-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SRPsyhJBIoP/5TTuVZivVyN44G8bmeb9mVtrE1mT2tr/jRLTP+i01NcrOKixwlI7 3kudEq8cNdTAugDap5ZuzA== 0000910079-01-500008.txt : 20010815 0000910079-01-500008.hdr.sgml : 20010815 ACCESSION NUMBER: 0000910079-01-500008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEDFORD PROPERTY INVESTORS INC/MD CENTRAL INDEX KEY: 0000910079 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 680306514 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12222 FILM NUMBER: 1711902 BUSINESS ADDRESS: STREET 1: 270 LAFAYETTE CIRCLE STREET 2: P. O. BOX 1058 CITY: LAFAYETTE STATE: CA ZIP: 94549 BUSINESS PHONE: 510-283-89 10-Q 1 q10q201.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2001. 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 1-12222 BEDFORD PROPERTY INVESTORS, INC. (Exact name of Registrant as specified in its charter) MARYLAND 68-0306514 (state or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 270 Lafayette Circle, Lafayette, CA 94549 (Address of principal executive offices) (Zip Code) (925) 283-8910 (Registrant's telephone number, including area code) Indicate by check mark whether 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 Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of August 10, 2001 - --------------------------------------------------------------------------- Common Stock, $0.02 par value 17,016,016 BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. FINANCIAL STATEMENTS Statement 1 Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 (Unaudited) 2 Consolidated Statements of Income for the three and six months ended June 30, 2001 and 2000 (Unaudited) 3 Consolidated Statements of Stockholders' Equity and Comprehensive Income for the six months ended June 30, 2001 (Unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000 (Unaudited) 5 Notes to Consolidated Financial Statements 6-15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 16-20 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK 21-22 PART II. OTHER INFORMATION ITEMS 1 - 6 23-24 SIGNATURES 25 BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATEMENT The consolidated financial statements included herein have been prepared by Bedford Property Investors, Inc. (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of its financial condition and results of operations for the interim periods presented. Such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the notes to consolidated financial statements appearing in the annual report to stockholders for the year ended December 31, 2000. When used in the discussion in this Form 10-Q, the words "believes," "expects," "intends," "anticipates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those discussed, including, but not limited to, those set forth in the section entitled "Potential Factors Affecting Future Operating Results," below. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2001 AND DECEMBER 31, 2000 (Unaudited) (in thousands, except share and per share amounts) June 30, 2001 December 31, 2000 - ----------------------------------------------------------------------------- Assets: Real estate investments: Industrial buildings $302,495 $305,857 Office buildings 310,092 310,882 Operating properties held for sale 16,318 5,226 Properties under development 18,797 13,702 Land held for development 11,636 11,721 - ----------------------------------------------------------------------------- 659,338 647,388 Less accumulated depreciation 42,968 35,944 - ----------------------------------------------------------------------------- 616,370 611,444 Cash and cash equivalents 505 3,160 Other assets 23,108 19,562 - ----------------------------------------------------------------------------- $639,983 $634,166 ============================================================================= Liabilities and Stockholders' Equity: Bank loan payable $106,560 $ 77,320 Mortgage loans payable 222,298 224,205 Accounts payable and accrued expenses 10,935 15,665 Dividend and distributions payable 7,691 8,005 Other liabilities 6,573 8,227 - ----------------------------------------------------------------------------- Total liabilities 354,057 333,422 - ----------------------------------------------------------------------------- Minority interest in consolidated partnership 1,229 1,229 - ----------------------------------------------------------------------------- Stockholders' equity: Common stock, par value $0.02 per share; authorized 50,000,000 shares; issued and outstanding 17,013,172 shares in 2001 and 17,709,738 shares in 2000 340 354 Additional paid-in capital 301,561 316,084 Accumulated dividends in excess of net income (17,217) (16,923) Accumulated other comprehensive income 13 - - ------------------------------------------------------------------------------ Total stockholders' equity 284,697 299,515 - ------------------------------------------------------------------------------ $639,983 $634,166 ==============================================================================
See accompanying notes to consolidated financial statements. BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited) (in thousands, except share and per share amounts) Three Months Six Months 2001 2000 2001 2000 - --------------------------------------------------------------------------- Property Operations: Rental income $ 25,033 $ 24,957 $ 49,423 $ 49,349 Rental expenses: Operating expenses 4,248 4,416 8,013 8,343 Real estate taxes 2,296 2,453 4,591 4,834 Depreciation and amortization 3,932 3,380 7,764 6,523 - --------------------------------------------------------------------------- Income from property operations 14,557 14,708 29,055 29,649 General and administrative expenses (1,005) (931) (2,023) (1,826) Interest income 47 73 103 107 Interest expense (5,785) (6,300) (11,687) (12,350) - ---------------------------------------------------------------------------- Income before (loss) gain on sales and minority interest 7,814 7,550 15,448 15,580 (Loss) gain on sales of real estate investments - (6) - 15,228 Minority interest (35) (33) (70) (66) - ---------------------------------------------------------------------------- Net income $ 7,779 $ 7,511 $ 15,378 $ 30,742 ============================================================================ Earnings per share - basic $ 0.46 $ 0.41 $ 0.90 $ 1.64 ============================================================================ Weighted average number of shares - basic 16,877,182 18,256,565 17,139,474 18,771,601 ============================================================================ Earnings per share - diluted $ 0.45 $ 0.41 $ 0.88 $ 1.62 ============================================================================ Weighted average number of shares - diluted 17,220,131 18,489,403 17,474,559 18,993,949 ============================================================================
See accompanying notes to consolidated financial statements. BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2001 (Unaudited) (in thousands, except per share amounts) Accumulated Accumulated Total Additional dividends other stock- Common paid-in in excess of comprehensive holders' stock capital net income income equity - ------------------------------------------------------------------------------------- Balance, December 31, 2000 $ 354 $316,084 ($16,923) $ - $299,515 Issuance of common stock 3 599 - - 602 Repurchase and retirement of common stock (17) (15,971) - - (15,988) Amortization of deferred compensation - 849 - - 849 Dividends to common stockholders ($0.90 per share) - - (15,672) - (15,672) - ------------------------------------------------------------------------------------- Subtotal 340 301,561 (32,595) - 269,306 - ------------------------------------------------------------------------------------- Net income - - 15,378 - 15,378 Other comprehensive income - - - 13 13 - ------------------------------------------------------------------------------------- Comprehensive income - - 15,378 13 15,391 - ------------------------------------------------------------------------------------- Balance, June 30, 2001 $ 340 $301,561 ($ 17,217) $ 13 $284,697 =====================================================================================
See accompanying notes to consolidated financial statements. BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited) (in thousands) 2001 2000 - ------------------------------------------------------------------------------------ Operating Activities: Net income $ 15,378 $ 30,742 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 70 66 Depreciation and amortization 9,059 7,440 Stock compensation amortization 849 880 Allowance for doubtful accounts 213 - Gain on sales of real estate investments, net - (15,228) Change in other assets (1,913) (3,668) Change in accounts payable and accrued expenses (6,753) (1,703) Change in other liabilities (1,654) (1,339) - ------------------------------------------------------------------------------------ Net cash provided by operating activities 15,249 17,190 - ------------------------------------------------------------------------------------ Investing Activities: Investments in real estate (11,867) (14,535) Proceeds from sales of real estate investments, net - 38,504 - ------------------------------------------------------------------------------------ Net cash (used) provided by investing activities (11,867) 23,969 - ------------------------------------------------------------------------------------ Financing Activities: Proceeds from bank loan payable, net of loan costs 29,194 33,269 Repayments of bank loan payable (1,924) (34,228) Refund (payment) of loan costs 42 (638) Repayments of mortgage loans payable (1,907) (1,672) Issuance of common stock 602 91 Payment of dividends and distributions (16,056) (16,123) Repurchase and retirement of common stock (15,988) (20,885) - ------------------------------------------------------------------------------------ Net cash (used) by financing activities (6,037) (40,186) - ------------------------------------------------------------------------------------ Net (decrease) increase in cash and cash equivalents (2,655) 973 Cash and cash equivalents at beginning of period 3,160 1,584 - ------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 505 $ 2,557 ==================================================================================== Supplemental disclosure of cash flow information: Cash paid during the year for interest, net of amounts capitalized of $629 in 2001 and $1,330 in 2000 $ 10,656 $11,542 ====================================================================================
See accompanying notes to consolidated financial statements. BEDFORD PROPERTY INVESTORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) JUNE 30, 2001 Note 1. The Company and Basis of Presentation The Company Bedford Property Investors, Inc. and subsidiaries (the Company) is a Maryland real estate investment trust with investments primarily in industrial and suburban office properties concentrated in the western United States. The Company's common stock trades under the symbol "BED" on both the New York Stock Exchange and the Pacific Exchange. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all information and footnotes necessary for a presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. The unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods presented in compliance with the instructions to Form 10-Q. All such adjustments are of a normal, recurring nature. Per Share Data Per share data are based on the weighted average number of common shares outstanding during the year. Stock options issued under the Company's stock option plans, non-vested restricted stock, and the limited partnership units of Bedford Realty Partners, L.P. are included in the calculation of diluted per share data if, upon exercise or vestiture, they would have a dilutive effect. Derivative Instruments and Hedging Activities Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," as amended by FASB Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," and Statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." SFAS 133, as amended, establishes accounting and reporting standards for derivative financial instruments. Specifically, SFAS 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. The adoption of SFAS 133 did not have a material impact on the Company's financial statements. See Note 4. The Company requires that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Instruments that meet the hedging criteria are formally designated as hedges at the inception of the derivative contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked- to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market each period. Reclassifications Certain prior year accounts have been reclassified to conform to the current year presentation. Note 2. Real Estate Investments As of June 30, 2001, the Company's real estate investments were diversified by property type as follows (dollars in thousands): Number of Percent of Properties Cost Total Cost ----------------------------------------- Industrial buildings 58 $302,495 46% Office buildings 27 310,092 47% Operating properties held for sale 5 16,318 2% Properties under development 5 18,797 3% Land held for development 10 11,636 2% ----------------------------------------- Total 105 $659,338 100% =========================================
The following table sets forth the Company's real estate investments as of June 30, 2001 (in thousands): Less Development Accumulated Land Building In-Progress Depreciation Total ------------------------------------------------------------ Industrial buildings Northern California $ 43,523 $107,395 $ - $ 13,294 $137,624 Arizona 20,218 56,715 - 5,184 71,749 Southern California 18,309 42,925 - 4,882 56,352 Greater Seattle Area 3,408 10,002 - 869 12,541 ------------------------------------------------------------ Total industrial buildings 85,458 217,037 - 24,229 278,266 ------------------------------------------------------------ Office buildings Northern California 5,165 17,253 - 1,379 21,039 Arizona 11,954 27,915 - 2,058 37,811 Southern California 9,361 21,950 - 2,093 29,218 Colorado 10,658 75,321 - 3,928 82,051 Greater Seattle Area 16,811 100,766 - 7,087 110,490 Nevada 2,102 10,836 - 1,061 11,877 ------------------------------------------------------------ Total office buildings 56,051 254,041 - 17,606 292,486 ------------------------------------------------------------ Operating properties held for sale Northern California 1,831 9,257 - 733 10,355 Colorado 1,911 3,319 - 400 4,830 ------------------------------------------------------------ Total operating properties held for sale 3,742 12,576 - 1,133 15,185 ------------------------------------------------------------ Properties under development Northern California 462 - 1,898 - 2,360 Southern California 889 - 517 - 1,406 Colorado 3,562 - 11,469 - 15,031 ------------------------------------------------------------ Total properties under development 4,913 - 13,884 - 18,797 ------------------------------------------------------------ Land held for development Northern California 3,822 - 54 - 3,876 Arizona 645 - - - 645 Southern California 2,998 - 126 - 3,124 Colorado 3,684 - 307 - 3,991 ------------------------------------------------------------ Total land held for development 11,149 - 487 - 11,636 ------------------------------------------------------------ Total as of June 30, 2001 $161,313 $483,654 $14,371 $ 42,968 $616,370 ============================================================ Total as of December 31, 2000 $160,997 $476,999 $ 9,392 $ 35,944 $611,444 ============================================================
Company personnel directly manage all but three of the Company's properties from regional offices in Lafayette, California; Tustin, California; Phoenix, Arizona; Denver, Colorado; and Seattle, Washington. The Company has retained outside managers to assist in some of the management functions for these three properties: U.S. Bank Centre in Reno, NV and Bryant Street Quad and Bryant Street Annex in Denver, CO. All financial record-keeping is centralized at the Company's corporate office in Lafayette, California. Income from property operations for operating properties held for sale as of June 30, 2001 was $957,000 and $822,000 for the six months ended June 30, 2001 and 2000, respectively. Note 3. Debt Bank Loan Payable In May 2001, the Company renewed its revolving credit facility with a bank group led by Bank of America. The facility, which matures on June 1, 2004, consists of a $150 million secured line with an accordion feature to expand the facility to $175 million, if needed. Interest on the facility is at a floating rate equal to either the lender's published "reference rate" or LIBOR plus a margin ranging from 1.35% to 1.55% depending on the Company's leverage level. As of June 30, 2001, the facility had an outstanding balance of $106,560,000 and is secured by 32 properties and interest in such properties, which collectively accounted for approximately 34% of the Company's annualized base rent and approximately 34% of the Company's total real estate assets as of June 30, 2001. The credit facility contains various restrictive covenants including, among other things, a covenant limiting quarterly dividends to 95% of average Funds From Operations. The Company was in compliance with the covenants and requirements of its revolving credit facility during the quarter ended June 30, 2001. The daily weighted average amount owed to the bank was $91,603,000 and $139,833,000 for the six months ended June 30, 2001 and 2000, respectively. The weighted average annual interest rates in each of these periods was 6.73% and 7.55%, respectively. The effective interest rate at June 30, 2001 was 5.65%. Mortgage Loans Payable Mortgage loans payable at June 30, 2001 consist of the following (in thousands): 7.50% note due January 1, 2002 $ 14,183 7.02% note due March 15, 2003 18,736 Floating rate note due January 1, 2005, current rate of 7.40%(1) 4,523 7.17% note due June 1, 2005 26,505 Floating rate note due August 1, 2005, current rate of 5.55%(2) 7,386 Floating rate note due August 1, 2005, current rate of 5.55%(2) 23,136 8.90% note due July 31, 2006 8,242 6.91% note due July 31, 2006 19,727 7.95% note due December 1, 2006 21,703 7.17% note due June 1, 2007 36,050 7.17% note due June 1, 2009 42,107 ------- $222,298 =======
(1) Current rate based on 3 month LIBOR plus 2.50% (adjusted quarterly). (2) Current rate based on fixed rate on interest swap agreements. See Note 4. The mortgage loans are collaterized by 49 properties and interest in such properties, which collectively accounted for approximately 59% of the Company's annualized base rents and approximately 51% of the Company's total real estate assets as of June 30, 2001. The Company was in compliance with the covenants and requirements of its various mortgage financings during the quarter ended June 30, 2001. The following table presents scheduled principal payments on mortgage loans as of June 30, 2001 (in thousands): Twelve month period ending June 30, 2002 $ 18,056 Twelve month period ending June 30, 2003 22,104 Twelve month period ending June 30, 2004 4,018 Twelve month period ending June 30, 2005 32,907 Twelve month period ending June 30, 2006 30,930 Thereafter 114,283 ------- $222,298 ======= Note 4. Derivative Instruments and Hedging Activities In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company limits these risks by following established risk management policies and procedures including the use of derivatives. For interest rate exposures, interest rate swaps are used primarily to hedge the cash flow risk of variable rate borrowing obligations. The Company does not use derivatives for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with major financial institutions. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from those instruments, nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives. Interest rate swaps that convert variable payments to fixed payments are cash flow hedges. Hedging relationships that are fully effective have no effect on net income or FFO. The unrealized gains and losses in the fair value of these interest rate swaps are reported on the balance sheet, as a component of other assets, with a corresponding adjustment to accumulated other comprehensive income. On June 18, 2001, the Company entered into interest swap agreements with United California Bank. The swap agreements allow the Company to hedge its exposure to variable interest rates on two mortgages with remaining principal balances totaling $30,522,000 by effectively paying a fixed rate of interest over the term of the swap agreement. Interest rate pay differentials that arise under these swap agreements are recognized in interest expense over the term of the contracts. These interest rate swap agreements were considered to be fully effective in hedging the variable rate risk associated with the two mortgages. The following summarizes the notional value, carrying value and fair value of the Company's interest swap contracts. The notional value at June 30, 2001 provides an indication of the extent of the Company's involvement in these contracts at that time but does not represent exposure to credit, interest rate or market risks. Approximate Notional Fixed Contract Cumulative Asset at Amount Rate Maturity Cash Paid, Net June 30, 2001 (1) ---------------------------------------------------------------------- $23,136,410 5.55% June 30, 2002 $630 $ 9,718 7,386,063 5.55% June 30, 2002 201 3,102 -------------------------------------------------------------------- $30,522,473 $831 $12,820 ====================================================================
To determine the fair values of derivative instruments in accordance with SFAS 133, the Company uses the discounted cash flow method, which requires the use of assumptions about market conditions and risks existing at the balance sheet date. Considerable judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair value is a general approximation of value, and such value may or may not actually be realized. At June 30, 2001, $13,000 is included in other assets and accumulated other comprehensive income, a stockholders' equity account, reflecting the estimated market value of the swap contracts at that date. (1) Represents the approximate amount which the Company would have received as of June 30, 2001 if the swap contracts were terminated. Note 5. Segment Disclosure The Company has five reportable segments organized by the region in which they operate: Northern California (Northern California and Nevada), Southwest (Arizona and greater Austin, Texas), Southern California, Northwest (greater Portland, Oregon and greater Seattle, Washington) and Colorado. During the year ended December 31, 2000, the Midwest portfolio (greater Kansas City, Kansas/Missouri, and greater Dallas, Texas) was sold; therefore, the Midwest segment is not reported for the six months ended June 30, 2001. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based upon income from real estate from the combined properties in each segment. For the six months ended June 30, 2001 (in thousands, except percentages) ---------------------------------------------------------------------------------- Northern Southern Corporate California Southwest California Northwest Colorado & Other Consolidated ---------------------------------------------------------------------------------- Rental income $ 17,438 $ 8,396 $ 7,079 $ 9,251 $ 7,259 $ - $ 49,423 Operating expenses and real estate taxes 3,666 2,337 1,349 2,634 2,618 - 12,604 Depreciation and amortization 2,422 1,494 961 1,800 1,087 - 7,764 ---------------------------------------------------------------------------------- Income from property operations 11,350 4,565 4,769 4,817 3,554 - 29,055 Percent of income from property operations 39% 16% 16% 17% 12% 0% 100% General and administrative expenses - - - - - (2,023) (2,023) Interest income(1) 13 - - 6 - 84 103 Interest expense - - - - - (11,687) (11,687) ------------------------------------------------------------------------------------ Income (loss) before minority interest 11,363 4,565 4,769 4,823 3,554 (13,626) 15,448 Minority interest - - - - - (70) (70) ------------------------------------------------------------------------------------ Net income (loss) $ 11,363 $ 4,565 $ 4,769 $ 4,823 $ 3,554 $(13,696) $ 15,378 ==================================================================================== Real estate investments $203,597 $117,446 $ 97,075 $130,988 $110,232 $ - $659,338 ==================================================================================== Additions of real estate investments $ 2,856 $ 441 $ 874 $ 139 $ 7,640 $ - $ 11,950 ==================================================================================== Total assets $216,782 $110,319 $108,177 $116,481 $ 81,539 $ 6,685 $639,983 ====================================================================================
(1) The interest income in the Northern California and Northwest segments represents interest earned from tenant notes receivable. For the six months ended June 30, 2000 (in thousands, except percentages) ------------------------------------------------------------------------------------- Northern Southern Corporate California Southwest California Northwest Midwest Colorado & Other Consolidated ------------------------------------------------------------------------------------- Rental income $ 16,717 $ 9,541 $ 6,770 $ 9,468 $ 2,500 $ 4,353 $ - $ 49,349 Operating expenses and real estate taxes 3,657 2,639 1,316 3,028 823 1,714 - 13,177 Depreciation and amortization 2,360 1,158 953 1,560 (86) 578 - 6,523 ------------------------------------------------------------------------------------- Income from property operations 10,700 5,744 4,501 4,880 1,763 2,061 - 29,649 Percent of income from property operations 36% 19% 15% 17% 6% 7% 0% 100% General and administrative expenses - - - - - - (1,826) (1,826) Interest income(1) 14 1 - 1 - - 91 107 Interest expense - - - - - - (12,350) (12,350) ------------------------------------------------------------------------------------ Income before gain on sales of real estate investments and minority interest 10,714 5,745 4,501 4,881 1,763 2,061 (14,085) 15,580 Gain (loss) on sales of real estate investments 14,219 - (6) 1,015 - - - 15,228 Minority interest - - - - - - (66) (66) ------------------------------------------------------------------------------------- Net income $ 24,933 $ 5,745 $ 4,495 $ 5,896 $ 1,763 $ 2,061 $(14,151) $ 30,742 ===================================================================================== Real estate investments $198,787 $137,407 $ 92,450 $143,042 $ 30,522 $70,168 $ - $672,376 ===================================================================================== Additions (dispositions) of real estate investments $ (6,471) $ 3,896 $ (2,008) $ (7,339) $ 229 $ 4,336 $ - $ (7,357) ===================================================================================== Total assets $208,371 $124,861 $101,616 $126,642 $ 30,654 $64,265 $ 4,756 $661,165 =====================================================================================
(1) The interest income in the Northern California, Southwest and Northwest segments represents interest earned from tenant notes receivable. Note 6. Earnings per Share Following is a reconciliation of earnings per share: (in thousands, except share and per share amounts) Three Months Ended June 30, Six Months Ended June 30, ----------------------------------------------------- 2001 2000 2001 2000 ----------------------------------------------------- Basic: Net income $ 7,779 $ 7,511 $ 15,378 $ 30,742 ================================================== Weighted average number of shares - basic 16,877,182 18,256,565 17,139,474 18,771,601 ================================================== Earnings per share: Earnings per share - basic $ 0.46 $ 0.41 $ 0.90 $ 1.64 ================================================== Diluted: Net income $ 7,779 $ 7,511 $ 15,378 $ 30,742 Add: minority interest 35 33 70 66 -------------------------------------------------- Net income for diluted earnings per share $ 7,814 $ 7,544 $ 15,448 $ 30,808 ================================================== Weighted average number of shares - basic 16,877,182 18,256,565 17,139,474 18,771,601 Weighted average shares of dilutive stock options using average period stock price under the treasury stock method 45,036 40,090 46,687 48,405 Weighted average shares issuable upon the conversion of operating partnership units 77,992 77,992 77,992 77,992 Weighted average shares of non- vested restricted stock using average period stock price under the treasury stock method 219,921 114,756 210,406 95,951 ------------------------------------------------- Weighted average number of shares - diluted 17,220,131 18,489,403 17,474,559 18,993,949 ================================================= Earnings per share - diluted $ 0.45 $ 0.41 $ 0.88 $ 1.62 =================================================
Note 7. Related Party Transactions The Company's activities relating to the development and acquisition of new properties and debt and equity financings have been performed by Bedford Acquisitions, Inc. (BAI) pursuant to a written contract dated January 1, 1995, as amended. The contract provides that BAI is obligated to provide services to the Company with respect to the Company's acquisition and financing activities, and that BAI is responsible for the payment of its expenses incurred in connection therewith. The contract provides that BAI is to be paid a fee in an amount equal to the lesser of (i) 1 1/2% of the gross amount of the aggregate purchase price of the property for acquisitions and dispositions, up to 1 1/2% of any loans arranged by BAI, plus 7% of development project costs, or (ii) an amount equal to (a) the aggregate amount of approved expenses funded by BAI through the time of such acquisition, disposition, loan or development minus (b) the aggregate amount of fees previously paid to BAI pursuant to such arrangement. In no event will the aggregate amount of fees paid to BAI exceed the aggregate amount of costs funded by BAI. The agreement with BAI has a term of one year and expires on December 31, 2001. The agreement is to be automatically extended for an additional term of one year unless either party gives notice of its intent to terminate the agreement by October 31, 2001. For the six months ended June 30, 2001 and 2000, the Company paid BAI $1,817,000 and $1,770,000, respectively, for activities performed pursuant to the foregoing arrangements. The Company believes that the fees charged under the foregoing arrangements (i) have been and continue to be comparable to those charged by other sponsors of real estate investment entities or other third party service providers and (ii) have been and continue to be charged only for completed transactions and development services provided. Such fees are properly accounted for as costs of acquired assets or originated debt to which they relate, or as selling costs with respect to dispositions. Note 8. Commitments and Contingencies As of June 30, 2001, the Company has contractual construction commitments relating to its properties under development of approximately $25 million of which $22 million has been paid. From time to time, the Company is subject to legal claims in the ordinary course of business. The Company currently is not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, prospects, financial condition or operating results. Note 9. Subsequent Event In August 2001, the Company closed on $18 million of mortgage financing from Washington Mutual Bank. The loan has a 5-year term and bears interest at a floating rate of a trailing 1-year treasury rate plus 2.6%. Proceeds from the loan were used to pay down a portion of the outstanding balance of the $150 million line of credit. . ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations The Company's operations consist of developing, owning and operating industrial and suburban office properties located primarily in the western United States. Variances in revenues, expenses, net income and cash flows for the six months ended June 30, 2001 when compared with the same period in 2000 were due primarily to the acquisition, development, and sale of operating properties as follows: Activities from Activities from January 1, 2000 to July 1, 2000 to June 30, 2000 June 30, 2001 Number of Number of Operating Square Operating Square Properties Feet Properties Feet ---------------------------------------------------- Acquisitions Office - - 1 165,191 ---------------------------------------------------- - - 1 165,191 ==================================================== Development Industrial 2 72,362 5 308,649 Office 2 93,692 4 207,145 ---------------------------------------------------- 4 166,054 9 515,794 ==================================================== Sales Industrial 4 325,329 11 591,772 Office - - 5 314,204 ---------------------------------------------------- 4 325,329 16 905,976 ====================================================
