Trustor if Trustor is a partnership; (v) legal or beneficial ownership of any membership interest in Trustor if Trustor is a limited liability company; (vi) legal or beneficial ownership of any partnership interest in any general partner, venturer or member of Trustor; or (vii) legal or beneficial ownership of any of the stock in Trustor if Trustor is a corporation or in any general partner, venturer or member in Trustor that is a corporation. |
(i) | Trustor shall not make or commit to make any Transfer without Beneficiarys prior written consent, which it may grant or withhold at its sole discretion (except with respect to those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement). It is expressly agreed that Beneficiary may predicate Beneficiarys decision to grant consent to a Transfer on such terms and conditions as Beneficiary may require, in Beneficiarys sole discretion, including without limitation (i) consideration of the creditworthiness of the party to whom such Transfer will be made and its development and management ability with respect to the Subject Property, (ii) consideration of whether the security for repayment, performance and discharge of the Secured Obligations, or Beneficiarys ability to enforce its rights, remedies, and recourses with respect to such security, will be impaired in any way by the proposed Transfer, (iii) an increase in the rate of interest payable under the Note or any other change in the terms and provisions of the Note and other Loan Documents, (iv) reimbursement of Beneficiary for all costs and expenses incurred by Beneficiary in investigating the creditworthiness and management ability of the party to whom such Transfer will be made and in determining whether Beneficiarys security will be impaired by the proposed Transfer, (v) payment to Beneficiary of a transfer fee to cover the cost of documenting the Transfer in its records, (vi) payment of Beneficiarys reasonable attorneys fees in connection with such Transfer, (vii) endorsements (to the extent available under applicable law) to any existing mortgagee title insurance policies or construction binders insuring Beneficiarys liens and security interests covering the Subject Property, and (viii) require additional security for the payment, performance and discharge of the Secured Obligations. If Beneficiarys consent should be given, any Transfer shall be subject to the Loan Documents and any transferee of Trustors interest shall: (i) assume all of Trustors obligations thereunder; and (ii) agree to be bound by all provisions and perform all obligations contained therein; provided, however, that such assumption shall not release Trustor or any maker or any guarantor of the Note from any liability thereunder or under any other Loan Documents without the prior written consent of Beneficiary. In the event of any Transfer without the prior written consent of Beneficiary, whether or not Beneficiary elects to enforce its right to accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the Note, as well as all other charges, expenses and costs owing under the Loan Documents, shall at the option of Beneficiary, automatically bear interest at five percent (5%) above the rate provided in the Note, from the date (or any date thereafter) of such unconsented to Transfer. Trustor acknowledges that the automatic shift(s) to this alternate rate is reasonable since the representations that Beneficiary relied upon in making the Loan may no longer be relied upon. A consent by Beneficiary to one or more Transfers shall not be construed as a consent to further Transfers or as a waiver of Beneficiarys consent with respect to future Transfers. |
5.14 | RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property and Collateral or in any manner obligated under the Secured Obligations (Interested Parties), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and Collateral and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of and security interests created by this Deed of Trust upon the Subject Property and Collateral. |
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5.15 | RECONVEYANCE. Upon Beneficiarys written request, and upon surrender to Trustee for cancellation of this Deed of Trust or a certified copy thereof and any note, instrument, or instruments setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Subject Property or that portion thereof then held hereunder. To the extent permitted by law, the reconveyance may describe the grantee as the person or persons legally entitled thereto and the recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Subject Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. Notwithstanding anything contained herein to the contrary, Beneficiary hereby agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to cause Trustee to reconvey the Subject Property notwithstanding the fact that all of the Secured Obligations have not been satisfied. |
5.16 | SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to the Loan Documents or by the proceeds of any loan secured by this Deed of Trust. |
5.17 | RIGHT OF INSPECTION. Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time for the purpose of inspecting the Subject Property and Collateral and ascertaining Trustors compliance with the terms hereof. |
5.18 | CONTRACTS. Trustor will deliver to Beneficiary a copy of each Contract promptly after the execution of same by all parties thereto and subject to any approval of Beneficiary required by any of the Loan Documents. Within twenty (20) days after a request by Beneficiary, Trustor shall prepare and deliver to Beneficiary a complete listing of all Contracts, showing date, term, parties, subject matter, concessions, whether any defaults exist, and other information specified by Beneficiary, of or with respect to each of such Contracts, together with a copy thereof (if so requested by Beneficiary). Trustor represents and warrants that none of the Contracts encumber or create a lien on the Subject Property, but are personal with Trustor. As used herein, the term Contract shall mean any management agreement, leasing and brokerage agreement, and operating or service contract with respect to the Subject Property or Collateral. |