Three Months Ended June 30, 2001 Compared with Three Months Ended June 30, 2000 Income from Property Operations Income from property operations (defined as rental income less rental expenses) decreased $151,000 or 1% in 2001 compared with 2000. This is due to an increase in rental expenses (which include operating expenses, real estate taxes, and depreciation and amortization) of $227,000, offset in part by an increase in rental income of $76,000. The increases in rental income and rental expenses are primarily attributable to development activities during 2000 and 2001, as well as the acquisition and sales of properties during the year 2000. Development and acquisitions activities increased rental income and rental expenses in 2001 by $1,839,000 and $1,196,000, respectively, as compared to 2000. These increases were offset by the sale of fifteen industrial properties and five office properties in 2000 which resulted in a reduction in rental income and rental expenses of $3,073,000 and $969,000, respectively as compared to 2000. The remaining increase in rental income of $1,310,000 is due to an increase in rental rates and expense recovery income. Expenses Interest expense, which includes amortization of loan fees, decreased $515,000 or 8% in 2001 compared with 2000. The decrease is attributable to lower interest rates and reduced principal balances on the Company's variable rate debt. The amortization of loan fees was $616,000 and $402,000 in 2001 and 2000, respectively. General and administrative expense increased $74,000 or 8% in 2001 compared with 2000, primarily as a result of increased compensation costs. Gain (loss) on sales In the second quarter 2000, the Company sold an industrial property in San Diego, California for a net sale price of $2,165,000, which resulted in a loss of approximately $6,000. Dividends Common stock dividends to stockholders and distributions to Operating Partnership (OP) Unitholders declared for the second quarter of 2001 were $0.45 per share or OP Unit. Consistent with the Company's policy, dividends and distributions were paid in the quarter after the quarter in which they were declared. Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000 Income from Property Operations Income from property operations (defined as rental income less rental expenses) decreased $594,000 or 2% in 2001 compared with 2000. This is due to an increase in rental expenses (which include operating expenses, real estate taxes, and depreciation and amortization) of $668,000, offset in part by an increase in rental income of $74,000. The increases in rental income and rental expenses are primarily attributable to development activities in 2000 and 2001, as well as the acquisition and sales of properties during the year 2000. Development and acquisitions activities increased rental income and rental expenses in 2001 by $4,054,000 and $2,588,000, respectively, as compared to 2000. These increases were offset by the sale of fifteen industrial properties and five office properties in 2000 which resulted in a reduction in rental income and rental expenses of $6,520,000 and $2,020,000, respectively as compared to 2000. The remaining increase in rental income of $2,540,000 is due to an increase in rental rates and expense recovery income. The balance of the increase in rental expenses of $100,000 is mainly due to increased depreciation expense on capital improvements. Expenses Interest expense, which includes amortization of loan fees, decreased $663,000 or 5% in 2001 compared with 2000. The decrease is attributable to lower interest rates on the Company's variable rate debt. The amortization of loan fees was $1,131,000 and $778,000 in the first six months of 2001 and 2000, respectively. General and administrative expense increased $197,000 or 11% in 2001 compared with 2000, primarily as a result of increased compensation costs. Gain (loss) on sales In the first quarter 2000, the Company sold an industrial property in San Jose, California and two industrial properties in Beaverton, Oregon for net sale prices totaling $36,339,000, which resulted in an aggregate gain of approximately $15,234,000. In the second quarter 2000, the Company sold an industrial property in San Diego, California for a net sale price of $2,165,000, which resulted in a loss of approximately $6,000. Dividends Common stock dividends to stockholders and distributions to Operating Partnership (OP) Unitholders declared for the first and second quarters of 2001 were $0.45 per share or OP Unit. Consistent with the Company's policy, dividends and distributions were paid in the quarter after the quarter in which they were declared. Liquidity and Capital Resources In May 2001, the Company renewed its revolving credit facility with a bank group led by Bank of America. The facility, which matures on June 1, 2004, consists of a $150 million secured line with an accordion feature to expand the facility to $175 million, if needed. Interest on the facility is at a floating rate equal to either the lender's published "reference rate" or LIBOR plus a margin ranging from 1.35% to 1.55% depending on the Company's leverage level. As of June 30, 2001, the facility had an outstanding balance of $106,560,000 and an effective interest rate of 5.65%. The Company was in compliance with the covenants and requirements of its various debt financings during the quarter ended June 30, 2001. The Company anticipates that the cash flow generated by its real estate investments and funds available under the above credit facility will be sufficient to meet its short-term liquidity requirements. During the six months ended June 30, 2001, the Company's operating activities provided cash flow of $15,249,000. Investing activities utilized cash of $11,867,000 for real estate investments and development. Financing activities utilized net cash flow of $6,037,000 consisting of the net proceeds from bank borrowings and mortgage loans of $29,235,000 and net proceeds from the issuance of common stock of $602,000, offset by repayment of bank borrowings and mortgage loans of $3,830,000, payment of dividends and distributions of $16,056,000, and the repurchase of 844,118 shares of common stock for $15,988,000. The Company expects to fund the cost of acquisitions, capital expenditures, costs associated with lease renewals and reletting of space, repayment of indebtedness, share repurchases, and development of properties from (i) cash flow from operations, (ii) borrowings under the credit facility and, if available, other indebtedness (which may include indebtedness assumed in acquisitions), and (iii) the sale of certain real estate investments. The ability to obtain mortgage loans on income producing property is dependent upon the ability to attract and retain tenants and the economics of the various markets in which the properties are located, as well as the willingness of mortgage-lending institutions to make loans secured by real property. The ability to sell real estate investments is partially dependent upon the ability of purchasers to obtain financing at commercially reasonable rates. Potential Factors Affecting Future Operating Results Many factors affect the Company's actual financial performance and may cause the Company's future results to be markedly outside of the Company's current expectations. These factors include the following: Interest Rate Fluctuations At the present time, borrowings under the Company's credit facility, the $4.6 million mortgage loan from Union Bank, and the $30.89 million mortgage loans from Security Life of Denver Insurance Company bear interest at floating rates. The floating interest rate on the $30.89 million mortgage loans has been fixed for a period of 1 year with interest swap agreements. The Company recognizes that its results from operations may be negatively impacted by future increases in interest rates and substantial additional borrowings to finance property acquisitions, development projects and share repurchases. Lease Renewals While the Company historically has been successful in renewing and reletting space, the Company is subject to the risk that certain leases expiring in 2001 and beyond may not be renewed, or the terms of renewal may be less favorable to the Company than current lease terms. The Company expects to incur costs in making improvements or repairs to its portfolio of properties required by new or renewing tenants and expects to incur expenses associated with brokerage commissions payable in connection with the reletting of space. Inflation Most of the leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Inflation, including escalations in electricity costs in California and neighboring states, however, could result in an increase in the Company's borrowings and other operating expenses. Government Regulations The Company's properties are subject to various federal, state and local regulatory requirements such as local building codes and other similar regulations. The Company believes its properties are currently in substantial compliance with all applicable regulatory requirements, although expenditures at its properties may be required to comply with changes in these laws. No material expenditures are contemplated at this time in order to comply with any such laws or regulations. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances released on, above, under, or in such property. Such laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of such removal or remediation could be substantial. Additionally, the presence of such substances or the failure to properly remediate such substances may adversely affect the owner's ability to borrow using such real estate as collateral. The Company believes that it is in compliance in all material respects with all federal, state and local laws regarding hazardous or toxic substances, and the Company has not been notified by any governmental authority of any non-compliance or other claim in connection with any of its present or former properties. Accordingly, the Company does not currently anticipate that compliance with federal, state and local environmental protection regulations will have any material adverse impact on the financial position, results of operations or liquidity of the Company. There can be no assurance, however, that future discoveries or events at the Company's properties, or changes to current environmental regulations, will not result in such a material adverse impact. Recent Accounting Pronouncements In July 2001, The Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations," which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The Company will adopt SFAS No. 141 effective January 1, 2002. The Company has determined that the adoption of SFAS No. 141 will not have a material impact on the Company's financial statements. In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets," which addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." The Company will adopt SFAS No. 142 effective January 1, 2002. The Company has determined that the adoption of SFAS No. 142 will not have a material impact on the Company's financial statements. Financial Performance Management considers Funds From Operations (FFO) to be one measure of the performance of an equity REIT. FFO during the three and six months ended June 30, 2001 was $11,746,000 and $23,212,000, respectively. During the same periods in 2000, FFO was $10,930,000 and $22,103,000, respectively. FFO is used by financial analysts in evaluating REITs and can be one measure of a REIT's ability to make cash distributions. Presentation of this information provides the reader with an additional measure to compare the performance of REITs. FFO is generally defined by the National Association of Real Estate Investment Trusts as net income (loss) (computed in accordance with accounting principles generally accepted in the United States of America), excluding extraordinary items such as gains (losses) from debt restructurings and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO was computed by the Company in accordance with this definition. FFO does not represent cash generated by operating activities in accordance with generally accepted accounting principles; it is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to net income (loss) as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. Further, FFO as disclosed by other REITs may not be comparable to the Company's presentation. Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ------------------------------------------------- Funds From Operations (in thousands, except share amounts): Net income $ 7,779 $ 7,511 $15,378 $ 30,742 Add: Depreciation and amortization 3,932 3,380 7,764 6,523 Minority interest 35 33 70 66 (Gain) loss on sales, net - 6 - (15,228) ------------------------------------------------- Funds From Operations $11,746 $10,930 $23,212 $ 22,103 ================================================= Weighted average number of shares - diluted 17,220,131 18,489,403 17,474,559 18,993,949 ====================================================
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company's real estate investment portfolio and operations. The Company's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the Company balances its borrowings between fixed and variable rate debt. While the Company has entered into interest swap agreements to minimize its exposure to interest rate fluctuations, the Company does not enter into derivative or interest rate transactions for speculative purposes. The Company's interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts, weighted average annual interest rates, fair values and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes (dollars in thousands): Twelve Month Period Ending June 30, Fair 2002 2003 2004 2005 2006 Thereafter Total Value ------------------------------------------------------------------------- Variable rate LIBOR debt $ 74 $ 685 $107,342 $ 5,020 $27,807 - $140,928 $140,928 Average interest rate 7.40% 5.70% 5.65% 7.12% 5.48% - 5.67% 5.67% Fixed rate debt $17,982 $21,419 $ 3,237 $27,887 $ 3,122 $114,283 $187,930 $190,242 Average interest rate 7.40% 7.05% 7.35% 7.19% 7.40% 7.37% 7.31% 7.25%
As the table incorporates only those exposures that exist as of June 30, 2001, it does not consider those exposures or positions which could arise after that date. Moreover, because firm commitments are not presented in the table above, the information presented therein has limited predictive value. As a result, the Company's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, the Company's hedging strategies at that time, and interest rates. On June 18, 2001, the Company entered into interest swap agreements with United California Bank. The swap agreements allow the Company to hedge its exposure to variable interest rates on two mortgages with remaining principal balances totaling $30,522,000 by effectively paying a fixed rate of interest over the term of the swap agreement. Interest rate pay differentials that arise under these swap agreements are recognized in interest expense over the term of the contracts. These interest rate swap agreements were considered to be fully effective in hedging the variable rate risk associated with the two mortgages. The following summarizes the notional value, carrying value and fair value of the Company's interest swap contracts. The notional value at June 30, 2001 provides an indication of the extent of the Company's involvement in these contracts at that time but does not represent exposure to credit, interest rate or market risks. Notional Fixed Contract Cumulative Approximate Asset Amount (1) Rate Maturity Cash Paid, Net at June 30, 2001 (2) - --------------------------------------------------------------------------- $23,136,410 5.55% June 30, 2002 $630 $ 9,718 7,386,063 5.55% June 30, 2002 201 3,102 - ---------------------------------------------------------------------- $30,522,473 $831 $12,820 ======================================================================
(1) The notional amount is included in the table of qualitative and quantitative disclosure about market risk as variable rate LIBOR debt and fixed rate debt, as applicable. (2) Represents the approximate amount which the Company would have received as of June 30, 2001 if the swap contracts were terminated. To determine the fair values of derivative instruments in accordance with SFAS 133, the Company uses the discounted cash flow method, which requires the use of assumptions about market conditions and risks existing at the balance sheet date. Considerable judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair value is a general approximation of value, and such value may or may not actually be realized. At June 30, 2001, $13,000 is included in other assets and accumulated other comprehensive income, a stockholders' equity account, reflecting the estimated market value of the swap contracts at that date. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The Company held its annual stockholders' meeting on May 17, 2001 to consider the following proposals: 1. To elect five directors by the holders of the Common Stock for the ensuing year. 2. To ratify the appointment by the Board of Directors of the Company's independent public accountants for the year ending December 31, 2001. All proposals were approved. Following are the results of the voting for proposals 1 and 2: For Against Abstain ---------------------------------- 1. To elect five directors to serve until the next annual meeting of stockholders 15,998,815 - 229,871 2. To ratify the appointment by the Board of Directors of the Company's independent public accountants 16,157,015 40,922 30,749
Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit No. Exhibit 3.1(a) Articles of Incorporation of Bedford Property Investors, Inc. is incorporated herein by reference to Exhibit 4.2 of the Company's Registration Statement on Form S-2 (File No. 333-00921) filed on February 14, 1996. 3.1(b) Charter of the Company, as amended, is incorporated herein by reference to Exhibit 4.2 of the Company's Amendment No. 1 to its Registration Statement on Form S-2 (File No. 333-00921) filed on March 29, 1996. 3.1(c) Articles of Amendment of Charter of Bedford Property Investors, Inc. is incorporated herein by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended June 30, 1997. 3.2 Amended and Restated Bylaws of the Company is incorporated herein by reference to Exhibit 3.2 to the Company's Form 10-K for the year ended December 31, 2000. 10.35* Fifth Amended and Restated Credit Agreement among Bedford Property Investors, Inc., The Banks Party Hereto, Bank of America, NA, as Administrative Agent for The Banks, Union Bank of California, NA, as Co-Agent, and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, dated May 18, 2001. 10.36* Promissory Note, dated as of July 23, 2001, between Bedford Property Investors, Inc. as Borrower and Washington Mutual Bank as Lender. 10.37* Interest Rate Protection Agreement, dated as of June 18, 2001, between Bedford Property Investors, Inc. and United California Bank, formerly Sanwa Bank California. 10.38* Interest Rate Protection Agreement, dated as of June 18, 2001, between Bedford Property Investors, Inc. and United California Bank, formerly Sanwa Bank California. 10.39* Master Agreement, dated as of May 15, 2001, between Bedford Property Investors, Inc. and United California Bank, formerly Sanwa Bank California. * Filed herewith B. Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, hereunto duly authorized. Dated: August 14, 2001 BEDFORD PROPERTY INVESTORS, INC. (Registrant) By: /s/ HANH KIHARA Hanh Kihara Senior Vice President and Chief Financial Officer By: /s/ KRISTA K. ROWLAND Krista K. Rowland Vice President Controller
EX-10 3 q10q1035.txt EXHIBIT 10.35 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT This FIFTH AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of May 18, 2001, among BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation (the "Company"), BANK OF AMERICA, NATIONAL ASSOCIATION, a national banking association ("Bank of America"), successor to Bank of America National Trust and Savings Association, and the several additional financial institutions from time to time party to this Agreement (collectively, the "Banks"; each individually, a "Bank"), BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent for the Banks, UNION BANK OF CALIFORNIA, N.A., as Co-Agent, and BANC OF AMERICA SECURITIES, LLC, as Sole Lead Arranger and Sole Book Manager. Factual Background WHEREAS, Bank of America and certain of the Banks have previously made available to the Company a revolving credit facility upon the terms and subject to the conditions set forth in that certain Fourth Amended and Restated Credit Agreement dated as of June 15, 1998, among the Company, the banks party thereto and Bank of America, as agent for such banks (the "Existing Credit Agreement"), which Existing Credit Agreement amended and restated in full that certain Third Amended and Restated Credit Agreement dated as of June 13, 1997, among the Company, the banks party thereto and Bank of America, as agent for such banks, as amended from time to time; WHEREAS, under the Existing Credit Agreement, the Banks party thereto agreed to make available to the Company a secured revolving line of credit in the maximum principal amount of $175,000,000, with Bank of America having a pro rata share of 48.571428%, representing a maximum commitment of $85,000,000; Sanwa Bank California having a pro rata share of 14.285714%, representing a maximum commitment of $25,000,000; The First National Bank of Chicago having a pro rata share of 14.285714%, representing a maximum commitment of $25,000,000; and Union Bank of California, N.A. having a pro rata share of 22.857142%, representing a maximum commitment of 40,000,000; WHEREAS, the Company has requested that the Banks modify the terms of the revolving credit facility made available to the Company pursuant to the Existing Credit Agreement to, among other things, extend the maturity date of the secured revolving line of credit available to the Company; WHEREAS, following modification of the revolving credit facility made available to the Company pursuant to the Existing Credit Agreement, Bank One, N.A., successor to The First National Bank of Chicago, will no longer be a party to the revolving credit facility; and WHEREAS, the remaining Banks have agreed to make available to the Company an amended secured revolving line of credit upon the terms and subject to the conditions set forth in this Agreement, which amends and restates in full the Existing Credit Agreement, with the pro rata shares of the remaining Banks adjusted so that Bank of America has a pro rata share of 33.333333%, representing a maximum commitment of $50,000,000; Sanwa Bank California has a pro rata share of 16.666667%, representing a maximum commitment of $25,000,000; Union Bank of California, N.A. has a pro rata share of 23.333333%, representing a maximum commitment of $35,000,000; Citizens Bank of Rhode Island has a pro rata share of 16.666667%, representing a maximum commitment of $25,000,000; and Comerica Bank has a pro rata share of 10.000000%, representing a maximum commitment of $15,000,000. Agreement NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: 1. Definitions. 1.1 Defined Terms In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Administrative Agent" means Bank of America in its capacity as administrative agent for the Banks hereunder, and any successor administrative agent designated under Section 9.6. "Adobe Property" means the Company's leasehold interest in that certain real property commonly known as 701 and 801 North 34th Street, Seattle, Washington, a portion of which is presently leased to Adobe Systems Incorporated. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. In no event shall any of the Banks be deemed an "Affiliate" of the Company or of any Subsidiary of the Company. "Agent-Related Persons" means Bank of America and any successor administrative agent designated under Section 9.6, together with their respective Affiliates and the officers, directors, employees and agents of such Persons. "Agent's Payment Office" means the address for payments set forth herein for the Administrative Agent, or such other address as the Administrative Agent may from time to time specify. "Agreement" means this Fifth Amended and Restated Credit Agreement, as amended, amended and restated, supplemented or modified from time to time. "Applicable Margin" means (a) with respect to Prime Rate Loans, zero (0) basis points; and (b) with respect to LIBOR Loans, (i) 130 basis points when Leverage is less than or equal to 0.30, (ii) 140 basis points when Leverage is greater than 0.30 but less than or equal to 0.40, or (iii) 155 basis points when Leverage is greater than 0.40. "Appraisal" means a real estate appraisal conducted in accordance with the Uniform Standards of Professional Appraisal Practice (as promulgated by the Appraisal Standards Board of the Appraisal Foundation), all Requirements of Law applicable to the Banks and all applicable internal policies of the Banks, prepared by the Administrative Agent or undertaken by an independent appraisal firm satisfactory to the Administrative Agent, and providing an assessment of fair market value of a parcel of property, taking into account any and all Estimated Remediation Costs. "Appraised Value" means, for an Approved Parcel at any time, an amount equal to the "as is" fair market value of such Approved Parcel (excluding any portion of such Approved Parcel consisting of undeveloped land, including excess land, to which no value will be assigned) established by the Administrative Agent's most recently completed Appraisal of such Approved Parcel. The Appraised Value of an Approved Parcel shall be adjusted upon the completion and review by the Banks of each Appraisal of such Approved Parcel (and, in the event of a disagreement among the Banks, with the approval of the Administrative Agent and the Majority Banks). "Approved Parcel" means a Parcel satisfying all of the conditions set forth in Section 4.1, subject to the provisions of Section 2.14.2; "Approved Parcel Value" means, for any Approved Parcel at any time, the lesser of (a) the Collateral Value of such Approved Parcel at such time and (b) the Cash Flow Value of such Approved Parcel at such time, subject to the provisions of Section 2.14.3. "Assignee" has the meaning specified in subsection 10.8.1. "Assignment of Leases" means any assignment of leases and rents or other document encumbering leases as security for the Obligations. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external legal counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Availability" means, at any time, the difference between (a) the Borrowing Base at such time, and (b) the sum of (i) the aggregate principal amount of all outstanding Loans (including Swing Loans) at such time and (ii) the aggregate principal amount of all outstanding but undrawn Letters of Credit at such time. "Average Unused" has the meaning specified in Section 2.9. "Bank" has the meaning specified in the introductory sentence of this Agreement; Bank of America in its capacity as a lender hereunder and in its capacity as the Swing Line Lender is one of the Banks. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978, as amended from time to time (11 U.S.C. Section 101, et seq.). "Bank of America" has the meaning specified in the introductory sentence of this Agreement. "Borrowing" means a borrowing hereunder consisting of Loans of the same Type made to the Company on the same day by the Banks under Article 2 and, other than in the case of Prime Rate Loans, having the same Interest Period, but does not include (a) a conversion of Loans of one Type to another Type or (b) a continuation of a Loan as a Loan of the same Type, but with a new Interest Period. "Borrowing Base" means, at any time, the lesser of (i) the Total Approved Parcel Value at such time and (ii) the Maximum Commitment Amount at such time. "Borrowing Notice" means a notice substantially in the form of Exhibit A given by the Company to the Administrative Agent pursuant to Section 2.4. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in San Francisco, California, are authorized or required by law to close and, if the applicable Business Day relates to any LIBOR Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any Bank or of any corporation controlling any Bank. "Capitalization Rate" means, at any time, a rate of 9.50%, subject to increase annually based on then-current market conditions, on the anniversary of the date of this Agreement, by written notice from the Administrative Agent to the Company at the direction of the Majority Banks. "Capital Stock" means all classes or series of stock of the Company. "Cash Flow" means, for any calendar quarter, the sum of (i) the quarterly net income from property operations for the Company and its consolidated subsidiaries for such quarter (excluding income from minority interests in any Person), and (ii) all depreciation and amortization expense of the Company and its consolidated subsidiaries for such quarter (if deducted in determining quarterly net income from property operations but excluding depreciation and amortization from minority interests in any Person), as evidenced by the most recently delivered consolidated financial statements of the Company. "Cash Flow Value" means, for any Approved Parcel at any time, the maximum amount for which 74.074% of the Net Operating Income for such Approved Parcel at such time would be sufficient to amortize such amount in twenty-five (25) equal annual installments of principal and interest at a per annum rate equal to the greater of (i) 2.00% per annum above the average yield on seven-year United States treasury bonds maturing approximately seven (7) years from the date of determination (as reported by the Administrative Agent's Funding and Interest Rate Desk, or any other recognized source of treasury yield quotations acceptable to the Administrative Agent in its sole and absolute discretion, on the determination date) or (ii) 8.5%, computed on the basis of a year of 365 or 366 days, as applicable, and actual day months. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act of 1980. "Closing Date" means the earliest date on which all conditions precedent set forth in Section 4.2 are satisfied or waived by the Administrative Agent. "Co-Agent" means any Bank designated as a "Co-Agent" in this Agreement, each in its capacity as a co-agent hereunder. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. "Collateral" means all property and interests in property and proceeds thereof now owned or hereafter acquired by the Company or one of its Subsidiaries in or upon which a Lien securing the Obligations now or hereafter exists in favor of the Banks or the Administrative Agent on behalf of the Banks, whether under this Agreement or under any other Collateral Documents executed by any such Persons and delivered to the Administrative Agent. "Collateral Documents" means, collectively, (i) the Mortgages, Assignments of Leases, and all other security agreements, mortgages, deeds of trust, lease assignments and other similar agreements between the Company or its Subsidiaries and the Banks or the Administrative Agent, for the benefit of the Banks, now or hereafter delivered to the Administrative Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents) now or hereafter filed in accordance with the UCC (or comparable law) naming the Company or any Subsidiaries as debtor in favor of the Banks or the Administrative Agent, for the benefit of the Banks, as secured party in connection therewith, and (ii) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "Collateral Value" means, for any Approved Parcel at any time, sixty-five percent (65%) of the Appraised Value of such Approved Parcel at such time; provided, however, that the Collateral Value of the Adobe Property at any time shall be sixty percent (60%) of the Appraised Value of such Approved Parcel at such time. "Commitment" means the amount of the credit and the outstanding Loans for which each Bank is obligated. "Contingent Obligation" means, as to any Person, (a) any Guaranty Obligation of that Person, and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person in respect of (i) any letter of credit or similar instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or (ii) any Swap Contract. The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Controlled Group" means the Company and all Persons (whether or not incorporated) under common control or treated as a single employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the Code. "Conversion Date" means any date on which the Company elects to convert a Prime Rate Loan to a LIBOR Loan or a LIBOR Loan to a Prime Rate Loan. "Conversion/Continuation Notice" means a notice substantially in the form of Exhibit B given by the Company to the Administrative Agent pursuant to Section 2.5. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied) constitute an Event of Default. "Disposition" means the sale, lease, conveyance or other disposition of any Approved Parcel, other than (i) leases of an Approved Parcel to third-party tenants in the ordinary course of business or (ii) sales or other dispositions expressly permitted under Section 7.2. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a Person that is primarily engaged in the business of commercial banking and is an Affiliate of a Bank, or (iii) any Person approved by Majority Banks and the Administrative Agent. "Entitled Land" means unimproved real Property satisfying all of the following conditions: (a) the Company's intended use of such real Property is permissible under the applicable general plan or its equivalent, (b) such intended use is permissible under any applicable specific plan, zoning classification and development agreement, (c) such real Property has access to roads and utilities adequate for the Company's intended use, and (d) the Company intends to improve such real property within twenty-four (24) months of its acquisition. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Laws or for injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in or from an Approved Parcel, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Laws. "Environmental Indemnity" means the unsecured environmental indemnity executed by the Company and delivered to the Administrative Agent, for the benefit of the Banks, pursuant to Section 4.2.1(a). "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters; including CERCLA, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act, the California Hazardous Waste Control Law, the California Solid Waste Management, Resource, Recovery and Recycling Act, the California Water Code and the California Health and Safety Code. "Environmental Permits" has the meaning specified in subsection 5.12(b). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b), 414(c) or 414(m) of the Code. "ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan or a Multi-employer Plan; (b) withdrawal by the Company or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multi-employer Plan; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Qualified Plan or Multi-employer Plan subject to Title IV of ERISA; (e) failure by the Company or any member of the Controlled Group to make required contributions to a Qualified Plan or Multi-employer Plan; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multi-employer Plan; (g) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-exempt prohibited transaction occurs with respect to any Plan for which the Company or any Subsidiary of the Company may be directly or indirectly liable; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary or disqualified person with respect to any Plan for which the Company or any member of the Controlled Group may be directly or indirectly liable. "Estimated Remediation Costs" means all costs associated with performing work to remediate contamination of real property or groundwater, including engineering and other professional fees and expenses, costs to remove, transport and dispose of contaminated soil, costs to "cap" or otherwise contain contaminated soil, and costs to pump and treat water and monitor water quality. "Event of Default" means any of the events or circumstances specified in Section 8.1. "Event of Loss" means, with respect to any Approved Parcel, any of the following: (a) any loss or damage to, or destruction of, such Approved Parcel; (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such Approval Parcel or for the exercise of any right of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Approved Parcel, or confiscation of such Approved Parcel or the requisition of the use of such Approved Parcel. "Federal Funds Rate" means, for any day, the rate published by the Federal Reserve Bank of New York for the preceding Business Day as "Federal Funds (Effective)"; (or, if not published, the arithmetic mean of the rates for overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day quoted by three brokers of Federal Funds in New York City as determined by the Administrative Agent). "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereof. "Fee Letter" has the meaning specified in Section 2.9. "Fixed Charges" means, for any calendar quarter, the sum of (a) Interest Expense for such quarter, (b) the principal amount of Indebtedness of the Company and its consolidated subsidiaries payable during such quarter, and (c) dividends and distributions payable during such quarter on the Company's preferred stock (whether or not declared), as evidenced by the most recently delivered consolidated financial statements of the Company. "Funds from Operations" means, for any fiscal quarter, the net income of the Company for such quarter, excluding gains or losses from debt restructuring and sales of property, plus depreciation and amortization, after adjustments for unconsolidated ventures. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Gross Asset Value" means, at any time, the sum of (a) an amount equal to four (4) times the Cash Flow for the most recent calendar quarter, divided by the Capitalization Rate at such time, (b) the cost basis of all construction in process of the Company and its consolidated subsidiaries as of the end of such calendar quarter (taking into account any downward adjustment of such cost basis reflected on the Company's balance sheet), (c) the cost of all unimproved real Property of the Company and its consolidated subsidiaries as of the end of such calendar quarter (taking into account any downward adjustment of such cost reflected on the Company's balance sheet), and (d) the book value as of the end of such calendar quarter of all other non-real Property assets of the Company and its consolidated subsidiaries other than goodwill and other intangible assets, as evidenced by the most recently delivered consolidated financial statements of the Company. "Guaranty Obligation" means, as applied to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material or toxic substance, or petroleum or petroleum derived substance or waste. "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services; (c) all reimbursement obligations with respect to surety bonds, letters of credit and similar instruments (in each case, to the extent material or non-contingent); (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (f) all indebtedness referred to in clauses (a) through (e) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (g) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (e) above. "Indemnified Liabilities" has the meaning specified in Section 10.5. "Indemnified Person" has the meaning specified in Section 10.5. "Insolvency Proceeding" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case (a) and (b) undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code. "Interest Expense" means, for any calendar quarter, all interest on Indebtedness of the Company and its consolidated subsidiaries paid, accrued or capitalized during such quarter, as evidenced by the most recently delivered consolidated financial statements of the Company. "Interest Payment Date" means the first day of each month following disbursement of the initial Loan. "Interest Period" means, with respect to any LIBOR Loan, the period commencing on the Business Day the Loan is disbursed or continued or on the Conversion Date on which the Loan is converted to a LIBOR Loan and ending on the date that is one (1), two (2), three (3), six (6) or twelve (12) months thereafter, as selected by the Company in its Borrowing Notice or Conversion/Continuation Notice; provided that: (a) if any Interest Period pertaining to a LIBOR Loan would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; and (b) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period. "Lending Office" means, as to any Bank, the office specified as its "Lending Office" opposite its name on the signature pages hereto, or such other office as such Bank may specify to the Company and the Administrative Agent from time to time. "Letter of Credit" means a standby letter of credit issued by Bank of America for the Company's account pursuant to Section 2.1. "Leverage" means, at any time, the ratio of (a) the sum of (i) the total consolidated liabilities of the Company at such time (including as liabilities all then-outstanding but undrawn Letters of Credit) and (ii) all Contingent Obligations of the Company at such time, to (b) Gross Asset Value at such time, as evidenced by the most recent certificate of a Responsible Officer of the Company delivered to the Administrative Agent pursuant to Section 6.2(a) (for purposes of determining the Applicable Margin, the Leverage calculation set forth in such certificate shall be effective during the period from the first day of the first month after the month in which such certificate is delivered to the Administrative Agent through and including the last day of the month in which the next such certificate is delivered to the Administrative Agent pursuant to Section 6.2(a)). "LIBOR Borrowing" means a Borrowing consisting of LIBOR Loans. "LIBOR Loan" means a Loan that bears interest based on the LIBOR Rate. "LIBOR Rate" means, for each Interest Period in respect of any LIBOR Loan, a fluctuating rate of interest (carried out to the fifth decimal place) appearing on Telerate Page 3750 (or any successor page) equal to the London interbank offered rate for deposits in U.S. Dollars in amounts and for periods comparable to those of the applicable LIBOR Loan and Interest Period at approximately 11:00 a.m. (London, England, time) on the second preceding Business Day, as adjusted from time to time in the Administrative Agent's sole discretion for then applicable reserve requirements, deposit insurance assessment rates and other regulatory costs. If for any reason such rate is not available, the term "LIBOR Rate" shall mean the fluctuating rate of interest equal to the rate of interest for the applicable Interest Period (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in U.S. Dollars in amounts and for periods comparable to those of the applicable LIBOR Loan and Interest Period at approximately 11:00 a.m. (London, England, time) on the second preceding Business Day, as adjusted from time to time in the Administrative Agent's sole discretion for then applicable reserve requirements, deposit insurance assessment rates and other regulatory costs; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the lessor's interest under a capital lease (determined in accordance with GAAP), any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement under the UCC or any comparable law naming the owner of the asset to which such lien relates as debtor) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease (determined in accordance with GAAP). "Loan" means an extension of credit by a Bank to the Company pursuant to Article 2, and may be a Prime Rate Loan, a LIBOR Loan or, in the case of the Swing Line Lender, a Swing Loan. "Loan Documents" means this Agreement, the Revolving Notes, the Collateral Documents, and all documents (except for the Environmental Indemnity) delivered to the Administrative Agent, on behalf of the Banks, in connection therewith. "Major Tenant" means, with respect to any Parcel, a tenant occupying ten percent (10%) or more of the net rentable area of the improvements located on such Parcel. "Majority Banks" means at any time at least two (2) Banks then holding at least sixty-six and two-thirds percent (66-2/3%) of the then aggregate unpaid principal amount of the Loans (or, if no principal amount is then outstanding, at least two (2) banks then having at least sixty-six and two-thirds percent (66-2/3%) of the unborrowed Commitments); provided, however, that if at any time there is only one Bank, then such one Bank shall constitute Majority Banks. "Margin Stock" means "margin stock" as such term is defined in Regulation G, T, U or X of the Federal Reserve Board. "Material Adverse Effect" means a material adverse change in, or a material adverse effect upon, any of (a) the operations, business, properties, condition (financial or otherwise) or prospects of the Company, or the Company and its Subsidiaries taken as a whole; (b) the ability of the Company to perform under any Loan Document and avoid any Event of Default; (c) the legality, validity, binding effect or enforceability of any Loan Document; or (d) the perfection or priority of any Lien granted to the Administrative Agent under any of the Collateral Documents. "Maturity Date" means June 1, 2004. "Maximum Commitment Amount" means, at any time, an amount equal to $150,000,000.00, subject to increase pursuant to, and on the terms and subject to the conditions set forth in, Section 2.19, and to decrease pursuant to the provisions of Section 2.6. "Mortgage" means any deed of trust, mortgage or other document creating a Lien on real property or any interest in real property as security for the Obligations. "Multi-employer Plan" means a "multi-employer plan" (within the meaning of Section 4001(a)(3) of ERISA) to which any member of the Controlled Group (i) makes, is making, or is obligated to make contributions, or (ii) during the preceding three calendar years has made, or has been obligated to make, contributions. "Net Operating Income" means, for any Approved Parcel as of any calendar quarter, an amount equal to Gross Income less Operating Expenses less Reserves for such Approved Parcel as of such time, where "Gross Income" for such Approved Parcel is equal to: either (a) if such Approved Parcel has been owned by either the Company or any Subsidiary of the Company and has been generating rental income for at least four (4) consecutive calendar quarters for which quarterly operating statements have been delivered to the Banks, the gross income (before capital expenditures) for such Approved Parcel, as evidenced by the most recently received quarterly operating statements for such Approved Parcel, and the quarterly operating statements for the three (3) immediately preceding quarters, or (b) if such Approved Parcel has been owned by either the Company or any Subsidiary of the Company and has been generating rental income for at least one (1) calendar quarter for which quarterly operating statements have been delivered to the Banks but fewer than four (4) consecutive calendar quarters for which quarterly operating statements have been delivered to the Banks, the annualized gross income (before capital expenditures) for such Approved Parcel as of the most recent calendar quarter for which quarterly operating statements have been delivered to the Banks, determined by multiplying the aggregate gross income (before capital expenditures) for such Approved Parcel for the number of consecutive calendar months during which the Company or a Subsidiary of the Company has owned such Approved Parcel and for which monthly or quarterly operating statements have been delivered to the Banks by a fraction the numerator of which is twelve (12) and the denominator of which is the number of consecutive calendar months during which the Company or a Subsidiary of the Company has owned such Approved Parcel and for which operating statements are available for such Approved Parcel at such time, or (c) if such Approved Parcel has been owned by either the Company or any Subsidiary of the Company and has been generating rental income for fewer than one (1) full calendar quarter for which quarterly operating statements have been delivered to the Banks, the annual gross income for such Approved Parcel for the year in which the determination is made, based on the pro forma cash flow statement set forth in the Appraisal for such Approved Parcel; "Operating Expenses" for such Approved Parcel are equal to: either (d) if such Approved Parcel has been owned by either the Company or any Subsidiary of the Company for at least four (4) consecutive calendar quarters for which quarterly operating statements have been delivered to the Banks, the aggregate amount of actual operating expenses other than capital expenditures relating to such Approved Parcel for the immediately preceding four (4) consecutive calendar quarters, as evidenced by the most recently received quarterly operating statements for such Approved Parcel and the quarterly operating statements for the three (3) immediately preceding quarters, or (e) if such Approved Parcel has been owned by either the Company or any Subsidiary of the Company for fewer than four (4) full calendar quarters for which quarterly operating statements have been delivered to the Banks, the aggregate amount of annual operating expenses other than capital expenditures relating to such Approved Parcel for the year in which the determination is made, based on the pro forma cash flow statement set forth in the Appraisal for such Approved Parcel; and "Reserves" are equal to: (f) if the Administrative Agent has determined that the improvements located on such Approved Parcel consist of office space, $1.00 per square foot of net rentable area of space in such Approved Parcel, representing capital expenditures for office space, or (g) if the Administrative Agent has determined that the improvements located on such Approved Parcel consist of research and development (other than office) space, $0.30 per square foot of net rentable area of space in such Approved Parcel, representing capital expenditures for research and development (other than office) space, or (h) if the Administrative Agent has determined that the improvements located on such Approved Parcel consist of bulk industrial or flexible industrial (other than research and development) space, $0.10 per square of net rentable area of space in such Approved Parcel, representing capital expenditures for bulk industrial or flexible industrial (other than research and development) space. "Net Proceeds" means proceeds in cash, checks or other cash equivalent financial instruments as and when received by the Person making a Disposition, net of: (a) the reasonable direct costs relating to such Disposition (excluding amounts payable to the Company or any Affiliate of the Company), (b) sale, use or other transaction taxes paid or payable as a result thereof, and (c) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien encumbering the asset that is the subject of such Disposition. "Net Proceeds" shall also include proceeds paid on account of any Event of Loss, net of (i) all money actually applied to repair or reconstruct the damaged property or property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments, and (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments. "Notice of Lien" means any "notice of lien" or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "Obligations" means all Loans and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing from the Company to the Administrative Agent, any Bank or any other Person required to be indemnified under any Loan Document, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, and arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other manner, 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. "Ordinary Course of Business" means, in respect of any transaction involving the Company or any Subsidiary of the Company, the ordinary course of such Person's business, substantially as conducted by any such Person prior to or as of the Closing Date, and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "Organization Documents" means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation, and (b) for any partnership, the partnership agreement, statement or certificate of partnership and any fictitious business name or other filing relating to such partnership. "Parcel" means (a) a parcel of real property that (i) is owned in fee by the Company or (ii) in the case of the Adobe Property is ground leased by the Company and (b) any parcel of real property that is owned in fee by any wholly-owned Subsidiary of the Company. "Participant" has the meaning specified in subsection 10.8.3. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Encumbrances" means, with respect to any Parcel, all matters to which the Administrative Agent consents in writing as exceptions to the Title Policy covering such Parcel. "Permitted Liens" has the meaning specified in Section 7.1. "Person" means an individual, partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company or any member of the Controlled Group sponsors or maintains or to which the Company or any member of the Controlled Group makes, is making or is obligated to make contributions, and includes any Multi-employer Plan or Qualified Plan. "Prime Rate" means the per annum rate of interest publicly announced from time to time by the Administrative Agent at its principal office in Charlotte, North Carolina, as its "Prime Rate." The Prime Rate is set by the Administrative Agent based on various factors, including the Administrative Agent's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing loans. The Administrative Agent may price loans at, above or below the Prime Rate. Any change in the Prime Rate shall take effect on the day specified in the public announcement of such change. "Prime Rate Borrowing" means a Borrowing consisting of Prime Rate Loans. "Prime Rate Loan" means a Loan that bears interest based on the Prime Rate. "Property" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal rounded to the ninth decimal place) at such time of such Bank's share of the credit and the outstanding Loans. "Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code and which any member of the Controlled Group sponsors, maintains, or to which it makes, is making or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at least five (5) plan years, but excluding any Multi-employer Plan. "Release Price" means, with respect to an Approved Parcel, the amount, if any, necessary to reduce the sum of (i) the aggregate principal amount outstanding on the Loans and (ii) the aggregate stated amount of all outstanding but undrawn Letters of Credit, to the Availability (computed without regard to the Approved Parcel for which the Company is seeking release), determined on the date of the Company's request to the Administrative Agent that the Banks release their Lien on such Approved Parcel. "Reportable Event" means, as to any Plan, (a) any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC, (b) a withdrawal from a Plan described in Section 4063 of ERISA, or (c) a cessation of operations described in Section 4062(e) of ERISA. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation, or any determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve-Adjusted Cash Flow" means, for any calendar quarter, Cash Flow for such quarter less a reserve amount for each parcel of real Property owned by the Company or any consolidated subsidiary as of the end of such quarter equal to one-fourth of the sum of (i) $1.00 per square foot of the aggregate net rentable area of space located on those parcels that the Administrative Agent has designated to be improved with office space, (ii) $0.30 per square foot of the aggregate net rentable area of space located on those parcels that the Administrative Agent has designated to be improved with research and development (other than office) space, and (iii) $0.10 per square of the aggregate net rentable area of space located on those parcels that the Administrative Agent has designated to be improved with bulk industrial or flexible industrial (other than research and development) space, as evidenced by the most recently delivered consolidated financial statements of the Company. "Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for "eurocurrency liabilities," as defined in Federal Reserve Board Regulation D. The Reserve Percentage shall be expressed in decimal form and rounded upward, if necessary, to the nearest 1/100th of one percent, and shall include marginal, emergency, supplemental, special and other reserve percentages. "Responsible Officer" means the chief executive officer or the president of the Company, or any other officer having substantially the same authority and responsibility or, with respect to financial matters, the chief financial officer or the treasurer of the Company, or any other officer having substantially the same authority and responsibility. "Revolving Note" means a promissory note of the Company payable to the order of a Bank in substantially the form of Exhibit C, and any amendments, supplements, modifications, renewals, replacements, consolidations or extensions thereof, evidencing the aggregate indebtedness of the Company to a Bank resulting from Loans made by such Bank pursuant to this Agreement; "Revolving Notes" means, at any time, all of the Revolving Notes executed by the Company in favor of a Bank outstanding at such time. "SEC" means the Securities and Exchange Commission, or any successor thereto. "Sole Lead Arranger" means Banc of America Securities LLC in its capacity as sole lead arranger and sole book manager for the Banks hereunder. "Solvent" means, as to any Person at any time, that (a) the fair value of the Property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code and, in the alternative, for purposes of the California Uniform Fraudulent Transfer Act and any other applicable fraudulent conveyance statute; (b) the present fair saleable value of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its Property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "Subsidiary" of a Person means any corporation, limited liability company, partnership, joint venture, association or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swing Line" has the meaning specified in Section 2.2.1. "Swing Line Availability" means, at any time, the difference between (a) the least of (i) $25,000,000.00, (ii) the Total Approved Parcel Value at such time and (iii) the Maximum Commitment Amount at such time, and (b) the principal amount outstanding under the Swing Line at such time. "Swing Line Lender" means Bank of America, in its capacity as the maker of Swing Loans under Section 2.2. "Swing Loan" has the meaning specified in Section 2.2.1. "Tangible Net Worth" means, at any time, the total consolidated stockholders' equity of the Company and its consolidated subsidiaries at such time (valuing preferred stock at face value and excluding as assets (i) any loans to tenants for tenant improvements and (ii) goodwill and other intangible assets, and valuing all real property at the lower of book or market value (where market value is based on the most recent Appraisal for each Approved Parcel)), as evidenced by the Company's most recently delivered consolidated financial statements. "Telerate Page 3750" means the British Bankers Association LIBOR Rates (determined at 11:00 a.m. London, England, time) that are published by Bridge Information Systems, Inc. "Title Policy" means any policy of title insurance required pursuant to this Agreement. "Total Approved Parcel Value" means, at any time, the sum of the Approved Parcel Values for all of the Approved Parcels at such time. "Transferee" has the meaning specified in subsection 10.8.5. "Type" means, in connection with a Loan, the characterization of such loan as a Prime Rate Loan or a LIBOR Loan. "UCC" means the Uniform Commercial Code as in effect in any jurisdiction, as the same may be amended, modified or supplemented from time to time. "Unfunded Pension Liabilities" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used by the Plan's actuaries for funding the Plan pursuant to section 412 of the Code for the applicable plan year. 1.2 Other Interpretive Provisions. 1.2.1 Use of Defined Terms Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant to this Agreement. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described. 1.2.2 Certain Common Terms. (a) The Agreement. The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule and exhibit references are to this Agreement unless otherwise specified. (b) Documents. The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (c) Including. The term "including" is not limiting, and means "including without limitation." (d) Performance. Whenever any performance obligation hereunder (other than a payment obligation) shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including". If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking or not taking such action. (e) Contracts. Unless otherwise expressly provided in this Agreement, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (f) Laws. References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation. (g) Captions. The captions and headings of this Agreement are for convenience of reference only, and shall not affect the construction of this Agreement. (h) Independence of Provisions. The parties acknowledge that this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement. (i) Exhibits and Schedules. All of the exhibits and schedules attached to this Agreement are incorporated herein by this reference. 1.2.3 Accounting Principles. (a) Accounting Terms. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) Fiscal Periods. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 2. The Credit. 