ARTICLE 6. DEFAULT PROVISIONS
6.1 | DEFAULT. For all purposes hereof, the term Default shall mean (a) the existence of any Event of Default as defined in the Loan Agreement; (b) at Beneficiarys option, the failure of Trustor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (c) the failure of Trustor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Trustor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Loan Agreement for such failure, or (d) if Trustor or any other Person shall make a Transfer without the prior written consent of Beneficiary (which consent may be withheld in Beneficiarys sole discretion (except for those Transfers reasonably approved by Beneficiary or otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.13). |
6.2 | RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies: |
(a) | With or without notice, to declare all Secured Obligations immediately due and payable; |
(b) | With or without notice, and without releasing Trustor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Trustor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Beneficiary or Trustee deem necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the |
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rights or powers of Beneficiary or Trustee under this Deed of Trust; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of either Beneficiary or Trustee, is or may be senior in priority to this Deed of Trust, the judgment of Beneficiary or Trustee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Deed of Trust; or (v) to employ counsel, accountants, contractors and other appropriate persons. |
(c) | To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Trustor hereunder, and Trustor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Trustor waives the defense of laches and any applicable statute of limitations; |
(d) | To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Trustor hereby consents to such appointment; |
(e) | To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Trustor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Beneficiary deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Trustees or Beneficiarys sole judgment, to protect or enhance the security hereof; |
(f) | To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Trustee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Trustee, without notice to or demand upon Trustor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Beneficiary in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Trustor nor any other person or entity other than Beneficiary shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Trustee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Trustee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee, Trustor or Beneficiary may purchase at the sale; |
(g) | To resort to and realize upon the security hereunder and any other security now or later held by Beneficiary concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Trustee and Beneficiary, or either of them, determine in their sole discretion. |
(h) | Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Beneficiary may credit bid (as determined by Beneficiary in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Beneficiary may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Beneficiary in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Beneficiary with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Beneficiary anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due |
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Loan No. 1002835
diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g. commissions, attorneys fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Beneficiary; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Beneficiary (in its sole and absolute discretion) deems appropriate. In regard to the above, Trustor acknowledges and agrees that: (w) Beneficiary is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Beneficiary any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Beneficiarys credit bid need not have any relation to any loan-to-value ratios specified in the Loan Documents or previously discussed between Trustor and Beneficiary; and (z) Beneficiarys credit bid may be (at Beneficiarys sole and absolute discretion) higher or lower than any appraised value of the Subject Property. |
6.3 | APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Trustee, and of this trust, including, without limitation, cost of evidence of title and attorneys fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Trustee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Beneficiary under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. |
6.4 | APPLICATION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. |
6.5 | NO CURE OR WAIVER. Neither Beneficiarys nor Trustees nor any receivers entry upon and taking possession of all or any part of the Subject Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Trustor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of or security interests created by this Deed of Trust. |
6.6 | PAYMENT OF COSTS, EXPENSES AND ATTORNEYS FEES. Trustor agrees to pay to Beneficiary immediately and without demand all costs and expenses incurred by Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation, court costs and attorneys fees, whether incurred in litigation or not) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein. In addition, Trustor shall pay to Trustee all Trustees fees hereunder and shall reimburse Trustee for all expenses incurred in the administration of this trust, including, without limitation, any attorneys fees. |
6.7 | POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems appropriate to protect Beneficiarys interest, (b) upon the issuance of a deed pursuant to the foreclosure of the lien of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Subject Property and Collateral, Leases and Payments |