2.1 Amount and Terms of Commitment. Each Bank severally agrees, on the terms and subject to the conditions hereinafter set forth, (a) to make Loans to the Company from time to time on any Business Day during the period from the Closing Date to the Maturity Date for the purpose of (i) facilitating the Company's acquisition of improved real property (subject to the provisions of Section 7.13), (ii) financing the Company's operations, including development activities (subject to the provisions of Sections 7.16 and 7.17), and (iii) providing working capital to the Company, in an aggregate amount not to exceed such Bank's Pro Rata Share of the Availability, and (b) to fund drawings on any Letters of Credit that Bank of America issues for the Company's account from time to time, in an aggregate amount not to exceed at any time outstanding such Bank's Pro Rata Share of the amount of such drawing. On the date that Bank of America issues a Letter of Credit for the Company's account, each Bank shall be deemed to have unconditionally and irrevocably purchased from Bank of America a pro rata risk participation in the stated amount of such Letter of Credit, without recourse or warranty, in an amount equal to such Bank's Pro Rata Share of the stated amount of such Letter of Credit. Bank of America agrees to issue Letters of Credit for the Company's account on any Business Day during the period from the Closing Date to the date that is six (6) months prior to the Maturity Date, for any purpose directly related to the Company's continuing operations, in an aggregate amount not to exceed Ten Million Dollars ($10,000,000.00) at any time outstanding; provided, however, that no Letter of Credit shall have an expiry date later than the then- applicable Maturity Date. Notwithstanding any contrary provision of this Agreement, the aggregate principal amount of all outstanding Loans shall not at any time exceed the Borrowing Base, and the aggregate amount of outstanding but undrawn Letters of Credit shall be considered a portion of the principal amount outstanding on the Loans for purposes of determining (x) the amount of Availability remaining available for disbursement and (y) mandatory repayments under Section 2.7.2. Within the limits of the Availability, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.1 prior to the Maturity Date, repay pursuant to Section 2.7 and reborrow pursuant to this Section 2.1 prior to the Maturity Date. 2.2 Swing Line. 2.2.1 Upon the Company's request, and subject to the terms and conditions of this Agreement, the Swing Line Lender may, in its sole and absolute discretion, on and after the Closing Date and prior to the Maturity Date, provide to the Company a swing line credit facility (the "Swing Line") of up to $25,000,000.00; provided that the Swing Line Lender shall not in any event be permitted to make any Loan under the Swing Line (each a "Swing Loan") if, after giving effect thereto, (i) the sum of the aggregate principal amount of all then-outstanding Loans (including Swing Loans) plus the aggregate amount of all then-outstanding but undrawn Letters of Credit would exceed the Availability at such time, or (ii) the aggregate principal amount of all then-outstanding Swing Loans made by the Swing Line Lender would exceed the Swing Line Availability at such time. Within the limits of the Swing Line Availability, the Company may borrow under this subsection 2.2.1 prior to the Maturity Date, repay pursuant to subsections 2.2.3 or 2.2.4 and reborrow pursuant to this subsection 2.2.1 prior to the Maturity Date. Notwithstanding any contrary provision of this Section 2.2, the Swing Line Lender shall not at any time be obligated to make any Swing Loan. 2.2.2 Notwithstanding the provisions of subsections 2.8.1 and 2.8.2, each Swing Loan outstanding under the Swing Line shall accrue interest at a rate per annum equal to the interest rate applicable to a Prime Rate Loan, which interest shall be payable in arrears on each Interest Payment Date and on the due date for Swing Loans set forth in subsection 2.2.3, and shall be payable to the Administrative Agent for the account of the Swing Line Lender; provided that, notwithstanding any other provision of this Agreement, each Swing Loan shall bear interest for a minimum of one (1) day. 2.2.3 Notwithstanding the provisions of Section 2.7, the principal outstanding under the Swing Line shall be due and payable: (i) at or before 10:00 a.m., San Francisco time, on the third Business Day immediately following any date on which a Swing Loan is made under the Swing Line; and (ii) in any event on the Maturity Date; provided that, if no Event of Default has occurred and remains uncured, and the Company is permitted to borrow Loans under the terms of this Agreement (the Availability being determined for such purpose without giving effect to any reduction thereof occasioned by such Swing Loans due and payable) at the time such Swing Loans are due, then unless the Company notifies the Swing Line Lender that it will repay such Swing Loans on their due date, the Company shall be deemed to have submitted a Borrowing Notice for Prime Rate Loans in an amount necessary to repay such Swing Loans on their due date, and the provisions of Section 2.4 concerning (i) the minimum principal amounts required for Borrowings and (ii) the funding of requested Borrowings as Swing Loans shall not apply to Loans made pursuant to this subsection 2.2.3. 2.2.4 Notwithstanding the provisions of subsection 2.7.1, the Company may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Swing Loans, without incurring any premium or penalty; provided that: (i) each such voluntary prepayment shall require prior written notice given to the Administrative Agent and Swing Line Lender no later than 10:00 a.m., San Francisco time, on the day on which the Company intends to make a voluntary prepayment, and (ii) each such voluntary prepayment shall be in a minimum amount of $250,000 (or, if less, the aggregate outstanding principal amount of all Swing Loans then outstanding). 2.2.5 Each Bank shall be deemed to have unconditionally and irrevocably purchased a pro rata risk participation from the Swing Line Lender in the Swing Loans, without recourse or warranty, in an amount equal to such Bank's Pro Rata Share of such Swing Loans. In addition, from and after the date that any Bank funds such participation, such Bank shall, to the extent of its Pro Rata Share, be entitled to receive a ratable portion of any payment of principal and/or interest received by the Swing Line Lender on account of such Swing Loans, payable to such Bank promptly upon such receipt. 2.2.6 At any time during the continuance of an Event of Default, the Swing Line Lender may, without the Company's consent, upon one (1) Business Day's notice to the Company, terminate the Swing Line and cause Prime Rate Loans to be made by the Lenders in an aggregate amount equal to the amount of principal and interest outstanding under the Swing Line (the Availability being determined for such purpose without giving effect to any reduction thereof occasioned by such Swing Loans), and the conditions precedent set forth in Section 2.4 and Section 4.3, and any requirement of Section 2.4 that a borrowing be funded as a Swing Loan shall not apply to such Loans. The proceeds of such Loans shall be paid to the Swing Line Lender to retire the outstanding principal and interest owing under the Swing Line. 2.2.7 The Swing Line Lender shall not, without the approval of all Banks, make a Swing Loan if the Swing Line Lender then has actual knowledge that a Default has occurred and is continuing. 2.3 Loan Accounts; Revolving Notes. 2.3.1 The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank and by the Administrative Agent in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent and each Bank shall, absent manifest error, be conclusive of the amounts of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the Company's obligations hereunder to pay any amount owing with respect to the Loans. 2.3.2 The Loans made by each Bank shall be evidenced by a Revolving Note payable to the order of such Bank in an amount equal to such Bank's Pro Rata Share of the Maximum Commitment Amount on the Closing Date. In addition, the Swing Loans made by the Swing Line Lender shall be evidenced by a Revolving Note payable to the order of the Swing Line Lender in the amount of $25,000,000.00. Such Bank may endorse on the schedule annexed to its Revolving Note(s) the date, amount and maturity of each Loan that it makes (which shall not include undrawn amounts on outstanding Letters of Credit, but shall include the amounts of any drawings on outstanding Letters of Credit), the purpose of the Loan, the amount of each payment of principal that the Company makes with respect thereto and the source of the funds from which each principal payment is made. The Company irrevocably authorizes each Bank to endorse its Revolving Note(s), and such Bank's record shall be conclusive absent manifest error; provided, however, that any Bank's failure to make, or its error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the Company's obligations to such Bank hereunder or under its Revolving Note(s). 2.4 Procedure for Obtaining Credit. Each Borrowing shall be made and each Letter of Credit shall be issued upon the irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) of the Company in the form of a Borrowing Notice (which notice must be received by the Administrative Agent prior to 9:30 a.m., San Francisco time, (i) three (3) Business Days prior to the requested borrowing date, in the case of LIBOR Loans, or (ii) one (1) Business Day prior to the requested borrowing date, in the case of Prime Rate Loans, or (iii) on the requested borrowing date, in the case of Swing Loans, or (iv) five (5) Business Days prior to the requested issuance date of a Letter of Credit), specifying: (a) the amount of the Borrowing or the Letter of Credit, which in the case of a Borrowing shall be in an aggregate principal amount of (i) Two Hundred Fifty Thousand dollars ($250,000) and increments of Fifty Thousand dollars ($50,000) in excess thereof for Prime Rate Borrowings or Swing Loans, and (ii) Five Hundred Thousand dollars ($500,000) and increments of One Hundred Thousand dollars ($100,000) in excess thereof for any LIBOR Borrowings; (b) the requested borrowing or Letter of Credit issuance date, which shall be a Business Day; (c) in the case of a Borrowing, the Type of Loans comprising the Borrowing; (d) in the case of a LIBOR Borrowing, the duration of the Interest Period applicable to the Loans comprising such LIBOR Borrowing. If the Borrowing Notice fails to specify the duration of the Interest Period for the Loans comprising a LIBOR Borrowing, such Interest Period shall be thirty (30) days. Notwithstanding the foregoing provisions of this Section 2.4, any amount drawn under a Letter of Credit shall, from and after the date on which such drawing is made, constitute a Borrowing for all purposes under this Agreement (including accrual and payment of interest and repayment of principal) other than disbursement of Loan proceeds under this Section 2.4. Unless the Company's Borrowing Notice expressly requests a LIBOR Borrowing, a Prime Rate Borrowing in an amount in excess of the Swing Line Availability or the issuance of a Letter of Credit, each requested Borrowing shall initially be funded as a Swing Loan, and shall be subject to the provisions of Section 2.2. Unless the Majority Banks otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan made as, or converted into or continued as, a LIBOR Loan. After giving effect to any Loan, there shall not be more than six (6) different Interest Periods in effect. 2.5 Conversion and Continuation Elections. 2.5.1 The Company may, upon irrevocable written notice to the Administrative Agent in accordance with subsection 2.5.2: (a) elect to convert, on any Business Day, any Prime Rate Loans (or any part thereof in an amount not less than $500,000.00 and increments of $100,000 in excess thereof) into LIBOR Loans; (b) elect to convert on any Interest Payment Date any LIBOR Loans maturing on such Interest Payment Date (or any part thereof in an amount not less than $250,000.00) into Prime Rate Loans; or (c) elect to renew on any Interest Payment Date any LIBOR Loans maturing on such Interest Payment Date (or any part thereof in an amount not less than $500,000.00 and increments of $100,000 in excess thereof); provided, that if the aggregate amount of LIBOR Loans in respect of any Borrowing shall have been reduced, by payment, prepayment or conversion of part thereof, to less than $500,000.00, such LIBOR Loans shall automatically convert into Prime Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, LIBOR Loans shall terminate. 2.5.2 The Company shall deliver by telex, cable or facsimile, confirmed immediately in writing, a Notice of Conversion/Continuation (which notice must be received by the Administrative Agent not later than 9:30 a.m. San Francisco time, (i) at least three (3) Business Days prior to the Conversion Date or continuation date, if the Loans are to be converted into or continued as LIBOR Loans, or (ii) on the Conversion Date, if the Loans are to be converted into Prime Rate Loans) specifying: (a) the proposed Conversion Date or continuation date; (b) the aggregate amount of Loans to be converted or continued; (c) the nature of the proposed conversion or continuation; and (d) if the Company elects to convert a Prime Rate Loan into a LIBOR Loan or elects to continue a LIBOR Loan, the duration of the Interest Period applicable to such Loan. If the Conversion/Continuation Notice fails to specify the duration of the Interest Period for a LIBOR Loan, such Interest Period shall be thirty (30) days. 2.5.3 If upon the expiration of any Interest Period applicable to LIBOR Loans the Company has failed to select a new Interest Period to be applicable to LIBOR Loans, or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert LIBOR Loans into Prime Rate Loans effective as of the expiration date of such current Interest Period. 2.5.4 Notwithstanding any other provision contained in this Agreement, after giving effect to any conversion or continuation of any Loans, there shall not be more than six (6) different Interest Periods in effect. 2.6 Voluntary Termination or Reduction of Commitment. The Company may, upon not less than ninety (90) days' prior written notice to the Administrative Agent, terminate the Banks' commitment to make Loans to the Company or issue Letters of Credit for the Company's account, or permanently reduce the Maximum Commitment Amount by a minimum amount of $1,000,000.00 or any multiple of $1,000,000.00 in excess thereof, unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the sum of the aggregate principal amount of (i) the then-outstanding Loans and (ii) the then-outstanding but undrawn Letters of Credit would exceed the Availability. Once reduced in accordance with this Section 2.6, the Maximum Commitment Amount may not be increased. Any reduction of the commitment amounts shall be applied to each Bank according to its Pro Rata Share. No commitment or extension fees paid prior to the effective date of any reduction of the Maximum Commitment Amount or termination of the Banks' commitment to make Loans to the Company or issue Letters of Credit for the Company's account shall be refunded. 2.7 Principal Payments. 2.7.1 Optional Repayments. Subject to the provisions of Section 3.4, the Company may, at any time or from time to time, upon at least one (1) Business Day's prior written notice to the Administrative Agent, ratably prepay Loans other than Swing Loans in part in an amount not less than $250,000.00 for Prime Rate Loans or $500,000 for LIBOR Loans; provided, however, that subject to the provisions of Sections 2.6 and 2.13, the Company shall not repay the Loans other than Swing Loans in full prior to the Maturity Date, and there shall be deemed outstanding at all times prior to the Maturity Date principal in the amount of at least $10.00 to the extent necessary to maintain the liens granted in the Collateral Documents. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be repaid. The Administrative Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If the Company gives a prepayment notice to the Administrative Agent, such notice is irrevocable and the prepayment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid, if required by the Administrative Agent, and all amounts required to be paid pursuant to Section 3.4. 2.7.2 Mandatory Repayments. (a) Availability Limit. Should the aggregate principal amount of the outstanding Loans at any time exceed the Availability, the Company shall immediately repay such excess to the Administrative Agent, for the account of the Banks; provided, however, that in the event that the aggregate amount of outstanding but undrawn Letters of Credit exceeds the Availability, the Company shall deliver cash collateral to the Administrative Agent in the amount of such excess. (b) Approved Parcel Dispositions. If the Company or any of its Subsidiaries shall at any time or from time to time agree to enter into a Disposition, or shall suffer an Event of Loss in which the anticipated Net Proceeds exceed $250,000.00, then (i) the Company shall promptly notify the Administrative Agent of such proposed Disposition or such Event of Loss (including the amount of the estimated Net Proceeds to be received by the Company or its Subsidiary in respect thereof) and (ii) promptly upon receipt by the Company or its Subsidiary of the Net Proceeds of such Disposition or Event of Loss, the Company shall ratably repay the Loans in an aggregate amount equal to the Release Price, in the case of a Disposition, or the amount of such Net Proceeds, in the case of an Event of Loss; provided, however, that if any Disposition would cause the number of Approved Parcels to be less than seven (7), the Company shall repay the principal amount of all outstanding Loans, together with all accrued but unpaid interest thereon and all other amounts then owing under this Agreement, upon the closing of such Disposition. (c) Application of Repayments. Any repayments pursuant to this subsection 2.7.2 shall be (i) subject to Section 3.4, and (ii) applied first to any Prime Rate Loans then outstanding and then to LIBOR Loans with the shortest Interest Periods remaining. Notwithstanding any contrary provision of this subsection 2.7.2, but subject to the provisions of Section 2.6, there shall be deemed outstanding on the Loans other than Swing Loans at all times prior to the Maturity Date principal in the amount of at least $10.00 to the extent necessary to maintain the liens granted in the Collateral Documents. 2.7.3 Repayment at Maturity. The Company shall repay the principal amount of all outstanding Loans on the Maturity Date or, if earlier, upon termination of the Banks' commitment pursuant to Section 2.6. 2.8 Interest. 2.8.1 Accrual Rate. Subject to the provisions of subsection 2.8.3, each Loan shall bear interest on the outstanding principal amount thereof from the date when made (which, in the case of a drawing on a Letter of Credit, is the date of such drawing) until it becomes due at a rate per annum equal to LIBOR or the Prime Rate, as the case may be, plus the Applicable Margin. 2.8.2 Payment. Interest on each Loan shall be payable in arrears on each Interest Payment Date. Interest shall also be payable on the date of any repayment of Loans pursuant to subsections 2.7.1 or 2.7.2 for the portion of the Loans so repaid, if required by the Administrative Agent, and upon payment (including prepayment) of the Loan in full. During the existence of any Event of Default, interest shall be payable on demand. 2.8.3 Default Interest. Commencing (i) ten (10) Business Days after the occurrence of any Event of Default under subsection 8.1.3 or (ii) upon the occurrence of any other Event of Default, and continuing thereafter while such Event of Default remains uncured, or after maturity or acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Obligations due and unpaid, at a rate per annum which is determined by adding 3.00% per annum to the Applicable Margin then in effect for such Loans and, in the case of Obligations not subject to an Applicable Margin, at a rate per annum equal to the Prime Rate plus 3.00%; provided, however, that on and after the expiration of any Interest Period applicable to any LIBOR Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Loan shall, during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Prime Rate plus 3.00%. 2.8.4 Maximum Legal Rate. Notwithstanding any contrary provision this Agreement, the Company's obligations to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that such Bank's contracting for or receiving such payment would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that such Bank may lawfully contract for, charge or receive, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law. 2.9 Fees. The Company shall pay to the Administrative Agent, for the account of the Banks (based on the allocations set forth below or such other allocations as may be agreed to by or among the Banks, or any of them, in writing from time to time), an unused commitment fee equal to (i) 0.20% per annum of the average during a calendar quarter of the daily difference between the Maximum Commitment Amount and the principal amount outstanding hereunder (the "Average Unused"), if the weighted average principal amount outstanding hereunder during such calendar quarter is less than fifty percent (50%) of the weighted average Maximum Commitment Amount during such calendar quarter, or (ii) 0.15% per annum of the Average Unused if the weighted average principal amount outstanding hereunder during such calendar quarter is greater than or equal to fifty percent (50%) of the weighted average Maximum Commitment Amount during such calendar quarter, in each case measured quarterly and payable quarterly in arrears on each October 1, January 1, April 1, July 1, and commencing July 1, 2001 (for the calendar quarter ending June 30, 2001). In addition, the Company shall pay to the Administrative Agent, for its own account or for the account of the Banks, as applicable, such fees as required by the letter agreement of even date herewith (the "Fee Letter") between the Borrower and the Administrative Agent. 2.10 Computation of Fees and Interest. All computations of interest and fees under this Agreement shall be made on the basis of a 360-day year and actual days elapsed, which results in more interest or fees being paid than if computed on the basis of a 365-day year. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. Any change in the interest rate on a Loan resulting from a change in the Prime Rate or the Reserve Percentage shall become effective as of the opening of business on the day on which such change in the Prime Rate or the Reserve Percentage becomes effective. Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. 2.11 Payments by the Company. 2.11.1 All payments (including prepayments) to be made by the Company on account of principal, interest, fees and other amounts required hereunder shall be made without set off or counterclaim and shall, except as otherwise expressly provided herein, be made to the Administrative Agent for the account of the Banks at the Administrative Agent's Payment Office, in dollars and in immediately available funds, no later than 10:00 a.m. San Francisco time on the date specified herein. The Administrative Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received. Any payment received by the Administrative Agent later than 10:00 a.m. San Francisco time shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. 2.11.2 Subject to the provisions set forth in the definition of the term "Interest Period," whenever any payment hereunder is stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. 2.11.3 Unless the Administrative Agent receives notice from the Company prior to the date on which any payment is due and payable to the Banks that the Company will not make such payment in full as and when required, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such date an amount equal to the amount then due and payable to such Bank. If and to the extent the Company has not made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent on demand the amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid. 2.12 Payments by the Banks to the Administrative Agent. 2.12.1 With respect to any Borrowing, unless the Administrative Agent receives notice from a Bank at least one (1) Business Day prior to the date of such Borrowing, that such Bank will not make available to the Administrative Agent, for the account of the Company, the amount of that Bank's Pro Rata Share of the Borrowing as and when required hereunder, the Administrative Agent may assume that each Bank has made such amount available to the Administrative Agent in immediately available funds on the borrowing date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Company such amount, that Bank shall, on the Business Day following such borrowing date, make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Administrative Agent submitted to any Bank with respect to amounts owing under this Section 2.13 shall be conclusive absent manifest error. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing Date, the Administrative Agent will notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. 2.12.2 The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any borrowing date. 2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Obligations owing to it any payment (whether voluntary, involuntary, or otherwise) in excess of its ratable share (or other share contemplated hereunder), such Bank shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded, and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (other than the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments. 2.14 Security; Appraisal of Approved Parcels. 2.14.1 All obligations of the Company under this Agreement, the Revolving Notes and all other Loan Documents (but not including the Environmental Indemnity) shall be secured in accordance with the Collateral Documents. 2.14.2 Notwithstanding any contrary provision of Section 4.1, the Administrative Agent and each Bank acknowledges that, as of the date of this Agreement, each of the Parcels identified on Exhibit E is an Approved Parcel having the Appraised Value set forth therein. 2.14.3 In the event the quarterly operating statements and rent rolls delivered to the Banks pursuant to Section 6.1(c) show that less than eighty percent (80%) of the net rentable area of the improvements on any Approved Parcel are leased to, and are occupied by, paying tenants under signed leases, any Bank may submit a written request (a "Reduction Request") to the Administrative Agent that the Approved Parcel Value of such Approved Parcel be reduced to $0.00. The Administrative Agent shall provide each Bank with written notice of the Reduction Request and shall request each Bank's written consent to such Reduction Request. Any reduction of the Approved Parcel Value for an Approved Parcel pursuant to this Section 2.14.3 shall require the consent of the Majority Banks. Upon the reduction of the Approved Parcel Value for any Approved Parcel pursuant to this Section 2.14.3, the Borrowing Base and the Availability shall be recomputed taking account of such reduction. The Company may, at any time, request that the Approved Parcel Value for any Approved Parcel that has been reduced pursuant to this Section 2.14.3 be redetermined by providing the Banks with (i) a certified rent roll showing that at least eighty percent (80%) of the net rentable area of the improvements on such Approved Parcel are leased to, and are occupied by, paying tenants under signed leases, and (ii) an operating statement for such Approved Parcel as of the most recent calendar month, and, following receipt of such certified rent roll and operating statement, the Approved Parcel Value shall automatically be redetermined for such Approved Parcel based on the operating statement delivered with the certified rent roll and the Borrowing Base and the Availability shall be recomputed taking account of such increased Approved Parcel Value. 2.14.4 At any time and from time to time the Administrative Agent shall have the right to obtain a new Appraisal of any Approved Parcel; provided, however, that so long as no Event of Default has occurred and remains uncured, the Company shall pay the cost of only one such Appraisal of each Approved Parcel during any twenty-four (24) consecutive calendar month period. For each Approved Parcel, the Company may request in writing, not more often than once during any twelve (12) consecutive calendar month period, that the Administrative Agent obtain a new Appraisal of such Approved Parcel at the Company's sole expense. 2.15 Release of Lien on Approved Parcel. 2.15.1 Release Conditions. The Administrative Agent shall reconvey and release its Lien on an Approved Parcel upon the Company's satisfaction of all of the following conditions precedent: (a) The Company shall have submitted to the Administrative Agent a written request that the Administrative Agent reconvey and release its Lien on such Approved Parcel; (b) The Company shall have paid to the Administrative Agent, for the account of the Banks, the lesser of (i) the Release Price for such Approved Parcel, or (ii) the then- outstanding aggregate principal amount of the Loans; (c) There shall have occurred no Default or Event of Default that remains uncured, and the Administrative Agent shall have received a certificate to that effect signed by a Responsible Officer; (d) The Approved Parcel to be reconveyed constitutes a legally separable and transferable lot or parcel under all applicable laws, ordinances, rules and regulations relating to the subdivision or parceling of real property and the transfer thereof; and (e) The foregoing conditions precedent are solely for the benefit of the Administrative Agent and the Banks, any may be waived in a writing signed by the Administrative Agent, with the consent of the Majority Banks, and in no other manner. 2.15.2 Application of Release Price . The Release Price of each Approved Parcel shall be applied, in the Administrative Agent's sole discretion, first to any amounts due hereunder other than interest or principal then due and payable, then to interest then due, and then to the prepayment of principal (first to any Prime Rate Loans then outstanding and then to LIBOR Loans with the shortest Interest Periods remaining). 2.16 Tenant Documents . The Company shall deliver to the Administrative Agent (or cause any Subsidiary of the Company to deliver to the Administrative Agent), within sixty (60) days after the recording of a Mortgage encumbering a Parcel for the benefit of the Administrative Agent and the Banks: (a) estoppel certificates, in form and substance satisfactory to the Administrative Agent, executed by each tenant whose lease covers at least twenty-five percent (25%) of the net rentable area of the improvements located on such Parcel; and (b) estoppel certificates and/or subordination, nondisturbance and attornment agreements, in form and substance satisfactory to the Administrative Agent, executed by such additional tenants as the Administrative Agent, by written notice to the Company prior to the recording of the Mortgage encumbering such Parcel, may require. In the event that the Company fails to deliver such estoppel certificates or subordination, nondisturbance and attornment agreements to the Administrative Agent within such sixty (60) day period, such Parcel shall, at the option of the Majority Banks exercised by written notice from the Administrative Agent to the Company within sixty (60) days after the expiration of the sixty-day period within which the Company is required to comply with the provisions of this Section 2.16, cease to be an Approved Parcel. Upon such written notice from the Administrative Agent, the Availability shall be adjusted to reflect such change and the Company shall repay to the Administrative Agent, for the benefit of the Banks, within thirty (30) days after such written notice from the Administrative Agent, any amounts payable pursuant to Section 2.7.2(a). The Banks shall be deemed to have waived their right to cause a Parcel to cease to be an Approved Parcel pursuant to this Section 2.16 if the Banks fail to act within sixty (60) days after the end of the period within which the Company is required to comply with the provisions of this Section 2.16. 