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Loan No. 1002835
in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiarys security interests and rights in or to any of the Subject Property and Collateral, and (d) upon the occurrence of an event, act or omission which, with notice or passage of time or both, would constitute a Default, Beneficiary may perform any obligation of Trustor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Trustor or any other person or entity for any failure to act (whether such failure constitutes negligence) by Beneficiary under this Section. |
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 | ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Trustor which apply to this Deed of Trust and to the Subject Property and Collateral and such further rights and agreements are incorporated herein by this reference. |
7.2 | MERGER. No merger shall occur as a result of Beneficiarys acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. |
7.3 | OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as Trustor, the obligations of all such persons hereunder shall be joint and several. |
7.4 | RECOURSE TO SEPARATE PROPERTY. Any married person who executes this Deed of Trust as a Trustor agrees that any money judgment which Beneficiary or Trustee obtains pursuant to the terms of this Deed of Trust or any other obligation of that married person secured by this Deed of Trust may be collected by execution upon that persons separate property, and any community property of which that person is a manager. |
7.5 | WAIVER OF MARSHALLING RIGHTS. Trustor, for itself and for all parties claiming through or under Trustor, and for all parties who may acquire a lien on or interest in the Subject Property and Collateral, hereby waives all rights to have the Subject Property and Collateral and/or any other property, which is now or later may be security for any Secured Obligation (Other Property) marshalled upon any foreclosure of the lien of this Deed of Trust or on a foreclosure of any other lien or security interest against any security for any of the Secured Obligations. Beneficiary shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. |
7.6 | RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term Subject Property and Collateral means all and any part of the Subject Property and Collateral, respectively, and any interest in the Subject Property and Collateral, respectively. |
7.7 | SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of clause (d) of Section 6.1. |
7.8 | EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any |
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counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages. |
7.9 | CALIFORNIA LAW. This Deed of Trust shall be construed in accordance with the laws of the State of California, except to the extent that federal laws preempt the laws of the State of California. |
7.10 | INCORPORATION. Exhibits A and B, as attached, are incorporated into this Deed of Trust by this reference. |
7.11 | NOTICES. All notices, demands or other communications required or permitted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by certified United States mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective upon receipt at the address set forth below; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be: |
Trustor: |
KBSII Torrey Reserve West, LLC c/o KBS Capital Advisors LLC Property Matters: Brent Carroll, Senior Vice President, Asset Management 620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660 Tel: (949) 417-6566 Fax (949) 417-6518 Email: bcarroll@kbsrealty.com
| |
Trustee: |
American Securities Company, a California corporation Legal Department 633 Folsom, 7th floor San Francisco, CA 94107 MAC 0149-075 Attn: Real Estate Group Counsel (w/ reference to Loan # 1002835 and Beneficiary AU #02955)
| |
Beneficiary: |
WELLS FARGO BANK, NATIONAL ASSOCIATION Real Estate Group (AU #02955) Orange County 2030 Main Street, Suite 800 Irvine, CA 92614 Attn: Bryan Stevens, Senior Vice President Tel: (949) 251-4125 Fax: (949) 851-9728 Loan #: 1002835
| |
With a copy to: |
Wells Fargo Bank, National Association Disbursement and Operations Center 2120 East Park Place, Suite 100 El Segundo, CA 90245 Attention: Eva Lopez
|
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Loan No. 1002835
Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Trustor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Trustor naming Beneficiary, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the construction of the Improvements or the ability of Trustor to perform its obligations to Beneficiary under the Note or the Loan Agreement.
7.12 | LIMITATIONS ON RECOURSE. The limitations on personal liability of shareholders, partners and members of Borrower contained in Section 13.27 of the Loan Agreement shall apply to this Deed of Trust. |
[Remainder of Page Intentionally Blank]
Page 18
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year set forth above.
TRUSTOR
KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company | ||||||||||
By: |
KBSII REIT ACQUISITION X, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS REIT PROPERTIES II, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
KBS LIMITED PARTNERSHIP II, a Delaware limited partnership, its sole member | |||||||||
By: |
KBS REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation, general partner | |||||||||
By: |
/s/ Charles J. Schreiber, Jr. | |||||||||
Charles J. Schreiber, Jr. Chief Executive Officer |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
EXHIBIT A
Loan No.1002835
EXHIBIT A
DESCRIPTION OF SUBJECT PROPERTY
Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company, as Trustor, to AMERICAN SECURITIES COMPANY, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain other lenders, as Beneficiary, dated as of March 10, 2011.