2.17 Collateral Documents. If (a) any provision of any Collateral Document shall for any reason cease to be valid and binding on or enforceable against the Company or any Subsidiary of the Company party thereto, or the Company or any Subsidiary of the Company shall so state in writing or bring an action to limit its obligations or liabilities thereunder or (b) any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected and first priority security interest subject only to Permitted Liens and Permitted Encumbrances, the Parcel encumbered by such Collateral Document shall, at the option of the Majority Banks, immediately cease to be an Approved Parcel, the Availability shall immediately be adjusted to reflect such change and the Company shall repay to the Administrative Agent, for the benefit of the Banks, within thirty (30) days after notice from the Administrative Agent, any amounts payable pursuant to Section 2.7.2(a). 2.18 Increases and Decreases in Pro Rata Shares. Upon the Company's satisfaction of all of the conditions set forth in Section 4.2 of this Agreement, each Bank whose Pro Rata Share of the combined Commitments of all of the Banks has increased, as evidenced by the difference for each Bank between the Pro Rata Share reflected in the Existing Credit Agreement and the Pro Rata Share reflected in this Agreement, shall pay to the Administrative Agent, for distribution to the Banks whose Pro Rata Shares of the combined Commitments of all of the Banks has decreased pursuant to this Agreement, an amount equal to the product of the increase in such Bank's Pro Rata Share (expressed as a decimal) multiplied by the aggregate outstanding principal amount of the Loans on the date of determination. 2.19 Increase in Maximum Commitment Amount. 2.19.1 Subject to the provisions of Section 2.6, on the terms and subject to the conditions set forth in this Section 2.19, the Company may, at any time and from time to time prior to the Maturity Date, by notice to the Administrative Agent, request an increase in the Maximum Commitment Amount by (i) permitting any Bank to increase its Commitment (and accordingly increase the Maximum Commitment Amount by such amount), or (ii) inviting any Eligible Assignee that has previously been approved by the Administrative Agent in writing to become a Bank under this Agreement and to provide a commitment to lend hereunder (and accordingly increase the Maximum Commitment Amount by such amount); provided, however, that in no event shall such actions cause the Maximum Commitment Amount to increase above $175,000,000. 2.19.2 Each of the Banks acknowledges and agrees that, notwithstanding anything to the contrary in Section 10.1, (i) its consent to any such increase in the Maximum Commitment Amount shall not be required and (ii) Eligible Assignees may be added to this Agreement and any Bank may increase its Commitment without the consent or agreement of the other Banks (provided, however, that no Bank's Commitment may be increased without such Bank's consent), so long as the Administrative Agent and the Company have consented in writing to such Eligible Assignee or the increase in the Commitment of any of the Banks, as applicable. 2.19.3 The Administrative Agent shall not unreasonably withhold its consent to the Company's request for an increase in the Maximum Commitment Amount under this Section 2.19 provided that the Company satisfies all of the following conditions precedent: (a) any Eligible Assignee must be acceptable to the Administrative Agent in its sole discretion; (b) the Company and each such Bank or Eligible Assignee shall execute and deliver to the Administrative Agent (for the benefit of the Administrative Agent, the Company and such Bank or Eligible Assignee) supplemental signature pages to this Agreement and any Co-Lender Agreement among the Administrative Agent and the Banks relating to this Agreement, in the form of Exhibit I-1 attached hereto, in the case of a Bank, or in the form of Exhibit I-2 hereto in the case of an Eligible Assignee (each, a "Supplemental Signature Page"). (c) the Company shall pay a fee for such increase which must be acceptable to the Administrative Agent in its sole discretion; (d) the Administrative Agent shall have sent written notice of each such request by the Company to the Banks, together with notice of such Eligible Assignee's Commitment or such Bank's increased Commitment, as the case may be, and the effective date (the "Effective Date") of such increase in the Maximum Commitment Amount as set forth in the Supplemental Signature Page; and (e) all requirements of this Section 2.19 must be satisfied. 2.19.4 Upon the Effective Date, and despite any contrary provision of this Agreement (i) each such Eligible Assignee shall become a party to this Agreement, and thereafter shall have all of the rights and obligations of a Bank hereunder, (ii) each such Eligible Assignee or Bank shall simultaneously pay to the Administrative Agent, for distribution to the Banks whose Pro Rata Shares of the combined Commitments of all of the Banks has decreased as a result of the new Commitment of such Eligible Assignee or the increased Commitment of such Bank, an amount equal to the product of such Eligible Assignee's Pro Rata Share (or the increase in such Bank's Pro Rata Share), expressed as a decimal, multiplied by the aggregate outstanding principal amount of the Loans on the date of determination, and (iii) each such Eligible Assignee or Bank shall thereafter be obligated to make its Pro Rata Share of Borrowings to the Company up to and including the amount of such Eligible Assignee's or Bank's Pro Rata Share of the increased Maximum Commitment Amount, on the terms and subject to the conditions set forth in this Agreement. 2.19.5 Notwithstanding any contrary provision of this Section 2.19, no increase in the Maximum Commitment Amount will be permitted unless (a) all then outstanding Loans constitute Prime Rate Loans or (b) the Interest Periods for all outstanding LIBOR Loans will expire (and any new Interest Periods for any such LIBOR Loans will commence) concurrently with the date on which any increase in the Maximum Commitment Amount becomes effective. 2.19.6 The effectiveness of any increase in the Maximum Commitment Amount pursuant to Section 2.19.1 is subject to the Administrative Agent's receipt of a CLTA form 108.10 indorsement or other comparable indorsement to each policy of title insurance insuring a then-existing Deed of Trust, insuring that the validity and priority of each such Deed of Trust is not affected by the increase in the Maximum Commitment Amount. 3. Taxes, Yield Protection and Illegality. 3.1 Taxes. If any taxes (other than taxes on a Bank's net income) are at any time imposed on any payments under or in respect of this Agreement or any instrument or agreement required hereunder, including payments made pursuant to this Section 3.1, the Company shall pay all such taxes and shall also pay to the Administrative Agent, for the account of the applicable Bank, at the time interest is paid, all additional amounts which such Bank specifies as necessary to preserve the yield, after payment of such taxes, that such Bank would have received if such taxes had not been imposed. 3.2 Illegality. (a) If any Bank determines that (i) the introduction of any Requirement of Law, or any change in any Requirement of Law or in the interpretation or administration thereof, has made it unlawful, or (ii) any central bank or other Governmental Authority has asserted that it is unlawful, for such Bank or its applicable Lending Office to make LIBOR Loans, then, on notice thereof by such Bank to the Company and the Administrative Agent, the obligation of such Bank to make LIBOR Loans shall be suspended until such Bank shall have notified the Company and the Administrative Agent that the circumstances giving rise to such determination no longer exist. (b) If any Bank determines that it is unlawful to maintain any LIBOR Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Administrative Agent), prepay in full all LIBOR Loans of that Bank then outstanding, together with interest accrued thereon and any amounts required to be paid in connection therewith pursuant to Section 3.4, either on the last day of the Interest Period thereof, if such Bank may lawfully continue to maintain such LIBOR Loans to such day, or immediately, if such Bank may not lawfully continue to maintain such LIBOR Loans. (c) Notwithstanding any contrary provision of Section 2.1, if the Company is required to prepay any LIBOR Loan immediately as provided in subsection 3.2(b), then concurrently with such prepayment the Company shall borrow a Prime Rate Loan from the affected Bank in the amount of such repayment. (d) If the obligation of any Bank to make or maintain LIBOR Loans has been terminated, the Company may elect, by giving notice to such Bank through the Administrative Agent, that all Loans which would otherwise be made by such Bank as LIBOR Loans shall instead be Prime Rate Loans. (e) Before giving any notice to the Administrative Agent or the Company pursuant to this Section 3.2, the affected Bank shall designate a different Lending Office with respect to its LIBOR Loans if such designation would avoid the need for giving such notice or making such demand and would not, in the judgment of such Bank, be illegal or otherwise disadvantageous to such Bank. 3.3 Increased Costs and Reduction of Return. (a) If any Bank determines that, due to either (i) the introduction of, or any change (other than a change by way of imposition of, or increase in, reserve requirements included in the Reserve Percentage) in or in the interpretation of, any law or regulation or (ii) the compliance by such Bank (or its Lending Office) or any Corporation controlling such Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any LIBOR Loans, then the Company shall be liable for, and shall from time to time, upon demand therefor by such Bank with a copy to the Administrative Agent, pay to the Administrative Agent for the account of such Bank such additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank determines that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by such Bank (or its Lending Office), or any corporation controlling such Bank, with any Capital Adequacy Regulation affects or would affect the amount of capital that such Bank or any corporation controlling such Bank is required or expected to maintain, and such Bank (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of any of its loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Company through the Administrative Agent, the Company shall immediately pay to the Administrative Agent, for the account of such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank for such increase. 3.4 Funding Losses. The Company agrees to pay to the Administrative Agent, from time to time, for the account of the Banks, any amount that would be necessary to reimburse the Banks for, and to hold the Banks harmless from, any loss or expense which the Banks may sustain or incur as a consequence of: (a) the failure of the Company to make any payment or prepayment of principal of any LIBOR Loan (including payments made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Borrowing Notice or a Conversion/Continuation Notice; (c) the failure of the Company to make any prepayment after the Company has given a notice in accordance with Section 2.6; (d) the prepayment (including pursuant to Section 2.7.2) of a LIBOR Loan on a day which is not the last day of the Interest Period with respect thereto; (e) the conversion pursuant to subsection 2.5 of any LIBOR Loan to a Prime Rate Loan on a day that is not the last day of the respective Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained to maintain the LIBOR Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. Solely for purposes of calculating amounts payable by the Company to the Administrative Agent, for the account of the Banks, under this Section 3.4, each LIBOR Loan (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the LIBOR Rate for such LIBOR Loan by a matching deposit or other borrowing in the applicable offshore dollar interbank market for a comparable amount and for a comparable period, whether or not such LIBOR Loan is in fact so funded. 3.5 Inability to Determine Rates. If any Bank determines that for any reason adequate and reasonable means do not exist for ascertaining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Loan or that the LIBOR Rate applicable pursuant to subsection 2.9.1 for any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to such Bank of funding such Loan, such Bank will forthwith give notice of such determination to the Company through the Administrative Agent. Thereafter, the obligation of such Bank to make or maintain LIBOR Loans hereunder shall be suspended until such Bank revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Borrowing Notice or Conversion/Continuation Notice then submitted by it. If the Company does not revoke such notice, the affected Bank shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Prime Rate Loans instead of LIBOR Loans. 3.6 Certificate of Bank. Any Bank, if claiming reimbursement or compensation pursuant to this Article 3, shall deliver to the Company through the Administrative Agent a certificate setting forth in reasonable detail the amount payable to such Bank hereunder, and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.7 Survival. . The agreements and obligations of the Company in this Article 3 shall survive the payment and performance of all other Obligations. 4. Conditions Precedent. 4.1 Conditions to Approving Parcels. Subject to the provisions of Section 2.14.2, a Parcel shall be considered an Approved Parcel for purposes of this Agreement upon satisfaction of all of the following conditions precedent: 4.1.1 Fee Ownership The Company owns fee title to such Parcel. 4.1.2 Satisfactory Parcel Such Parcel either (a) is satisfactory to Majority Banks in their sole and absolute discretion or (b) satisfies all of the following conditions: (1) the Parcel is improved, and the improvements located on such Parcel are and will be used solely for office, research and development, bulk industrial or flexible industrial purposes, (2) more than eighty percent (80%) of the net rentable area of the improvements located on such Parcel is covered by signed leases with third-party tenants having remaining terms of three (3) years or longer, and (3) the Administrative Agent has received evidence in form and substance satisfactory to the Administrative Agent of such Parcel's compliance with the foregoing conditions. 4.1.3 No Hazardous Materials. Such Parcel is free from all Hazardous Materials, including asbestos, other than commercially reasonable quantities of Hazardous Materials typically used in properties similar to such Parcel and permitted by all applicable Environmental Laws, and the Administrative Agent shall have received evidence in form and substance satisfactory to the Majority Banks of such Parcel's compliance with this condition. 4.1.4 Appraised Value. An Appraised Value shall have been established for such Parcel. 4.1.5 No Liens. Such Parcel and all related personal property is (or at the time a Mortgage is recorded against such Parcel it shall be) free and clear of all Liens other than Liens securing nondelinquent taxes or assessments. 4.1.6 Deliveries to the Administrative Agent. The Administrative Agent shall have received each of the following in form and substance satisfactory to the Administrative Agent: (1) a current ALTA survey of such Parcel and Surveyor's Certification, including a complete legal description; (2) copies of all exceptions to title with respect to such Parcel; (3) at the Administrative Agent's request, copies of any available plans and specifications for any improvements located on such Parcel; (4) an environmental site assessment for such Parcel, dated not more than twelve (12) months prior to the date the Company submits the Parcel to the Administrative Agent for approval by the Banks, prepared by a qualified firm acceptable to the Administrative Agent, stating, among other things, that such Parcel is free from Hazardous Materials other than commercially reasonable quantities of Hazardous Materials typically used in properties similar to such Parcel, and that any such Hazardous Materials located thereon and all operations conducted thereon are in compliance with all Environmental Laws and showing any Estimated Remediation Costs; (5) at the Administrative Agent's request, copies of all leases and contracts not cancelable on thirty (30) days' notice and a rent roll relating to all or any portion of such Parcel; (6) At the Administrative Agent's request, financial statements for any Major Tenant that are available to the Company; (7) an operating report for such Parcel for not less than the four (4) most recent consecutive quarters, together with a projection of the operating results for such Parcel for the following twelve (12) months; (8) if such Parcel has been owned by the Company for more than one (1) calendar month but fewer than four (4) consecutive calendar quarters, monthly operating statements for such Parcel for each full calendar month that the Company has owned such Parcel; (9) at the Administrative Agent's request, a cost budget for any anticipated renovation of such Parcel; (10) a duly executed Mortgage, Assignment of Leases, financing statement(s) and assignment of contracts covering such Parcel; (11) such certificates relating to the authority of the Persons signing the documents required under Section 4.1.6(10) as the Administrative Agent may reasonably request; (12) at the Administrative Agent's request, a written opinion of counsel to the Company and the Person signing the documents required under Section 4.1.6(10) practicing in the jurisdiction in which such Parcel is located (which counsel shall be acceptable to the Administrative Agent) covering such matters relating to the Company, such other Person, the Loans and such Parcel as the Administrative Agent may require; (13) such consents, subordination agreements and other documents and instruments executed by tenants and other Persons party to material contracts relating to such Parcel as the Administrative Agent may request; (14) certificates of insurance and loss payable endorsements for all policies required pursuant to Section 6.6, showing the same to be in full force and effect with respect to such Parcel; and (15) all other documents reasonably required by the Administrative Agent. 4.1.7 Recording of the Mortgage The Mortgage relating to such Parcel shall have been duly recorded in the official records of the jurisdiction in which such Parcel is located. 4.1.8 Title Insurance The Company shall, at its sole expense, have delivered to the Administrative Agent an ALTA form extended coverage lender's policy of title insurance, or evidence of a commitment therefor satisfactory to the Administrative Agent, in form, substance and amount, and issued by one or more insurers, reasonably satisfactory to the Administrative Agent, together with all indorsements and binders thereto reasonably required by the Administrative Agent, naming the Administrative Agent as the insured, insuring the Mortgage relating to such Parcel to be a valid first priority lien upon such Parcel, and showing such Parcel subject only to such Mortgage and the Permitted Encumbrances. 4.1.9 Filing of Financing Statements Financing statement(s) shall have been filed with all of the officials necessary, in the Administrative Agent's sole judgment, to perfect the security interests created by the Mortgage relating to such Parcel and all related personal property. 4.1.10 Perfection of Liens The Administrative Agent shall have received satisfactory evidence that all other actions necessary, or in the Administrative Agent's sole judgment desirable, to perfect and protect the first priority security interests for the benefit of the Administrative Agent created by the Collateral Documents have been taken. 4.1.11 Tax Reporting Service The Company shall, at its sole expense, have delivered to the Administrative Agent evidence of a contract with a property tax reporting service for such Parcel for a period of not less than thirty (30) years. 4.1.12 Costs The Company shall have paid to the Administrative Agent all amounts payable pursuant to Section 10.4 in connection with such Parcel and the Mortgage relating to such Parcel. 4.1.13 Expenses The Administrative Agent shall have received satisfactory evidence that the Company has paid all title insurance premiums, tax service charges, documentary stamp or intangible taxes, recording fees and mortgage taxes payable in connection with such Parcel, the recording of the Mortgage relating to such Parcel or the issuance of the Title Policy (whether due on the recording date of the Mortgage or in the future) including sums due in connection with any future advances. 4.2 Conditions of Initial Loan The obligation of the Banks to make the initial Loan after the Closing Date is subject to the satisfaction of all of the following conditions precedent: 4.2.1 Deliveries to the Administrative Agent The Administrative Agent shall have received, on or before the Closing Date, all of the following in form and substance satisfactory to the Administrative Agent and its counsel: (a) this Agreement, the Revolving Notes, the Fee Letter and the Environmental Indemnity executed by the Company; (b) fully executed and acknowledged originals of a recordable modification agreement (the "Short Form Modification Agreement") substantially in the form attached as Exhibit F hereto to be recorded in each county in which a Mortgage encumbering a Parcel has been recorded prior to the Closing Date; (c) copies of the resolutions of the board of directors of the Company approving and authorizing the execution, delivery and performance by the Company of this Agreement, the other Loan Documents to be delivered hereunder, and the Environmental Indemnity, and authorizing the borrowing of the Loans, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; (d) a certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute and deliver, as applicable, this Agreement, all other Loan Documents to be delivered hereunder, and the Environmental Indemnity; (e) copies of the resolutions of the board of directors of each Subsidiary of the Company owning fee title to a Parcel listed on Exhibit E attached hereto, approving and authorizing the execution, delivery and performance by such Subsidiary of any Loan Documents to be delivered hereunder, certified as of the Closing Date by the Secretary or an Assistant Secretary of such Subsidiary; (f) a certificate of the Secretary or Assistant Secretary of each Subsidiary of the Company owning fee title to a Parcel listed on Exhibit E attached hereto, certifying the names and true signatures of the officers of such Subsidiary authorized to execute and deliver, as applicable, any Loan Documents to be delivered hereunder; (g) the articles or certificate of incorporation of the Company and of each of its Subsidiaries owning fee title to a Parcel listed on Exhibit E attached hereto as in effect on the Closing Date, certified by the Secretary of State of the state of incorporation of the Company or such Subsidiary, as applicable, as of a recent date and by the Secretary or Assistant Secretary of the Company or such Subsidiary, as applicable, as of the Closing Date; and (h) a good standing certificate for the Company and for each of its Subsidiaries owning fee title to a Parcel listed on Exhibit E attached hereto as in effect on the Closing Date from the Secretary of State of (i) its state of incorporation and (ii) each state in which an Approved Parcel is situated, evidencing that the Company or such Subsidiary, as applicable, is qualified to do business as a foreign corporation in said state as of a recent date, together with bringdown certificates by telex or telefacsimile dated the Closing Date; (i) an opinion of counsel to the Company acceptable to the Administrative Agent, addressed to the Administrative Agent, substantially in the form of Exhibit D-1; (j) opinions of local counsel to the Administrative Agent in the States of Arizona, Colorado and Washington addressed to the Administrative Agent and the Banks, substantially in the form of Exhibit D-2. (k) a certificate signed by a Responsible Officer, dated as of the Closing Date, stating that (i) the representations and warranties contained in Article 5 are true and correct on and as of such date, as though made on and as of such date; (ii) the calculation of the Borrowing Base as of March 31, 2001, is true and correct on and as of such date; (iii) no Default or Event of Default exists or would result from the initial Loan; and (iv) there has occurred since December 31, 2000, no event or circumstance that could reasonably be expected to result in a Material Adverse Effect; (l) a certified copy of financial statements of the Company and its Subsidiaries referred to in Section 5.11; (m) such other approvals, opinions or documents as the Administrative Agent may request; (n) such assurance as the Administrative Agent may require that the validity and priority of any Mortgage encumbering a Parcel prior to the Closing Date has not been and will not be impaired by this Agreement or the transactions contemplated by it, including but not limited to, a 110.5 Endorsement to be attached to each policy of title insurance insuring the lien of a Mortgage; (o) an Appraisal for each Parcel listed on Exhibit E attached hereto performed not more than twelve (12) months prior to the date of this Agreement; and (p) an environmental site assessment for each Parcel listed on Exhibit E attached hereto performed not more than five (5) years prior to the date of this Agreement, prepared by a qualified firm acceptable to the Administrative Agent, stating, among other things, that such Parcel is free from Hazardous Materials other than commercially reasonable quantities of Hazardous Materials typically used in properties similar to such Parcel, and that any such Hazardous Materials located thereon and all operations conducted thereon are in compliance with all Environmental Laws and showing any Estimated Remediation Costs. 4.2.2 Payment of Expenses The Company shall have paid all costs, accrued and unpaid fees and expenses incurred by the Administrative Agent, to the extent then due and payable, on the Closing Date, including Attorney Costs incurred by the Administrative Agent, to the extent invoiced prior to or on the Closing Date, together with such additional amounts of Attorney Costs as shall constitute a reasonable estimate of Attorney Costs incurred or to be incurred through the closing proceedings, provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Administrative Agent, including any such costs, fees and expenses arising under or referenced in Section 10.4. 4.2.3 Payment of Fees Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date. 4.2.4 Maximum Commitment Amount The Maximum Commitment Amount shall be not less than $125,000,000. 4.3 Conditions to All Borrowings The obligation of the Banks to make any Loan (including the initial Loan) is subject to the satisfaction of all of the following conditions precedent on the relevant borrowing date: 4.3.1 Minimum Number of Approved Parcels At least seven (7) Parcels shall be Approved Parcels. 4.3.2 Notice of Borrowing The Administrative Agent shall have received a Borrowing Notice. 4.3.3 Continuation of Representations and Warranties The representations and warranties made by the Company contained in Article 5 shall be true and correct on and as of such borrowing date with the same effect as if made on and as of such borrowing date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). 4.3.4 No Existing Default No Default or Event of Default shall exist or shall result from such Loan. 4.3.5 No Future Advance Notice The Administrative Agent shall not have received from the Company any notice that any Collateral Document will no longer secure future advances or future Loans to be made or extended under this Agreement. 4.3.6 Further Assurances The Company shall have executed and acknowledged (or caused to be executed and acknowledged) and delivered to the Administrative Agent all documents and taken all actions, reasonably required by the Administrative Agent or the Banks from time to time to confirm the rights created or now or hereafter intended to be created by the Loan Documents or the Environmental Indemnity, or otherwise to carry out the purposes of the Loan Documents and the transactions contemplated thereunder. 4.3.7 Title Insurance The Administrative Agent shall have received, in form and substance satisfactory to the Banks, from any title insurer who issued a Title Policy, all indorsements, binders and modifications to such policy or policies reasonably required by the Banks. Each Borrowing Notice submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such Borrowing Notice and as of the date of each Loan, that the conditions in Section 4.3 are satisfied. 4.4 Letters of Credit In addition to the conditions set forth in Sections 4.2 and 4.3, Bank of America's obligation to issue any Letter of Credit is subject to the satisfaction of all of the following conditions precedent on the relevant issuance date: 4.4.1 The Company shall have executed and delivered to the Administrative Agent an application and agreement for standby letter of credit on Bank of America's standard form, a copy of which is attached hereto as Exhibit G. 4.4.2 The Company shall have paid to the Administrative Agent, (i) for the account of the Banks, a letter of credit fee an amount equal to the Applicable Margin then applicable to LIBOR Loans (expressed as a per annum rate) multiplied by the face amount of the requested Letter of Credit and based on the expiry date set forth therein, and (ii) for the account of Bank of America, all other costs and expenses of Bank of America as issuer of the requested Letter of Credit. 5. Representations and Warranties The Company represents and warrants to the Administrative Agent and each of the Banks that: 5.1 Existence and Power The Company and each of its Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; and (b) is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification. The Company and each of its Subsidiaries (c) has the power and authority, and has obtained all governmental licenses, authorizations, consents and approvals needed, to own its assets, to carry on its business and to execute, deliver and perform its obligations under the Loan Documents to which it is a party and the Environmental Indemnity; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clause (b) or clause (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.2 Corporate Authorization; No Contravention The execution, delivery and performance by the Company of this Agreement, any other Loan Document and the Environmental Indemnity have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of the Company's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its Property is subject; or (c) violate any Requirement of Law. 5.3 Governmental Authorization No approval, consent, exemption, authorization or other action by, or notice to or filing with, any Governmental Authority (except for recordings or filings in connection with the Liens granted to the Administrative Agent under the Collateral Documents) is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company of this Agreement, any other Loan Document to which the Company is a party, or the Environmental Indemnity. 5.4 Binding Effect This Agreement, each other Loan Document and the Environmental Indemnity constitute the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.5 Litigation Except as specifically disclosed in Schedule 5.5, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, any of its Subsidiaries or any of their respective Properties, which (a) purport to affect or pertain to this Agreement, any other Loan Document or the Environmental Indemnity, or any of the transactions contemplated hereby or thereby, or (b) if determined adversely to the Company or one or more of its Subsidiaries would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement, any other Loan Document or the Environmental Indemnity, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.6 No Default No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. Neither the Company nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect. 5.7 ERISA Compliance Each Plan and Multi-employer Plan is in full compliance with applicable Requirements of Law, including ERISA, and no ERISA Events or accumulated funding deficiencies within the meaning of ERISA have occurred with respect to any Qualified Plan or Multi-employer Plan that, in the aggregate, could result in a Material Adverse Effect. 