All that certain real property situated in the County of San Diego, State of California, described as follows:
Parcel A:
Parcel 1 of Parcel Map No. 18158, 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 4, 1998 as File No. 1998-0789068 of Official Records.
Excepting therefrom the interest conveyed to the City of San Diego by document recorded June 7, 2001 as Instrument No. 2001-378047 of Official Records.
Parcel B:
An exclusive perpetual easement for ingress and egress over and us of the Sorrento Parking Area, a non-exclusive perpetual easement for purposes of ingress and egress to and from Sorrento Valley Road over the Sorrento Connection, together with non-exclusive, perpetual easement for purposes of ingress and egress and maintenance over these easements as required to exercise maintenance rights being designated and described as the Torrey Easements in that Easement Deed and Agreement recorded October 14, 2004 as Instrument No. 2004-0978859 of Official Records.
Assessors Parcel Number 310-130-14-00
EXHIBIT B
Loan No.1002835
EXHIBIT B
NON-BORROWER TRUSTOR RIDER
Exhibit B to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by KBSII TORREY RESERVE WEST, LLC, a Delaware limited liability company, as Trustor, to AMERICAN SECURITIES COMPANY, as Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and certain other lenders, as Beneficiary, dated as of March 10, 2011.
To the extent the Deed of Trust secures a promissory note and other loan documents (Loan Documents) made by a party or parties (Borrower) not identical to the party or parties constituting Trustor, the party or parties constituting Trustor agree as follows:
1. | CONDITIONS TO EXERCISE OF RIGHTS. Trustor hereby waives any right it may now or hereafter have to require Beneficiary, as a condition to the exercise of any remedy or other right against Trustor hereunder or under any other document executed by Trustor in connection with any Secured Obligation: (a) to proceed against any Borrower or other person, or against any other collateral assigned to Beneficiary by Trustor or any Borrower or other person; (b) to pursue any other right or remedy in Beneficiarys power; (c) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Beneficiary by any Borrower or other person (other than Trustor), or otherwise to comply with the UCC (as defined in the Deed of Trust) with respect to any such personal property collateral; or (d) to make or give (except as otherwise expressly provided in the Loan Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with any Secured Obligation or any collateral (other than the Subject Property) for any Secured Obligation. |
2. | DEFENSES. Trustor hereby waives any defense it may now or hereafter have that relates to: (a) any disability or other defense of any Borrower or other person; (b) the cessation, from any cause other than full performance, of the obligations of Borrower or any other person; (c) the application of the proceeds of any Secured Obligation, by any Borrower or other person, for purposes other than the purposes represented to Trustor by any Borrower or otherwise intended or understood by Trustor or any Borrower; (d) any act or omission by Beneficiary which directly or indirectly results in or contributes to the release of any Borrower or other person or any collateral for any Secured Obligation; (e) the unenforceability or invalidity of any collateral assignment (other than this Deed of Trust) or guaranty with respect to any Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any lien (other than the lien hereof) which secures any Secured Obligation; (f) any failure of Beneficiary to marshal assets in favor of Trustor or any other person; (g) any modification of any Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (h) any and all rights and defenses arising out of an election of remedies by Beneficiary, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Trustors rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a suretys or guarantors obligation in proportion to the principal obligation; (j) any failure of Beneficiary to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (k) the election by Beneficiary, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code; (l) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code; (m) any use of cash collateral under Section 363 of the United States Bankruptcy Code; or (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. Trustor further waives any and all rights and defenses that Trustor may have because Borrowers debt is secured by real property; this means, among other things, that: (1) Beneficiary may collect from Trustor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Beneficiary forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Beneficiary may collect from Trustor even if Beneficiary, by foreclosing on the real property collateral, has destroyed any right Trustor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Trustor may have because Borrowers debt is secured by real property. These rights and defenses being waived by Trustor include, but are not limited to, any rights or defenses based upon Section |
EXHIBIT B
Loan No. 1002835
580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Trustor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Trustor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. |