5.8 Use of Proceeds; Margin Regulations The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Section 6.11, and are intended to be and shall be used in compliance with Section 7.6. 5.9 Title to Properties The Company and each of its Subsidiaries has good record and marketable title in fee simple to all real Property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. As of the Closing Date, the Property of the Company and each of its Subsidiaries is subject to no Liens that are not disclosed in the most recent financial statements delivered to the Administrative Agent other than Permitted Liens and, with respect to a Property that does not serve as Collateral for any of the Obligations (i) Liens securing the performance of obligations under recorded covenants, conditions and restrictions, easements or other agreements among adjoining landowners, and (ii) Liens securing purchase money financing of fixtures and equipment, or securing other indebtedness that in the aggregate does not exceed $100,000. 5.10 Taxes The Company and its Subsidiaries have filed all federal and other material tax returns and reports required to be filed, and have paid all federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP, and no Notice of Lien has been filed or recorded. There is no proposed tax assessment against the Company or any of its Subsidiaries that would, if the assessment were made, have a Material Adverse Effect. 5.11 Financial Condition. (a) The audited consolidated financial statements of the Company dated December 31, 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the year ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) are complete, accurate and fairly present the financial condition of the Company and its consolidated subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) except as specifically disclosed in Schedule 5.11, show all material Indebtedness and other liabilities, direct or contingent, of the Company and its consolidated subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations. (b) Since December 31, 2000, there has been no Material Adverse Effect. 5.12 Environmental Matters. (a) Except as specifically disclosed in Schedule 5.12, to the best knowledge of the Company the on-going operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws, except such non-compliance that would not (if enforced in accordance with applicable law) result in liability in excess of $50,000 in the aggregate. (b) Except as specifically disclosed in Schedule 5.12, the Company and each of its Subsidiaries has obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") and necessary for its ordinary course operations, all such Environmental Permits are in good standing, and the Company, each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits. (c) Except as specifically disclosed in Schedule 5.12, none of the Company, any of its Subsidiaries or any of their respective present Property or operations is subject to any outstanding written order from, or agreement with, any Governmental Authority, or subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material. (d) Except as specifically disclosed in Schedule 5.12, to the best knowledge of the Company there are no Hazardous Materials or other conditions or circumstances existing with respect to any Parcel, or arising from operations of the Company or any of its Subsidiaries prior to the Closing Date, that would reasonably be expected to give rise to Environmental Claims with a potential liability of the Company and its Subsidiaries in excess of $50,000 in the aggregate for any such condition, circumstance or Parcel. In addition, (i) neither the Company nor any of its Subsidiaries has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials off-site, and (ii) the Company and its Subsidiaries have notified all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and have met all notification requirements under Title III of CERCLA and all other Environmental Laws. 5.13 Regulated Entities Neither the Company nor any Person controlling the Company is (a) an "Investment Company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other federal or state statute or regulation limiting its ability to incur Indebtedness. 5.14 No Burdensome Restrictions The Company is not a party to, or bound by, any Contractual Obligation, or subject to any charter or corporate restriction or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 5.15 Solvency The Company is Solvent, and each of its Subsidiaries is Solvent. 5.16 Subsidiaries; Equity Investments As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.16, and has no equity investments in any corporation, partnership or other entity other than those specifically disclosed in part (b) of Schedule 5.16. 5.17 Brokers; Transaction Fees Neither the Company nor any of its Subsidiaries has any obligation to any Person in respect of any finder's, broker's or investment banker's fee in connection with the transactions contemplated hereby. 5.18 Insurance The Properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where the Company or such Subsidiary operates. 5.19 Full Disclosure None of the representations or warranties made by the Company or any of its Subsidiaries in the Loan Documents or the Environmental Indemnity, as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company or any of its Subsidiaries in connection with the Loan Documents, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. 6. Affirmative Covenants The Company covenants and agrees that, so long as any Bank shall have any obligation hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Administrative Agent, on behalf of the Majority Banks, waives compliance in writing: 6.1 Financial Statements The Company shall deliver to each of the Banks, in form and detail satisfactory to the Administrative Agent: (a) as soon as publicly available, but not later than 120 days after the end of each calendar year, a copy of the audited consolidated balance sheets of the Company as at the end of such year and the related consolidated statements of income, shareholders' equity and cash flows for such calendar year, setting forth in each case in comparative form the figures for the previous year, and accompanied by the opinion of a nationally recognized independent public accounting firm stating that such consolidated financial statements present fairly the financial positions of the Company for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; (b) as soon as publicly available, but not later than 60 days after the end of each of the first three (3) calendar quarters of each year, a copy of the unaudited consolidated balance sheets of the Company as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, certified by an appropriate Responsible Officer as being complete and correct and fairly presenting the financial position and results of operations of the Company in accordance with GAAP; (c) as soon as available, but not later than 60 days after the end of each calendar quarter of each year, operating statements and rent rolls for each Property securing the Loans, certified by an appropriate Responsible Officer as being complete and correct and fairly presenting the financial position and the results of operations of the Approved Parcel to which it relates, together with any additional information relating to any such Property reasonably requested by the Administrative Agent; (d) as soon as available, but not later than 120 days after the end of each calendar year, rolling two-year consolidated balance sheet, income statement and cash flow projections for the Company, together with a copy of the annual business plan approved by the Company's board of directors, in each case certified by an appropriate Responsible Officer of the Company as being complete and correct in all material respects; and (e) not later than 60 days after the end of each calendar quarter of each year, a report in form and substance satisfactory to the Administrative Agent concerning the status of all development activity of the Company and each of its Subsidiaries, certified by an appropriate Responsible Officer of the Company as being complete and correct in all material respects. 6.2 Certificates; Other Information The Company shall furnish to the Administrative Agent, with sufficient copies for each Bank: (a) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and (b) above, a certificate of a Responsible Officer in form and detail substantially similar to the certificates previously delivered to the Administrative Agent, (i) stating that, to the best of such officer's knowledge, the Company, during such period, has observed and performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified (by applicable subsection reference) in such certificate, (ii) showing in detail the calculations supporting such statement in respect of Sections 2.7.2(a), 7.3, 7.8, 7.10, 7.11, 7.12, 7.15, 7.16, 7.17 and 7.18, and (iii) showing in detail the calculations supporting the calculations of Leverage and Total Approved Parcel Value; (b) promptly after the same are sent, copies of all financial statements and reports which the Company sends to its shareholders; and promptly after the same are filed (but in the case of the Company's (i) Form 10-K filing, in no event later than 120 days after the end of the calendar year to which it relates, and (ii) Form 10-Q filing, in no event later than 60 days after the end of the calendar quarter to which it relates), copies of all financial statements and regular, periodical or special reports which the Company may make to, or file with, the SEC or any successor or similar Governmental Authority; and (c) promptly, such additional business, financial, corporate affairs and other information as the Administrative Agent may from time to time reasonably request. 6.3 Notices The Company shall promptly notify the Administrative Agent: (a) upon, but in no event later than ten (10) days after, becoming aware of (i) the occurrence of any Default or Event of Default, and (ii) the occurrence or existence of any event or circumstance that foreseeable will become a Default or Event of Default; (b) of (i) any breach or non-performance of, or any default under, any Contractual Obligation of the Company or any of its Subsidiaries which could result in a Material Adverse Effect; and (ii) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority; (c) of the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary of the Company (i) in which the amount of damages claimed is $500,000 or more, (ii) in which injunctive or similar relief is sought and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement, any Loan Document or the Environmental Indemnity; (d) upon, but in no event later than ten (10) days after, becoming aware of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Company, any Subsidiary of the Company or any of their respective Properties pursuant to any applicable Environmental Laws, (ii) all other Environmental Claims, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of any real Property of the Company or any Subsidiary of the Company that could reasonably be anticipated to cause such Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such Property under any Environmental Laws; (e) of any of the following ERISA events affecting the Company or any member of its Controlled Group (but in no event more than ten (10) days after such event), together with a copy of any notice with respect to such event that may be required to be filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any member or its Controlled Group with respect to such event: (i) an ERISA Event; (ii) the adoption of any new Plan that is subject to Title IV of ERISA or section 412 of the Code by any member of the Controlled Group; (iii) the adoption of any amendment to a Plan that is subject to Title IV of ERISA or section 412 of the Code, if such amendment results in a material increase in benefits or Unfunded Pension Liabilities; or (iv) the commencement of contributions by any member of the Controlled Group to any Plan that is subject to Title IV of ERISA or section 412 of the Code; (f) any Material Adverse Effect subsequent to the date of the most recent audited financial statements of the Company delivered to the Administrative Agent pursuant to subsection 6.1(a); (g) of any change in accounting policies or financial reporting practices by the Company or any of its Subsidiaries within ten (10) days of their adoption; and (h) of any notice of redemption given with respect to any or all of the Company's preferred shares, within ten (10) days of the date of such notice. Each notice pursuant to this Section shall be accompanied by a written statement by a Responsible Officer of the Company setting forth details of the occurrence referred to therein, and stating what action the Company proposes to take with respect thereto and at what time. Each notice under subsection 6.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated. 6.4 Preservation of Corporate Existence, Etc. Subject to the provisions of Section 7.2, the Company shall, and shall cause each of its Subsidiaries to: (a) preserve and maintain in full force and effect its corporate or partnership existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business; and (c) use its reasonable efforts, in the Ordinary Course of Business, to preserve its business organization. 6.5 Maintenance of Property The Company shall maintain, and shall cause each of its Subsidiaries to maintain, and preserve all of its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.6 Insurance In addition to insurance requirements set forth in the Collateral Documents, the Company shall maintain, and shall cause each of its Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to its Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, including workers' compensation insurance, public liability insurance, property and casualty insurance and rental interruption insurance, the amount of which shall not be reduced by the Company or any Subsidiary of the Company in the absence of thirty (30) days' prior notice to the Administrative Agent. All casualty insurance covering an Approved Parcel maintained by the Company and its Subsidiaries shall name the Administrative Agent, as administrative agent for the Banks, as loss payee, and all liability, rental interruption and other insurance covering an Approved Parcel maintained by the Company and its Subsidiaries shall name the Administrative Agent, as administrative agent for the Banks, as additional insured as its interest may appear. Upon request of the Administrative Agent, the Company shall furnish the Administrative Agent at reasonable intervals (but not more often than once per calendar year) a certificate of a Responsible Officer of the Company (and, if requested by the Administrative Agent any insurance broker for the Company) setting forth the nature and extent of all insurance maintained by the Company and its Subsidiaries in accordance with this Section 6.6 or any Collateral Documents (and which, in the case of a certificate of a broker, were placed through such broker). 6.7 Payment of Obligations The Company shall, and shall cause its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the imposition of a Lien on, or the forfeiture or sale of, any Property of the Company or any of its Subsidiaries) and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its Property unless the same are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the imposition of a Lien on, or the forfeiture or sale of, any Property of the Company or any of its Subsidiaries) and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.8 Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business or any of its Property, except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.9 Inspection of Property and Books and Records. The Company shall maintain, and shall cause each of its Subsidiaries to maintain, proper books of record and account in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiaries. The Company shall permit, and shall cause each of its Subsidiaries to permit, representatives of the Administrative Agent or any Bank to visit and inspect any of their respective Properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers and independent public accountants, all at the expense of the Company (which shall include all internal or outside legal and other consultant fees and other out-of-pocket expenses incurred by the Administrative Agent or any of the Banks in connection with any such inspection, but shall not include the Administrative Agent's or any Bank's normal overhead or employee costs of administering the Loans) and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, that when an Event of Default exists the Administrative Agent or any Bank may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice. No actions by the Administrative Agent or any Bank pursuant to this Section 6.9 shall unreasonably interfere with (a) the performance by the Company's employees of their duties or (b) the occupancy of any of the Company's tenants. 6.10 Environmental Laws The Company shall, and shall cause each of its Subsidiaries to, conduct its operations and keep and maintain its Property in compliance with all Environmental Laws whose violation could, individually or in the aggregate, result in liability in excess of $250,000. Upon the written request of the Administrative Agent or any Bank, the Company shall submit, and cause each of its Subsidiaries to submit, to the Administrative Agent, with sufficient copies for each Bank, at the Company's sole cost and expense, at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to subsection 6.3(d), that could, individually or in the aggregate, result in liability in excess of $250,000. 6.11 Use of Proceeds Subject to the provisions of Section 3.2(c), the Company shall use the proceeds of the Loans solely for the purpose of (i) facilitating the Company's acquisition of improved real property (subject to the provisions of Section 7.12), (ii) financing the Company's operating expenses, including development activities (subject to the provisions of Sections 7.15 and 7.16), and (iii) providing working capital to the Company. 6.12 Solvency The Company shall at all times be, and shall cause each of its Subsidiaries to be, Solvent. 6.13 Further Assurances. Promptly upon request by the Administrative Agent, the Company shall (and shall cause any of its Subsidiaries to) do such further acts, and execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all deeds, conveyances, security agreements, deeds of trust, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments, as the Administrative Agent may reasonably require from time to time in order to (i) carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) subject to the Liens created by any of the Collateral Documents any of the Properties, rights or interests covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Administrative Agent and the Banks the rights granted or now or hereafter intended to be granted to the Administrative Agent or the Banks under any Loan Document or under any other document executed in connection therewith. 6.14 Registration of Capital Stock. At least one class or series of outstanding shares of the Company's Capital Stock shall be listed on the New York Stock Exchange or another nationally recognized stock exchange. 7. Negative Covenants. The Company hereby covenants and agrees that, so long as any Bank shall have any obligation hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Administrative Agent, on behalf of the Majority Banks, waives compliance in writing: 7.1 Limitation on Liens. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of the Collateral, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) any Lien created under any Loan Document; (b) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.7, provided that no Notice of Lien has been filed or recorded; or (c) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the Ordinary Course of Business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto. 7.2 Consolidations and Mergers. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) any Subsidiary of the Company may merge with (i) the Company, provided that the Company shall be the continuing or surviving Person, or (ii) any one or more subsidiaries of the Company, provided that if any transaction shall be between a Subsidiary and a wholly-owned Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person; and (b) any Subsidiary of the Company may sell all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or a wholly-owned Subsidiary of the Company; provided, however, that so long as the continuing or surviving Person remains liable for all of the Company's obligations to the Banks under the Loan Documents, the Administrative Agent and the Banks shall not unreasonably withhold their consent to any merger or consolidation of the Company or any of its Subsidiaries with or into any other Person. 7.3 Loans and Investments. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, make any advance, loan, extension of credit or capital contribution to any Person, including any Affiliate of the Company, or enter into any partnership, joint venture, limited liability company or similar entity with any non-Affiliate of the Company, except for (a) advances, loans, extensions of credit or capital contributions to partnerships, limited liability companies or joint ventures whose assets, in the aggregate, do not at any time exceed ten percent (10%) of the Gross Asset Value of the Company and its consolidated subsidiaries at such time, (b) loans to tenants for tenant improvements in a maximum principal amount of $1,500,000 for any such loan, and (c) loans to employees of the Company to finance their purchase of Company stock, where such employee loans are reported on the Company's financial statements in a manner that does not affect the Company's total assets, total liabilities or net worth; provided, however, that at any time the aggregate amount of (i) advances, loans, extensions of credit or capital contributions that the Company and its consolidated subsidiaries have made to partnerships, limited liability companies or joint ventures, (ii) the acquisition, development and construction costs, determined on a GAAP basis before depreciation, of development projects with which the Company or its consolidated subsidiaries are then involved, and (iii) the value of undeveloped land then owned by the Company and its consolidated subsidiaries, shall not exceed twenty percent (20%) of the Gross Asset Value of the Company and its consolidated subsidiaries at such time. 7.4 Limitation on Indebtedness The Company shall not, and shall not suffer or permit any of its Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to any unsecured Indebtedness in an aggregate principal amount in excess of $2,500,000.00, except (a) accounts payable to trade creditors for goods and services and current operating liabilities (not the result of the borrowing of money) incurred in the Ordinary Course of Business of the Company or such Subsidiary in accordance with customary terms and paid within the specified time, and (b) a loan from the Company to Bedford Realty Partners, L.P., a California limited partnership, in a principal amount not to exceed $1,500,000.00. 7.5 Transactions with Affiliates The Company shall not, and shall not suffer or permit any of its Subsidiaries to, enter into any transaction with any Affiliate of the Company or of any such Subsidiary, except (a) as expressly permitted by this Agreement, or (b) in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of the Company or such Subsidiary; in each case (a) and (b), upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such Subsidiary. 7.6 Use of Proceeds The Company shall not, and shall not suffer or permit any of its Subsidiaries to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock (other than shares of the Company's common or preferred stock), (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock (other than shares of the Company's common or preferred stock), (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Securities and Exchange Act of 1934 or any regulations promulgated thereunder. 7.7 Contingent Obligations. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Contingent Obligations except endorsements for collection or deposit in the Ordinary Course of Business. 7.8 Creation of Subsidiaries. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, (i) form any additional Subsidiaries other than wholly-owned Subsidiaries, or (ii) enter into any additional partnership, joint venture or similar business arrangement with any Person except a partnership, limited liability company or joint venture whose assets, when combined with the aggregate assets of all other such partnerships, limited liability companies and joint ventures, do not exceed twenty percent (20%) of the Gross Asset Value of the Company. 7.9 Compliance with ERISA. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, (i) terminate any Plan subject to Title IV of ERISA so as to result in any material (in the opinion of the Administrative Agent) liability to the Company or any ERISA Affiliate, (ii) permit to exist any ERISA Event, or any other event or condition, which presents the risk of a material (in the opinion of the Administrative Agent) liability to any member of the Controlled Group, (iii) make a complete or partial withdrawal (within the meaning of ERISA Section 4201) from any Multi-employer Plan so as to result in any material (in the opinion of the Administrative Agent) liability to the Company or any ERISA Affiliate, (iv) enter into any new Plan or modify any existing Plan so as to increase its obligations thereunder which could result in any material (in the opinion of the Administrative Agent) liability to any member of the Controlled Group, or (v) permit the present value of all nonforfeitable accrued benefits under any Plan (using the actuarial assumptions utilized by the PBGC upon termination of a Plan) materially (in the opinion of the Administrative Agent) to exceed the fair market value of Plan assets allocable to such benefits, all determined as of the most recent valuation date for each such Plan. 7.10 Debt to Gross Asset Value Ratio. The Company shall not at any time permit the ratio of (a) its total consolidated liabilities (including as liabilities the aggregate amount of all then-outstanding but undrawn Letters of Credit and all other Contingent Obligations of the Company and its consolidated subsidiaries) as of the end of any calendar quarter to (b) its Gross Asset Value as of the end of such quarter, to be greater than 0.55 at any time. 7.11 Interest Coverage Ratio. The Company shall not permit the ratio of (a) its Cash Flow for any calendar quarter to (b) its Interest Expense for such quarter, to be less than 2.00 at any time. 7.12 Fixed Charge Coverage Ratio. The Company shall not permit the ratio of (a) its Reserve-Adjusted Cash Flow for any calendar quarter to (b) its Fixed Charges for such quarter, to be less than 1.75 at any time. 7.13 Change in Business. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, engage in any material line of business substantially different from those lines of business carried on by it on the date hereof. 7.14 Accounting Changes. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any of its consolidated Subsidiaries. 7.15 Limitation on Dividends. The Company shall not, during any fiscal quarter, declare or pay dividends to its shareholders (including the holders of any of its preferred shares) in an amount that would cause the aggregate amount of dividends paid to such shareholders during such fiscal quarter and the three (3) immediately preceding fiscal quarters to exceed ninety- five percent (95%) of the Company's Funds From Operations during the four (4) consecutive fiscal quarters immediately preceding the declaration date of any such dividend; provided, however, that the Company may declare or pay dividends to its shareholders (including the holders of any of its preferred shares) in any fiscal quarter in an amount that exceeds ninety-five percent (95%) of the Company's Funds From Operations during the fiscal quarter immediately preceding the declaration date of such dividend only to the extent necessary to preserve the Company's status as a real estate investment trust for federal income tax purposes; and provided further, however, that for the calendar quarter in which any equity offering is completed and the next two (2) consecutive calendar quarters, the Company may pay dividends to its shareholders that exceed, in the aggregate, the foregoing limitations so long as (i) the portion of such dividend payments that relate to the Company's common and preferred shares issued and outstanding prior to such equity offering satisfy the foregoing limitations, (ii) such dividend payments on any new issue of common stock do not exceed the rate at which the Company pays dividends on its other common stock and (iii) such dividend payments on any new issue of preferred stock do not exceed the minimum amount needed to pay the required dividend on such preferred stock; provided, however, that when an Event of Default has occurred that remains uncured, the Company shall not pay dividends to its shareholders that exceed the minimum required for the Company to maintain its status as a "Real Estate Investment Trust" under Section 857 of the Code. 7.16 Development Activity. The Company shall not, and shall not permit any of its Subsidiaries to, engage in real estate development activity other than projects involving at any time aggregate acquisition, development and construction costs, determined on a GAAP basis before depreciation, not to exceed at any time an amount equal to fifteen percent (15%) of the Gross Asset Value of the Company and its consolidated subsidiaries at such time; provided, however, that no individual project shall involve at any time aggregate acquisition, development and construction costs, determined on a GAAP basis before depreciation, in excess of five percent (5%) of the Gross Asset Value of the Company and its consolidated subsidiaries; and provided further, however, that at any time the aggregate amount of (i) advances, loans, extensions of credit or capital contributions that the Company and its consolidated subsidiaries have made to partnerships, limited liability companies or joint ventures, (ii) the acquisition, development and construction costs, determined on a GAAP basis before depreciation, of development projects with which the Company or its consolidated subsidiaries are then involved, and (iii) the value of undeveloped land then owned by the Company and its consolidated subsidiaries, shall not exceed twenty percent (20%) of the Gross Asset Value of the Company and its consolidated subsidiaries at such time. For purposes of this Section 7.16, real estate development activity begins when the Company or any Subsidiary first incurs costs relating to a project, and ends when (x) such project has received a certificate of occupancy or equivalent approval for the shell and core and (y) more than eighty percent (80%) of the net rentable area of such project is covered by signed leases with third-party tenants having remaining terms of three (3) years or longer. 