3. | SUBROGATION. Trustor hereby waives, until such time as all Secured Obligations are fully performed: (a) any right of subrogation against any Borrower that relates to any Secured Obligation; (b) any right to enforce any remedy Trustor may now or hereafter have against any Borrower that relates to any Secured Obligation; and (c) any right to participate in any collateral now or hereafter assigned to Beneficiary with respect to any Secured Obligation. |
4. | BORROWER INFORMATION. Trustor warrants and agrees: (a) that Beneficiary would not make the Loan but for this Deed of Trust; (b) that Trustor has not relied, and will not rely, on any representations or warranties by Beneficiary to Trustor with respect to the credit worthiness of any Borrower or the prospects of repayment of any Secured Obligation from sources other than the Subject Property; (c) that Trustor has established and/or will establish adequate means of obtaining from each Borrower on a continuing basis financial and other information pertaining to the business operations, if any, and financial condition of each Borrower; (d) that Trustor assumes full responsibility for keeping informed with respect to each Borrowers business operations, if any, and financial condition; (e) that Beneficiary shall have no duty to disclose or report to Trustor any information now or hereafter known to Beneficiary with respect to any Borrower, including, without limitation, any information relating to any of Borrowers business operations or financial condition; and (f) that Trustor is familiar with the terms and conditions of the Loan Documents and consents to all provisions thereof. |
5. | REINSTATEMENT OF LIEN. Beneficiarys rights hereunder shall be reinstated and revived, and the enforceability of this Deed of Trust shall continue, with respect to any amount at any time paid on account of any Secured Obligation which Beneficiary is thereafter required to restore or return in connection with a bankruptcy, insolvency, reorganization or similar proceeding with respect to any Borrower. |
6. | SUBORDINATION. Until all of the Secured Obligations have been fully paid and performed: (a) Trustor hereby agrees that all existing and future indebtedness and other obligations of each Borrower to Trustor (collectively, the Subordinated Debt) shall be and are hereby subordinated to all Secured Obligations which constitute obligations of the applicable Borrower, and the payment thereof is hereby deferred in right of payment to the prior payment and performance of all such Secured Obligations; (b) Trustor shall not collect or receive any cash or non-cash payments on any Subordinated Debt or transfer all or any portion of the Subordinated Debt; and (c) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, any Borrower with respect to any Subordinated Debt is received by Trustor, such payment or distribution shall be held in trust and immediately paid over to Beneficiary, is hereby assigned to Beneficiary as security for the Secured Obligations, and shall be held by Beneficiary in an interest bearing account until all Secured Obligations have been fully paid and performed. |
7. | LAWFULNESS AND REASONABLENESS. Trustor warrants that all of the waivers in this Deed of Trust are made with full knowledge of their significance, and of the fact that events giving rise to any defense or other benefit waived by Trustor may destroy or impair rights which Trustor would otherwise have against Beneficiary, Borrower and other persons, or against collateral. Trustor agrees that all such waivers are reasonable under the circumstances and further agrees that, if any such waiver is determined (by a court of competent jurisdiction) to be contrary to any law or public policy, the other waivers herein shall nonetheless remain in full force and effect. |
8. | ENFORCEABILITY. Trustor hereby acknowledges that: (a) the obligations undertaken by Trustor in this Deed of Trust are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Beneficiarys consideration for entering into this transaction, Beneficiary has specifically bargained for the waiver and relinquishment by Trustor of all such defenses, and (d) Trustor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Trustor does hereby represent and confirm to Beneficiary that Trustor is fully informed regarding, and that Trustor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Trustor, and (iv) the legal consequences to |
EXHIBIT B
Loan No. 1002835
Trustor of waiving such defenses. Trustor acknowledges that Trustor makes this Deed of Trust with the intent that this Deed of Trust and all of the informed waivers herein shall each and all be fully enforceable by Beneficiary, and that Beneficiary is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. |
9. | WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY THEN APPLICABLE LAW, EACH PARTY TO THIS DEED OF TRUST, AND BY ITS ACCEPTANCE HEREOF, BENEFICIARY, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND BENEFICIARY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS DEED OF TRUST AND BENEFICIARY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND BENEFICIARY TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. |
10. | INTEGRATION; INTERPRETATION. This Deed of Trust and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. This Deed of Trust and the other Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Beneficiary in writing. |
STATE OF CALIFORNIA
COUNTY OF SS.
On before me, , personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature
My commission expires .
Exhibit 21.1
Direct and Indirect Subsidiaries of KBS Real Estate Investment Trust II, Inc.
CA Capital Management Services, LLC | KBSII REIT Acquisition I, LLC | |
KBS Debt Holdings II, LLC | KBSII REIT Acquisition II, LLC | |
KBS Debt Holdings II X, LLC | KBSII REIT Acquisition III, LLC | |
KBS Limited Partnership II | KBSII REIT Acquisition IV, LLC | |
KBS REIT Holdings II LLC | KBSII REIT Acquisition V, LLC | |
KBS REIT Properties II, LLC | KBSII REIT Acquisition VI, LLC | |
KBS REIT II Finance LLC | KBSII REIT Acquisition VII, LLC | |
KBS TRS Services, LLC | KBSII REIT Acquisition VIII, LLC | |
KBS II Securities LLC | KBSII REIT Acquisition IX, LLC | |
KBSII 100-200 Campus Drive, LLC | KBSII REIT Acquisition X, LLC | |
KBSII 300-600 Campus Drive, LLC | KBSII REIT Acquisition XI, LLC | |
KBSII 300 North LaSalle, LLC | KBSII REIT Acquisition XII, LLC | |
KBSII 350 Plumeria, LLC | KBSII REIT Acquisition XIII, LLC | |
KBSII 445 South Figueroa, LLC | KBSII REIT Acquisition XIV, LLC | |
KBSII 601 Tower, LLC | KBSII REIT Acquisition XV, LLC | |
KBSII 2500 Regent Boulevard, LLC | KBSII REIT Acquisition XVI, LLC | |
KBSII Crescent VIII, LLC | KBSII REIT Acquisition XVII, LLC | |
KBSII Emerald View, LLC | KBSII REIT Acquisition XVIII, LLC | |
KBSII Gateway Corporate Center, LLC | KBSII REIT Acquisition XIX, LLC | |
KBSII Granite Tower, LLC | KBSII REIT Acquisition XX, LLC | |
KBSII Hartman Business Center, LLC | KBSII REIT Acquisition XXI, LLC | |
KBSII Horizon Tech Center, LLC | KBSII REIT Acquisition XXII, LLC | |
KBSII Mountain View, LLC | KBSII REIT Acquisition XXIII, LLC | |
KBSII National City Tower, LLC | KBSII Torrey Reserve West, LLC | |
KBSII One Main Place, LLC | KBSII I-81 Industrial Portfolio Trust | |
KBSII Pierre LaClede Center, LLC | KBSII I-81 Industrial Portfolio, LLC | |
KBSII Plano Business Park, LLC | KBSII Willow Oaks, LLC | |
KBSII CityPlace Tower, LLC | KBSII Two Westlake Park, LLC |
Exhibit 31.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles J. Schreiber Jr., certify that:
1. | I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust II, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 11, 2011
/S/ CHARLES J. SCHREIBER, JR. |
Charles J. Schreiber, Jr. |
Chairman of the Board, Chief Executive Officer and Director |
Exhibit 31.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, David E. Snyder, certify that:
1. | I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust II, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 11, 2011
/S/ DAVID E. SNYDER |
David E. Snyder |
Chief Financial Officer |
Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust II, Inc. (the Registrant) for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Charles J. Schreiber Jr., Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: March 11, 2011
/S/ CHARLES J. SCHREIBER, JR. |
Charles J. Schreiber, Jr. |
Chairman of the Board, Chief Executive Officer and Director |
Exhibit 32.2
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust II, Inc. (the Registrant) for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, David E. Snyder, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: March 11, 2011
/S/ DAVID E. SNYDER |
David E. Snyder |
Chief Financial Officer |
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