7.17 Undeveloped Land. The Company will not, and will not permit any of its Subsidiaries to, purchase undeveloped land, whether it is excess land adjacent to a Parcel or otherwise, that (a) is not Entitled Land, or (b) causes the aggregate value of undeveloped land owned by the Company and its Subsidiaries, determined on a GAAP basis, to exceed ten percent (10%) of the Gross Asset Value of the Company; provided, however, that at any time the aggregate amount of (i) advances, loans, extensions of credit or capital contributions that the Company and its consolidated subsidiaries have made to partnerships, limited liability companies or joint ventures, (ii) the acquisition, development and construction costs, determined on a GAAP basis before depreciation, of development projects with which the Company or its consolidated subsidiaries are then involved, and (iii) the value of undeveloped land then owned by the Company or its consolidated subsidiaries, shall not exceed twenty percent (20%) of the Gross Asset Value of the Company at such time. 7.18 Tangible Net Worth. The Company shall not at any time permit its Tangible Net Worth to be less than the sum of (a) Two Hundred Fifty-five Million Four Hundred Four Thousand Six Hundred Dollars ($255,404,600.00) plus (b) eighty- five percent (85%) of the proceeds of any equity offering of the Company (net of the reasonable expenses of such equity offering) occurring after December 31, 2000. 8. Events of Default and Remedies. 8.1 Event of Default. Any of the following shall constitute an Event of Default: 8.1.1 Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same shall become due, any interest, fee or any other amount payable hereunder or pursuant to any other Loan Document; or 8.1.2 Representation or Warranty. Any representation or warranty by the Company or any of its Subsidiaries made or deemed made in this Agreement or any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any of its Subsidiaries, or their respective Responsible Officers, furnished at any time under this Agreement or in or under any other Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or 8.1.3 Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in Sections 6.1, 6.2, 6.3, 6.6, 6.9, 7.3, 7.4, 7.10, 7.11, 7.12, 7.15, 7.16, 7.17 or 7.18; or 8.1.4 Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of twenty (20) days after the earlier of (i) the date upon which a Responsible Officer of the Company knew of such failure or (ii) the date upon which written notice thereof is given to the Company by the Administrative Agent; or 8.1.5 Cross-Default. The occurrence of any default or event of default under any agreement of the Company that, either by itself or together with any other such defaults or events of default, relates to (i) recourse Indebtedness in an aggregate principal amount in excess of $10,000,000, or (ii) nonrecourse Indebtedness in an aggregate principal amount in excess of $20,000,000; or 8.1.6 Insolvency; Voluntary Proceedings. The Company or any of its Subsidiaries (i) ceases or fails to be Solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or 8.1.7 Insolvency; Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Subsidiary of the Company, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any of its Subsidiaries' Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded, within sixty (60) days after commencement, filing or levy; (ii) the Company or any of its Subsidiaries admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any of its Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business; or 8.1.8 ERISA Plans. The occurrence of any one or more of the following events with respect to the Company, provided such event or events could reasonably be expected, in the judgment of the Administrative Agent, to subject the Company to any tax, penalty or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of the Company with respect to a Plan: (a) A Reportable Event shall occur with respect to a Plan which is, in the reasonable judgment of the Administrative Agent likely to result in the termination of such Plan for purposes of Title IV of ERISA; or (b) Any Plan termination (or commencement of proceedings to terminate a Plan) or the Company's full or partial withdrawal from a Plan; or 8.1.9 Monetary Judgments. One or more final (non-interlocutory) judgments, orders or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not fully covered by insurance) as to any single or related series of transactions, incidents or conditions of $1,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of sixty (60) days after the entry thereof; or 8.1.10 Adverse Change. There shall occur, or be reasonably likely to occur, a Material Adverse Effect that continues unremedied for a period of thirty (30) days after the earlier of (i) the date upon which a Responsible Officer of the Company knew or should have known of such Material Adverse Effect or (ii) the date upon which written notice thereof is given to the Company by the Administrative Agent; or 8.1.11 Management Changes. The Chairman of the Board or the chief executive officer of the Company resigns, is terminated or otherwise ceases to act for any reason, and such officer of the Company is not replaced with a person reasonably satisfactory to the Majority Banks within six (6) months after he ceases to hold such position. 8.1.12 Preferred Dividend Defaults. The Company fails to pay in full any two (2) consecutive quarterly dividend payments owing to holders of the Company's preferred shares. 8.2 Remedies. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Majority Banks: 8.2.1 Termination of Commitment to Lend. Declare the commitment of each Bank to make Loans or the commitment of Bank of America to issue Letters of Credit to be terminated, whereupon such commitment shall forthwith be terminated; provided, however, that the Administrative Agent and the Banks shall continue to honor any outstanding Letter of Credit; and 8.2.2 Acceleration of Loans. Declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and 8.2.3 Security for Letters of Credit. Require that the Company deposit with the Administrative Agent, for the benefit of the Banks, on demand and as cash security for the Company's obligations under the Loan Documents, an amount equal to the aggregate undrawn amount of all then-outstanding Letters of Credit (and the Company hereby grants to the Administrative Agent, as administrative agent for the Banks, a security interest in any such amount deposited with the Administrative Agent (and any amount deposited with the Administrative Agent pursuant to subsection 2.6.2(a)), all earnings thereon and all proceeds thereof, and as to such amounts the Administrative Agent shall have the rights and remedies of a secured party under the California Uniform Commercial Code); provided that upon the occurrence of any event specified in subsections 8.1.6 or 8.1.7 above (in the case of clause (i) of subsection 8.1.7 upon the expiration of the 60-day period mentioned therein) such amounts shall automatically become due and payable without further act of the Administrative Agent or the Banks; and 8.2.4 Exercise of Rights and Remedies Exercise all rights and remedies available to it under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsections 8.1.6 or 8.1.7 above (in the case of clause (i) of subsection 8.1.7 upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans and the obligation of Bank of America to issue Letters of Credit shall automatically terminate, and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Administrative Agent or any Bank. Notwithstanding any contrary provision of any Loan Document, the Administrative Agent shall not incur any trustee or other foreclosure fees or expenses for which it will seek reimbursement from the Company under Section 10.4(b) until at least five (5) Business Days after the occurrence of an Event of Default under subsection 8.1.3; provided, however, that this restriction shall not apply to any other Event of Default. Notwithstanding any contrary provision of applicable law, not less than thirty (30) days shall elapse between the occurrence of an Event of Default and the actual sale of any Property securing the Loans, but the Administrative Agent may give any notices, commence any actions, obtain the appointment of receivers and other provisional remedies, sequester any rents, issues and profits, or exercise any of its other rights or remedies during such thirty (30) day period; provided, however, that upon the occurrence of an Event of Default under Section 8.1.12, the Administrative Agent may not exercise any of its remedies under Sections 8.2.2, 8.2.3 or 8.2.4 until the earlier of (i) the first date on which a notice of redemption is given with respect to any or all of the Company's preferred shares and (ii) ninety (90) days after the occurrence of such Event of Default, unless the Company cures such Event of Default during such ninety (90) day period. 8.3 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. 9. The Administrative Agent. 9.1 Appointment and Authorization of the Administrative Agent. Each Bank hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement, each other Loan Document and the Environmental Indemnity, and to exercise such powers and perform such duties, as are expressly delegated to it by the terms of this Agreement, any other Loan Document or the Environmental Indemnity, together with such powers as are reasonably incidental thereto and as further provided in the Co-Lender Agreement described below. 9.2 The Administrative Agent's Powers. Subject to the limitations set forth in the Loan Documents, the Environmental Indemnity and the Co-Lender Agreement, the Administrative Agent's powers include but are not limited to the power: (a) to administer, manage and service the Loans; (b) to enforce the Loan Documents and/or the Environmental Indemnity; (c) to make all decisions under the Loan Documents or the Environmental Indemnity in connection with the day-to-day administration of the Loans, any inspections required by the Loan Documents or the Environmental Indemnity, and other routine administration and servicing matters; (d) to collect and receive from the Company or any third persons all payments of amounts due under the terms of the Loan Documents and to distribute the amounts thereof to the Banks; (e) to collect and distribute or disburse all other amounts due under the Loan Documents or the Environmental Indemnity; (f) to grant or withhold consents, approvals or waivers, and make any other determinations in connection with the Loan Documents or the Environmental Indemnity; and (g) to exercise all such powers as are incidental to any of the foregoing matters. The Administrative Agent shall furnish to the Banks copies of material documents, including confidential ones, received from the Company regarding the Loans, the Loan Documents, the Environmental Indemnity and the transactions contemplated thereby. The Administrative Agent shall have no responsibility with respect to the authenticity, validity, accuracy or completeness of the information provided. 9.3 Limitation on the Administrative Agent's Duties. Notwithstanding any contrary provision of any Loan Document or the Environmental Indemnity, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth in the Loan Documents, the Environmental Indemnity or the Co-Lender Agreement, nor shall the Administrative Agent have any fiduciary relationship with any Bank, and no implied covenants, responsibilities, duties, obligations or liabilities shall be read into this Agreement, any other Loan Document, the Environmental Indemnity or the Co-Lender Agreement against the Administrative Agent. 9.4 Acknowledgment of Co-Lender Agreement. The Company acknowledges that the Banks have executed a Co-Lender Agreement to supplement the Loan Documents with respect to the relationship of the Banks and the Administrative Agent among themselves in connection with the Loans. The Co-Lender Agreement is not a Loan Document. 9.5 Co-Agents. None of the Banks identified on the face page or the signature pages of this Agreement as a "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement or the other Loan Documents other than those applicable to all Banks as such. 9.6 Successor Administrative Agent. The Administrative Agent may, and at the request of the Majority Banks shall, resign as Administrative Agent upon thirty (30) days' notice to the Banks. If the Administrative Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor administrative agent. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Banks, a successor administrative agent that would qualify as an Eligible Assignee. Upon its acceptance of the appointment as successor administrative agent, such successor shall succeed to all of the rights, powers and duties of the retiring Administrative Agent, the term "Administrative Agent", shall mean such successor, and the appointment, powers and duties of such retiring Administrative Agent, shall terminate. After any retiring Administrative Agent's resignation hereunder as administrative agent, the provisions of this Agreement or the Environmental Indemnity regarding payment of costs and expenses and indemnification of the Administrative Agent shall inure to its benefit as to any actions that such retiring Administrative Agent took or omitted to take while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date that is thirty (30) days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Banks shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Majority Banks appoint a successor administrative agent in the manner set forth above. Upon replacement of the Administrative Agent as provided in this Agreement, the former Administrative Agent shall promptly deliver to the new Administrative Agent an assignment of all beneficial interest in any Mortgage and any other Collateral Documents (if before acquisition of title to the Collateral encumbered thereby), or a quitclaim deed to and assignment of any such Property (if after acquisition of the Collateral encumbered thereby) and copies of any books, records and documents related to the Loans and the Collateral to which the Banks are entitled and which is then in the former Administrative Agent's possession. 10. Miscellaneous. 10.1 Amendments and Waivers . No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any of its Subsidiaries therefrom, shall be effective unless the same shall be in writing and signed by the Administrative Agent at the written request of the Majority Banks, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided however, that no such amendment or waiver shall do any of the following unless it is in writing and signed by the Administrative Agent at the written request of all the Banks: (a) Increase the Commitment of any Bank; (b) Postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any one of them) hereunder or under any other Loan Document; (c) Reduce the rate of interest or any fees or other amounts payable in connection with the Loan; (d) Change the voting percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that is required for the Banks, or any of them, to take any action hereunder; (e) Amend this or any provision requiring consent of all Banks for action by the Banks or the Administrative Agent; (f) Discharge the Company or any guarantor, or release any of the Collateral, except as otherwise may be provided in the Loan Documents or except where the consent of only the Majority Banks is expressly required by any Loan Document; (g) Amend the definitions of the terms "Collateral Value" or "Cash Flow Value" as set forth in Section 1.1 of the Loan Agreement. 10.2 Notices. (a) All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, facsimile transmission) and mailed (by certified mail, postage prepaid, return receipt requested), delivered or telecopied to the address or number specified for notices on the applicable signature page hereof, or to such other address as shall be designated by such party in a written notice to the other parties. (b) All such notices and communications shall, when transmitted by overnight delivery or telecopied by facsimile, be effective when delivered for overnight delivery or transmitted by telecopier, respectively, or if delivered, upon delivery, except that notices pursuant to Article 2 shall not be effective until actually received by the Administrative Agent. All notices and communications telecopied by facsimile will also be mailed by ordinary first class mail, postage prepaid. All such notices and communications delivered by mail shall be effective upon the earlier of (i) two (2) Business Days after deposit in the United States mail, or (ii) actual receipt, as evidenced by the return receipt. (c) The Company acknowledges and agrees that any agreement of the Administrative Agent at Article 2 herein to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Administrative Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice, and the Administrative Agent and the Banks shall not have any liability to the Company or any other Person on account of any action taken or not taken by the Administrative Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Administrative Agent or the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent or the Banks of a confirmation which is at variance with the terms understood by the Administrative Agent or the Banks to be contained in the telephonic or facsimile notice. 10.3 No Waiver; Cumulative Remedies. No failure on the part of the Administrative Agent or any Bank in exercising, and no delay in its exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.4 Costs and Expenses. The Company shall, whether or not the transactions contemplated hereby shall be consummated: (a) pay or reimburse the Administrative Agent within fifteen (15) Business Days after demand (subject to subsections 4.1.12 and 4.2.2) for all costs and expenses incurred by them in connection with the development, preparation, delivery, administration (other than normal overhead costs of administering the Loans), syndication and execution of, and any amendment, supplement, waiver or modification to, this Agreement, any other Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including Attorney Costs incurred by Bank of America (including in its capacity as the Administrative Agent) with respect thereto; (b) pay or reimburse the Administrative Agent within fifteen (15) Business Days after demand (subject to subsections 4.1.12 and 4.2.2) for all costs and expenses incurred in connection with the enforcement, attempted enforcement or preservation of any rights or remedies (including in connection with any workout or restructuring regarding the Loans) under this Agreement, any other Loan Document, and any such other documents, including Attorney Costs incurred by the Administrative Agent; and (c) pay or reimburse Bank of America (including in its capacity as the Administrative Agent) within thirty (30) days after demand (subject to subsections 4.1.12 and 4.2.2) for all appraisal (including the allocated cost of internal appraisal services), audit, environmental, inspection and review (including the allocated cost of such internal services), travel, search and filing costs, fees and expenses incurred or sustained by Bank of America (including in its capacity as the Administrative Agent) in connection with the matters referred to under paragraphs (a) and (b) of this Section. 10.5 Indemnity. Whether or not the transactions contemplated hereby shall be consummated, the Company shall pay, indemnify, and hold the Agent- Related Persons, the Sole Lead Arranger and each Bank and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs) of any kind or nature whatsoever which may be incurred by or asserted against any such Indemnified Person arising out of relating to the execution, delivery, enforcement, performance or administration of this Agreement or any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding related to this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising solely from the gross negligence or willful misconduct of such Indemnified Person. The obligations in this Section 10.5 shall survive termination of any Commitment and payment or satisfaction of all other Obligations. At the election of any Indemnified Person, the Company shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person's sole discretion, at the sole cost and expense of the Company. All amounts owing under this Section 10.5 shall be paid within thirty (30) days after demand. 10.6 Marshaling; Payments Set Aside. Neither the Administrative Agent not the Banks shall be under any obligation to marshal any assets in favor of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes a payment or payments to the Administrative Agent or the Banks, or the Administrative Agent or the Banks enforce their Liens, and such payment or payments or the proceeds of such enforcement or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party in connection with any Insolvency Proceeding, or otherwise, then to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement had not occurred. 10.7 Successors and Assigns 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 Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Bank. 10.8 Assignments, Participations, Confidentiality. 10.8.1 Assignments . Each Bank may at any time assign and delegate to one or more Eligible Assignees (each, an "Assignee") with the written consent of the Company and the Administrative Agent, which consent shall not be unreasonably withheld (provided that no written consent of the Company shall be required (a) after the occurrence and during the continuance of an Event of Default or (b) in connection with any assignment and delegation to an Affiliate of such Bank), all or a portion of the Loans, the Commitment and the other rights and obligations of such Bank hereunder, under the other Loan Documents and under the Environmental Indemnity; provided, however, that any Bank that is or becomes a party to this Agreement from time to time shall at all times retain an interest in the Loans, the Commitment and the other rights and obligations of a Bank hereunder in an aggregate principal amount of not less than Ten Million Dollars ($10,000,000.00); and provided further, however, that any assignment of a Bank's interest in the Loans, the Commitment and the other rights and obligations of such Bank hereunder and under the other Loan Documents shall be in the minimum amount of Ten Million Dollars ($10,000,000.00) and multiples of One Million Dollars ($1,000,000.00) in excess thereof; and provided further, however, that the Company may continue to deal solely and directly with the assignor Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, substantially in the form of Schedule 1 to the attached Exhibit H, shall have been given to the Company and the Administrative Agent by such Bank and the Assignee, (ii) such Bank and its Assignee shall have delivered to the Administrative Agent and the Company an Assignment and Assumption Agreement substantially in the form of the attached Exhibit H (the "Assignment and Assumption Agreement") (together with any Note(s) subject to such assignment), and (iii) the Assignee shall have paid to the Administrative Agent a processing fee in the amount of $2,500. In the event that the Company elects to permanently reduce the Maximum Commitment Amount pursuant to Section 2.6, the minimum required hold amounts and the minimum amount of any assignment of a Bank's interest in the Loans, the Commitment and the other rights and obligations of such Bank hereunder and under the other Loan Documents shall be reduced pro rata. 10.8.2 Effect of Assignment. From and after the date on which the Administrative Agent notifies the assigning Bank that all conditions and requirements of the assignment have been met, then to the extent that rights and obligations hereunder have been assigned (a) the Assignee thereunder shall be a party hereto and shall have the rights and obligations of a Bank under the Loan Documents, the Environmental Indemnity and the Co-Lender Agreement, (b) the assigning Bank shall relinquish such assigned rights and be released from such assigned obligations under the Loan Documents, (c) this Agreement shall be deemed to be amended to the extent necessary to reflect the addition of the Assignee and the resulting adjustment of the Pro Rata Shares of the Loans arising therefrom, and (d) the Pro Rata Share allocated to an Assignee shall reduce the Pro Rata Share of the assigning Bank. 10.8.3 Participations. Subject to the limitations set forth in Section 10.8.1, which apply equally to participations and assignments, any Bank (the "originating Bank") may at any time sell to one or more Persons that are not Affiliates of the Company (each, a "Participant") participating interests in any Loans, the Commitment and the other interests of such originating Bank hereunder and under the other Loan Documents; provided, however, that (a) the originating Bank's obligations under this Agreement shall remain unchanged, (b) the originating Bank shall remain solely responsible for the performance of such obligations, (c) the Company and the Administrative Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, (d) the Participant shall, together with the originating Bank, be entitled to the non-exclusive protections of Sections 3.1 and 3.3 as though it were also the originating Bank hereunder, and (e) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment, consent or waiver with respect to any Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks. A Participant shall not have any rights under the Loan Documents or the Co-Lender Agreement, and all amounts payable by the Company hereunder shall be determined as if the originating Bank had not sold such participation. 10.8.4 Pledge to Federal Reserve Bank. Notwithstanding any other provision, a Bank may pledge its interest in the Commitment, in the Loans and under the Loan Documents in favor of any Federal Reserve Bank in accordance with Federal law. 10.8.5 Confidentiality. Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all non-public information provided to it by the Company or any Subsidiary of the Company in connection with this Agreement or any other Loan Document, and the Banks and any of its Affiliates shall not use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement, except to the extent such information (i) was or becomes generally available to the public other than as a result of a disclosure by such Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Company (provided that such source is not bound by a confidentiality agreement with the Company known to such Bank); provided, however, that such Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; and (D) to such Bank's independent auditors and other professional advisors. Notwithstanding the foregoing, the Company authorizes each Bank to disclose to any Participant or Assignee (each, a "Transferee"), and to any prospective Transferee, such financial and other information in such Bank's possession concerning the Company or its Subsidiaries which has been delivered to such Bank pursuant to this Agreement or which has been delivered to such Bank by the Company in connection with the Bank's credit evaluation of the Company prior to entering into this Agreement; provided that, unless otherwise agreed by the Company, such Transferee agrees in writing with such Bank to keep such information confidential to the same extent required of such Bank hereunder. 10.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.10 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.11 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Administrative Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person (other than an Indemnified Person under Section 10.5) shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. The Administrative Agent shall have no obligation to any Person not a party to this Agreement or other Loan Documents. 10.12 Time . Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. 10.13 Governing Law. This Agreement and the Revolving Notes shall be governed by, and construed in accordance with, the laws of the State of California (without regard to conflicts of law rules); provided that the Administrative Agent and the Banks shall retain all rights arising under federal law. 10.14 Arbitration; Reference. (a) Mandatory Arbitration. Any controversy or claim between or among the parties, including those arising out of or relating to this Agreement or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) Real Property Collateral. Notwithstanding the provisions of subparagraph 10.14(a), no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or relates to an obligation to the Banks which is secured by real property collateral. If all parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in subparagraph 10.14(c). (c) Judicial Reference. At the request of any party, a controversy or claim which is not submitted to arbitration as provided and limited in subparagraphs 10.14(a) and 10.14(b) shall be determined by a reference in accordance with California Code of Civil Procedure Section 638 et seq. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. (d) Provisional Remedies, Self-Help and Foreclosure. No provision of this Section 10.14 shall limit the right of any party to this Agreement to exercise self-help remedies such as set-off, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of a power of sale under the deed of trust or mortgage or by judicial foreclosure. 10.15 Notice of Claims; Claims Bar. THE COMPANY HEREBY AGREES THAT IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE, AGAINST THE BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO THE LOANS (OR THE COLLATERAL THEREFOR), OR ANY ACT OR OMISSION TO ACT BY THE ADMINISTRATIVE AGENT OR ANY BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO THE ADMINISTRATIVE AGENT OR SUCH BANK WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR ASSERTING, SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY. 10.16 Entire Agreement; Amendment and Restatement . This Agreement, together with the other Loan Documents, embodies the entire Agreement and understanding among the Company, on the one hand, and the Administrative Agent and the Banks, on the other, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Administrative Agent or any of the Banks. This Agreement amends, restates and supersedes in its entirety the Existing Credit Agreement; provided, however, that any LIBOR Loan (as defined in the Existing Credit Agreement) that remains outstanding on and after the Closing Date shall continue to be a valid LIBOR Loan governed by the terms of the Existing Credit Agreement. 10.17 Interpretation. This Agreement is the result of negotiations between, and has been reviewed by counsel to, the Company and the Administrative Agent, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Administrative Agent or the Banks merely because of their involvement in the preparation of such documents and agreements. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. "Company" BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By /s/ Peter B. Bedford Peter B. Bedford Chairman and Chief Executive Officer Notice Address: 270 Lafayette Circle Lafayette, California 94549 Attention: Peter B. Bedford Telephone No.: (510) 283-8910 Telecopier No.: (510) 283-5697 "Administrative Agent" BANK OF AMERICA, NATIONAL ASSOCIATION, successor to Bank of America National Trust and Savings Association, as Administrative Agent By /s/Juliana M. Matson Juliana M. Matson, Vice President [Printed Name and Title] Notice Address: 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Telephone No.: (415) 913-6368 Telecopier No.: (415) 913-3445 "Banks" BANK OF AMERICA, NATIONAL ASSOCIATION, successor to Bank of America National Trust and Savings Association By /s/Juliana M. Matson Juliana M. Matson, Vice President [Printed Name and Title] Commitment: $50,000,000 Lending Office/Notice Address: 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Telephone No.: (415) 913-6368 Telecopier No.: (415) 913-3445 UNION BANK OF CALIFORNIA, N.A. as Co-Agent and a Bank By __/s/David B. Murphy_________________________________ David B. Murphy, Vice President Commitment: $35,000,000 Lending Office/Notice Address: 350 California Street, 7th Floor San Francisco, CA 94115 Attention: David B. Murphy Telephone No.: (415) 705-7329 Telecopier No.: (415) 433-7438 SANWA BANK CALIFORNIA, a California corporation By /s/Nancy DalBello Nancy DalBello, Vice President Commitment: $25,000,000 Lending Office/Notice Address: One Front Street, 22nd Floor San Francisco, CA 94111 Attention: Nancy DalBello Telephone No.: (415) 597-5014 Telecopier No.: (415) 597-5490 CITIZENS BANK OF RHODE ISLAND By /s/Craig E. Schermerhorn Craig E. Schermerhorn, Vice President [Printed Name and Title] Commitment: $25,000,000 Lending Office/Notice Address: 1 Citizens Plaza RC 0440 Providence, RI 02903 Attention: Craig Schermerhorn Telephone No.: (401) 455-5425 Telecopier No.: (401) 282-4485 COMERICA BANK By /s/Casey Ostrander Casey Ostrander, Account Officer Commitment: $15,000,000 Lending Office/Notice Address (Overnight Mail): Comerica Tower at Detroit Center 500 Woodward Avenue Detroit, MI 48226 Attention: Casey Ostrander Telephone No.: (313) 222-5286 Telecopier No.: (313) 222-9295 Lending Office/Notice Address (U.S. Mail): P.O. Box 75000 Detroit, MI 48275-3256 Attention: Casey Ostrander Telephone No.: (313) 222-5286 Telecopier No.: (313) 222-9295 CONSENT OF THIRD-PARTY TRUSTORS Each of the undersigned consents to the foregoing Fifth Amended and Restated Credit Agreement. Dated as of May 18, 2001 ICMPI (CONCORD DIABLO 3), INC., a Delaware corporation By /s/Peter B. Bedford Peter B. Bedford Chief Executive Officer ICMPI (CONCORD DIABLO 8), INC., a Delaware corporation By __/s/Peter B. Bedford______ Peter B. Bedford Chief Executive Officer ICMPI (CONCORD MASON 18), INC., a Delaware corporation By ___/s/Peter B. Bedford_____ Peter B. Bedford Chief Executive Officer EXHIBIT A [Form of Borrowing Notice] (Date) Bank of America, National Association, as Administrative Agent 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Re: $150,000,000 Secured Revolving Loan to Bedford Property Investors, Inc.; Loan No. ____________________; Borrowing Notice No. _________________________ Gentlemen: Bedford Property Investors, Inc. (the "Company") hereby requests a [Borrowing] [Letter of Credit][Swing Loan] on the terms set forth below pursuant to Sections 2.1 and 2.4 of that certain Fifth Amended and Restated Credit Agreement dated as of May 18, 2001, among the Company, the Banks party thereto and Bank of America, National Association, as Administrative Agent for the Banks (the "Agreement"). Capitalized terms used herein and not defined herein shall have the meanings given to them in the Agreement. 1. [The amount of the [Borrowing][Swing Loan] is U.S.$ __________ (minimum principal amount of $250,000 and increments of $50,000 in excess thereof for Prime Rate Borrowings or Swing Loans, and minimum principal amount of $500,000 and increments of $100,000 in excess thereof for LIBOR Borrowings).] [The amount of the Letter of Credit is U.S.$_______________.] 2. [The borrowing date will be ____________, 20__.] [The issuance date of the Letter of Credit will be ___________, 20__, and the expiry date of the Letter of Credit will be ___________, 20__.] [3. The Borrowing will be a [Prime Rate/LIBOR Rate/Swing] Loan.] [4. If the Borrowing is to consist of LIBOR Loans, the Interest Period will be _____ months, and will begin on _______________, 20__, and will end on _______________, 20__.] The Company hereby represents and warrants to the Administrative Agent and the Banks that (i) the representations and warranties made by the Company contained in Article 5 of the Agreement are true and correct on and as of the borrowing date with the same effect as if made on and as of such borrowing date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct as of such earlier date); (ii) no Default or Event of Default has occurred and remains uncured and no Default or Event of Default shall result from the [making of the requested Loan][issuance of the requested Letter of Credit]; and (iii) [with respect to the requested [Loan][Swing Loan], all of the conditions of Section 4.3] [with respect to the requested Letter of Credit, all of the conditions of Sections 4.3 and 4.4] of the Agreement have been satisfied (and will be satisfied on the date such [Loan is made] [Letter of Credit is issued]). BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation, By ____________________________ ____________________________ [Printed Name and Title] EXHIBIT B [Form of Conversion/Continuation Notice] (Date) Bank of America, National Association, as Administrative Agent 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Re: $150,000,000 Revolving Loan to Bedford Property Investors, Inc.; Loan No. ____________________; Conversion/Continuation Notice No. ___________ Gentlemen: Pursuant to Section 2.5 of that certain Fifth Amended and Restated Credit Agreement dated as of May 18, 2001, among Bedford Property Investors, Inc., a Maryland corporation (the "Company"), the Banks party thereto and Bank of America, National Association, as Administrative Agent for the Banks (the "Agreement"), the Company hereby elects to [convert the [Prime Rate Loan/expiring LIBOR Loan] described below into [a LIBOR Loan/a Prime Rate Loan] having the terms described below] [continue the expiring LIBOR Loan described below as a LIBOR Loan having the terms described below]. Capitalized terms used herein and not defined herein shall have the meanings given to them in the Agreement. 1. The [conversion/continuation] date is _______________, 20__. 2. The aggregate amount of Loans to be [converted to [LIBOR Loans] [Prime Rate Loans]/continued as LIBOR Loans] is U.S.$ ____________. 3. The Company requests [conversion of U.S.$ _______________ of [Prime Rate Loans] [LIBOR Loans] to [a LIBOR Loan having an Interest Period of _____ months, beginning on _______________, 20__, and ending on _______________, 20__] [a Prime Rate Loan]] [continuation of U.S.$ _______________ of LIBOR Loans as a LIBOR Loan having an Interest Period of _____ months, beginning on _______________, 20__, and ending on _______________, 20__. BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation, By ____________________________ ____________________________ [Printed Name and Title] EXHIBIT C [Form of Revolving Note] REVOLVING NOTE $_____________ San Francisco, California _________, 20__ FOR VALUE RECEIVED, BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation (the "Company"), promises to pay to the order of __________________________________________________________ (the "Bank"), at the offices of Bank of America, National Association, Administrative Agent for the Bank, at 600 Montgomery Street, 22nd Floor (Structured Debt Group), San Francisco, California 94111, or at such other place as the Bank may designate from time to time, the sum of ________________________________ ($_____________), or the aggregate unpaid principal amount outstanding hereunder, whichever may be the lesser, in immediately available funds and lawful money of the United States of America. Interest shall accrue on amounts outstanding hereunder in accordance with that certain Fifth Amended and Restated Credit Agreement dated as of May 18, 2001 (the "Agreement") among the Company, the Banks party thereto and Bank of America, National Association, as Administrative Agent for the Banks. (Capitalized term used in this Revolving Note and not defined herein shall have the meanings given to them in the Agreement.) Pursuant thereto, interest shall accrue on amounts outstanding hereunder from time to time: (a) at a fluctuating per annum rate equal to the Prime Rate; or (b) at the Company's option, subject to the terms of the Agreement, at a per annum rate equal to the LIBOR Rate plus the Applicable Margin. A change in the interest rate for Prime Rate Loans shall take effect on the day specified in the public announcement of the change in the Prime Rate. Interest shall be computed on the basis of a 360-day year and actual days elapsed. Interest shall become due and payable in accordance with the terms of the Agreement. All unpaid principal and interest outstanding hereunder shall be due and payable on June 1, 2004; provided that prepayments of principal shall be made as provided in the Agreement. This Revolving Note is one of the Revolving Notes referred to in the Agreement, and is issued in conjunction with, and is entitled to all of the rights, benefits and privileges provided in, the Agreement, as now existing or as the same may from time to time be supplemented, modified or amended. The Agreement, among other things, provides that amounts outstanding hereunder from time to time may be repaid pursuant to the Agreement and reborrowed from time to time pursuant to the Agreement, and contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. The Bank may endorse on the schedule annexed to this Revolving Note the date, amount and maturity of each Loan that it makes pursuant to the Agreement, the purpose of the Loan, the amount of each payment of principal that the Company makes with respect thereto and the source of the funds from which each principal payment is made. The Company irrevocably authorizes the Bank to endorse this Revolving Note, and the Bank's record shall be conclusive absent manifest error; provided, however, that the Bank's failure to make, or its error in making, a notation on the attached schedule with respect to any Loan shall not limit or otherwise affect the Company's obligations to the Bank hereunder or under the Agreement. Except as otherwise expressly provided in any Collateral Document, this Revolving Note is secured by (1) each of the Mortgages executed from time to time pursuant to the Agreement and covering an Approved Parcel and (2) each of the Assignments of Leases and other Collateral Documents executed from time to time pursuant to the Agreement. The Company waives presentment, demand, protest, notice of protest, notice of nonpayment or dishonor and all other notices in connection with the delivery, acceptance, performance, default or enforcement of this Revolving Note. Time is of the essence hereof. This Revolving Note has been executed by the undersigned in the State of California, and shall be governed by, and construed in accordance with, the laws of the State of California. BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By ____________________________ ____________________________ [Printed Name and Title] EXHIBIT D-1 [Form of Opinion of Counsel] _______________, 2001 The Banks Party to the Credit Agreement Described Below Bank of America, National Association, as Administrative Agent 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Re: $150,000,000 Secured Revolving Line of Credit (the "Credit Line") from the several financial institutions from time to time party to the Credit Agreement (as defined below) (collectively, the "Banks") to Bedford Property Investors, Inc., a Maryland corporation (the "Company") Gentlemen: We have acted as counsel to the Company and to each of its subsidiaries listed on Schedule 1 attached hereto and incorporated herein by this reference (each, a "Subsidiary") in connection with the negotiation and execution of the documents evidencing the Credit Line, and we are delivering this opinion to you at the Company's request. In connection with our representation of the Company and the Subsidiaries, we have examined all of the following documents (collectively, the "Loan Documents"): 1. Fifth Amended and Restated Credit Agreement dated as of May 18, 2001, among the Company, the Banks, and Bank of America, National Association, as administrative agent for the Banks (in such capacity, the "Administrative Agent") (the "Credit Agreement"); 2. Revolving Note made by the Company and payable to the order of Bank of America, National Association ("Bank of America") in the maximum principal amount of $50,000,000.00; 3. Revolving Note made by the Company and payable to the order of Union Bank of California, N.A. ("Union") in the maximum principal amount of $35,000,000.00; 4. Revolving Note made by the Company and payable to the order of Sanwa Bank California, a California corporation ("Sanwa") in the maximum principal amount of $25,000,000.00; 5. Revolving Note made by the Company and payable to the order of Citizens Bank of Rhode Island ("Citizens") in the maximum principal amount of $25,000,000.00; 6. Revolving Note made by the Company and payable to the order of Comerica Bank ("Comerica") in the maximum principal amount of $15,000,000.00; 7. Revolving Note made by the Company and payable to the order of Bank of America in the maximum principal amount of $25,000,000.00; 8. Fourth Amended and Restated Environmental Indemnity made by the Company for the benefit of the Banks; 9. Modification Agreement (Short Form) executed by the Company or a Subsidiary of the Company and the Administrative Agent in connection with a Mortgage or Deed of Trust securing the Company's obligations to the Banks under the Credit Agreement and each of the Revolving Notes described as items 2 through 7, above; 10. Secretary's Certificate executed by the Company's secretary; 11. Secretary's Certificate executed by the secretary of ICMPI (Concord Diablo 3), Inc., a Delaware corporation ("Concord Diablo 3"); 12. Secretary's Certificate executed by the Secretary of by ICMPI (Concord Diablo 8), Inc., a Delaware corporation ("Concord Diablo 8"); and 13. Secretary's Certificate executed by the secretary of ICMPI (Concord Mason 18), Inc., a Delaware corporation ("Concord Mason 18"). The documents referred to in numbered paragraphs 1 through 8, above are hereinafter collectively referred to as the "Credit Documents." We have also reviewed such other documents, certificates and instruments as we deemed relevant, appropriate or necessary in rendering the opinions contained herein. In rendering the opinions set forth below, we have assumed the truth of the facts stated in the foregoing documents, the genuineness of the signatures thereon and the completeness thereof. Based upon the foregoing, but subject to the limitations and qualifications expressed below, we are of the opinion that: 1. The Company is a corporation duly organized, existing and in good standing under the laws of the State of Maryland, and is duly qualified to do business in the State of California. The Company has the full right, power and authority to execute, deliver and perform its obligations under the Credit Documents to which it is a party and all other documents and agreements it may execute concurrently with the Credit Documents. 2. Each Subsidiary is a corporation duly organized, existing and in good standing under the laws of the State of Delaware, and is duly qualified as a foreign corporation to do business in the jurisdictions shown on Schedule 1. Each Subsidiary has the full right, power and authority to execute, deliver and perform its obligations under the Modification Agreement and such other documents and agreements it may execute concurrently with the execution by the Company of the Credit Documents (collectively, as to each Subsidiary, the "Collateral Documents"). 3. The Company's execution, delivery and performance of the Credit Documents to which it is a party, and each Subsidiary's execution, delivery and performance of the Collateral Documents to which it is a party (i) have been duly authorized by all necessary corporate action, (ii) do not conflict with any term or provision of the Company's or such Subsidiary's articles of incorporation or bylaws, and (iii) do not require the consent or approval of any governmental authority or any other person or entity to the extent such consent or approval is required by any provision of the Company's or such Subsidiary's articles of incorporation or bylaws. 4. There are no actions, suits, proceedings, claims or disputes pending or threatened, at law, in equity, in arbitration or before any governmental authority, against the Company which purport to affect or pertain to any of the transactions contemplated by the Credit Documents. As to each Subsidiary, there are no actions, suits, proceedings, claims or disputes pending or threatened, at law, in equity, in arbitration or before any governmental authority, against such Subsidiary which purport to affect or pertain to any of the transactions contemplated by the Collateral Documents to which it is a party. 5. The Credit Documents to which the Company is a party constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. As to each Subsidiary, the Collateral Documents to which such Subsidiary is a party constitute legal, valid and binding obligations of such Subsidiary, enforceable against such Subsidiary in accordance with their respective terms. The opinions expressed herein are subject to the effect of bankruptcy, insolvency and other similar laws affecting the rights of creditors generally, and general principles of equity. Very truly yours, _____________________________ SCHEDULE 1 TO EXHIBIT D List of Subsidiaries ICMPI (Concord Diablo 3), Inc., a Delaware corporation California ICMPI (Concord Diablo 8), Inc., a Delaware corporation California ICMPI (Concord Mason 18), Inc., a Delaware corporation California EXHIBIT D-2 [Form of Opinion of Administrative Agent's Counsel] _______________, 2001 The Banks Party to the Credit Agreement Described Below Bank of America, National Association, as Administrative Agent 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Re: $150,000,000 Secured Revolving Line of Credit (the "Credit Line") from the several financial institutions from time to time party to the Credit Agreement (as defined below) (collectively, the "Banks") to Bedford Property Investors, Inc., a Maryland corporation (the "Company") Gentlemen: We have acted as special local counsel in the state of _____________ (the "State") to Bank of America, National Association, as Administrative Agent (in such capacity, the "Administrative Agent"), and Bank of America, National Association, as a bank (in such capacity, "Bank of America"), in connection with that certain Fifth Amended and Restated Credit Agreement, dated as of May 18, 2001 (the "Credit Agreement"), among the Company, Administrative Agent, Bank of America and the other "Banks" that are parties thereto, and the other Loan Documents referred to in the Credit Agreement. This opinion is furnished to you pursuant to the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. In connection with this opinion, we have examined execution copies of (i) the Credit Agreement and (ii) each of the documents listed on Annex I hereto (collectively, the "State Security Documents"; together with the Credit Agreement, the "Loan Documents"). We have also examined such other documents as we have deemed necessary or appropriate for the purpose of giving this opinion. For the purposes of this opinion, we have assumed: (i) the genuineness of all signatures; (ii) the authenticity of all documents submitted to us as originals; and (iii) the conformity to original documents of documents submitted to us as certified or photostatic copies. You have advised us that in rendering this opinion, we may assume that: (i) the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland; (ii) the Company is duly qualified as a foreign corporation and is in good standing under the laws of the State; (iii) the actions of each of the Banks and the Administrative Agent are permitted under their respective certificates of incorporation, bylaws and other organizational or governing documents; and (iv) the execution, delivery and performance of each of the Loan Documents has been duly authorized by the respective parties thereto in the form of the execution copies reviewed by us. Based on the foregoing, we are of the opinion that: 1. Neither the execution and delivery of the Loan Documents by any entity that is a party thereto, nor the performance by any such entity of any of its obligations thereunder, does or will violate any applicable Requirement of Law of the State. 2. No license, authorization, consent, exemption, franchise or other approval of, permit or action by, or registration, declaration or filing with, any Governmental Authority of the State or any political subdivision thereof is required on the part of any entity in connection with its execution and delivery of, and the performance of its obligations under, any of the Loan Documents, or the grant of the liens and security interests created by the State Security Documents, or for the exercise by the Administrative Agent of its rights and remedies thereunder, except for the recordation of the State Security Documents referred to in paragraph 3, below. 3. Each State Security Document listed on Annex I hereto (a) is in proper form for execution and recording in the office of the __________ County Recorder (the "Filing Office"), (b) when recorded in the Filing Office, will impart constructive notice to third parties, and (c) constitutes a valid modification of the [mortgage] [deed of trust] to which it relates, enforceable in accordance with its terms under all applicable laws in effect in the State. The opinions set forth herein are subject to the following limitations, qualifications, and exceptions: [insert any qualifications regarding creditor's rights, nonjudicial foreclosure, etc.] We have not made or undertaken to make any investigation of the state of title to the real property and personal property described in the State Security Documents, and we express no opinion with respect to the title thereto. We understand that you are relying on your own examinations of title to real and personal property and on a policy of title insurance as to your interests under the State Security Documents listed on Annex I. We express no opinion concerning the priority of any liens or security interests in real property, fixtures or personal property in connection with the transaction. This opinion is rendered in connection with the transaction contemplated by the Loan Documents, and is intended solely for your guidance in connection therewith. Our opinion speaks only as of the date hereof. This opinion is not to be relied upon in any other context, nor is it to be relied upon by any other person or entity for any reason whatsoever. Very truly yours, ANNEX I State Security Documents 1. Modification Agreement (Short Form--_______ County) executed by the Company and the Administrative Agent, as administrative agent for itself and the other Banks, to be recorded in the official records of ___________ County, __________. EXHIBIT E Approved Parcels California Properties 1. Village Green: Real property located in Contra Costa County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of July 1, 1994, recorded on July 7, 1994, in the Official Records of Contra Costa County, California, as Instrument No. 94-176593. Appraised Value is $3,540,000. 2. Concord Diablo 3: Real property located in Contra Costa County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party), recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215846, and rerecorded on February 13, 1996 as Instrument No. 96-25838. Appraised Value is $2,180,000. 3. Concord Diablo 8: Real property located in Contra Costa County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party), recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215848, and rerecorded on February 13, 1996 as Instrument No. 96-25840. Appraised Value is $3,320,000. 4. Concord Mason 18: Real property located in Contra Costa County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party), recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215850. Appraised Value is $1,850,000. 5. Lundy: Real property located in Santa Clara County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, recorded on December 4, 1996, in the Official Records of Santa Clara County, California, as Instrument No. 13542186. Appraised Value is $10,800,000. 6. Laguna Hills: Real property located in Orange County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, recorded on December 4, 1996, in the Official Records of Orange County, California, as Instrument No. 19960614118. Appraised Value is $8,600,000. 7. Spinnaker: Real property located in Alameda County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of October 6, 1997, recorded on October 10, 1997, in the Official Records of Alameda County, California, as Instrument No. 97265982. Appraised Value is $20,250,000. 19. Petaluma: Real property located in Sonoma County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of October 6, 1997, recorded on October 10, 1997, in the Official Records of Sonoma County, California, as Instrument No. 1997-00922902. Appraised Value is $9,900,000. 22. Oakridge: Real property located in San Diego County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of April 13, 1998, recorded on April 30, 1998, in the Official Records of San Diego County, California, as Instrument No. 98-02477-60. Appraised Value is $3,425,000. 23. Monterey: Real property located in Monterey County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of June 22, 1998, recorded on June 30, 1998, in the Official Records of Monterey County, California, as Instrument No. 9842640. Appraised Value is $12,450,000. 24. Canyon Park: Real property located in Contra Costa County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of May 13, 1998, recorded on June 30, 1998, in the Official Records of Contra Costa County, California, as Instrument No. 98-0149676-00. Appraised Value is $7,500,000. 25. Parkpoint Business Center: Real property located in Sonoma County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of June 22, 1998, recorded on October 28, 1998, in the Official Records of Sonoma County, California, as Instrument No. 1998-0127315. Appraised Value is $7,400,000. 26. GEOCON: Real property located in San Diego County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of May 27, 1999, recorded on May 27, 1999, in the Official Records of San Diego County, California, as Instrument No. 0364052. Appraised Value is $3,500,000. 27. Oakmead Business Park: Real property located in Sonoma County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated May 27, 1999, recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068162. Appraised Value is $5,300,000. 28. 2180 & 2190 S. McDowell Blvd.: Real property located in Sonoma County, California encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of May 27, 1999, recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068164. Appraised Value is $6,550,000. Arizona Properties 1. Troika: Real property located in Pima County, Arizona encumbered by that certain Deed of Trust with Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of October 6, 1997, recorded on October 10, 1997, in the Official Records of Pima County, Arizona as Instrument No. 97167094. Appraised Value is $5,350,000. 2. Butterfield: Real property located in Pima County, Arizona encumbered by that certain Deed of Trust with Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of June 1, 1998, recorded on June 30, 1998, in the Official Records of Pima County, Arizona, as Instrument No. 10828-577. Appraised Value is $5,300,000. 3. Cimarron Business: Real property located in Maricopa County, Arizona encumbered by that certain Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of May 27, 1999, recorded on May 27, 1999, in the Official Records of Maricopa County, Arizona, as Instrument No. 99-0505727. Appraised Value is $7,730,000. 4. Phoenix Tech: Real property located in Maricopa County, Arizona encumbered by that certain Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of February 5, 2001, recorded on February 16, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01-0117651. Appraised Value is $4,250,000. 5. Mountain Pointe: Real property located in Maricopa County, Arizona encumbered by that certain Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of February 5, 2001, recorded on February 15, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01- 0116823. Appraised Value is 6,900,000. Washington Property 1. Adobe: Real property located in King County, Washington encumbered by that certain Deed of Trust with Assignment of Rents, Assignment of Nondisturbance Agreements, Security Agreement and Fixture Filing dated as of June 4, 1999, recorded on June 4, 1999, in the Official Records of King County, Washington, as Instrument No. 990604-838. Appraised Value is $52,200,000. 2. Highlands A & B: Real property located in Snohomish County, Washington encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of February 5, 2001, recorded on February 15, 2001, in the Official Records of Snohomish County, Washington, as Instrument No. 200102150570. Appraised Value is $21,457,705,02. 3. Federal Way Building II: Real property located in King County, Washington encumbered by that certain Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing dated as of February 5, 2001, recorded on May 11, 2001, in the Official Records of King County, Washington, as Instrument No. 2001-0511001159. Appraised Value is $17,350,000. EXHIBIT F RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: BANK OF AMERICA, N.A. SF-SDG #9105 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attn.: Ms. Shefali M. Patel Loan No. 211522 ______________________________________________________________________ ______ SPACE ABOVE THIS LINE FOR RECORDER'S USE MODIFICATION AGREEMENT (Short Form - Contra Costa County, CA) This Modification Agreement (the "Agreement") is made and entered into as of May 18, 2001, by BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation ("Borrower"), and BANK OF AMERICA, NATIONAL ASSOCIATION, successor in interest by merger to Bank of America National Trust and Savings Association, in its capacity as administrative agent for the Banks pursuant to the terms of the Credit Agreement described below (in such capacity, the "Administrative Agent"). Factual Background A. Pursuant to that certain Fourth Amended and Restated Credit Agreement dated as of June 15, 1998 (as amended from time to time, the "Original Credit Agreement"), among Borrower, the banks from time to time party thereto (each, a "Bank" and collectively, the "Banks") and Bank of America National Trust and Savings Association ("Bank of America"), the Administrative Agent's predecessor in interest, as "Administrative Agent," the Banks agreed to make available to Borrower a secured revolving line of credit in the maximum aggregate principal amount of $175,000,000.00 (the "Credit Line"). B. Borrower's obligation to repay amounts outstanding from time to time under the Credit Line is evidenced by certain Revolving Notes, each made payable to a Bank, in the aggregate stated principal amount of $175,000,000.00 (collectively, the "Original Notes"). C. The Original Credit Agreement and the Original Notes are collectively secured by, among other things, (a) those certain deeds of trust (collectively, as heretofore modified, the "Deeds of Trust") more particularly described on Exhibit A attached hereto, each executed by Borrower (unless otherwise noted), as trustor or grantor, for the benefit of either the Administrative Agent or its predecessor in interest, as administrative agent for the Banks, as beneficiary, and (b) those certain assignments of leases (collectively, as heretofore modified, the "Lease Assignments") more particularly described on Exhibit A attached hereto, each executed by Borrower (unless otherwise noted), as assignor, in favor of either the Administrative Agent or its predecessor in interest, as administrative agent for the Banks, as assignee. The Deeds of Trust and the Lease Assignments encumber certain real property more particularly described therein (collectively, the "Property"). D. In connection with the Credit Line, Borrower executed an unsecured Third Amended and Restated Unsecured Indemnity Agreement (the "Existing Unsecured Indemnity"). The Existing Unsecured Indemnity is not a Loan Document as defined below. E. Concurrently with the execution of this Modification Agreement, (i) Borrower, the Administrative Agent and the Banks have made and entered into a Fifth Amended and Restated Credit Agreement (the "Credit Agreement") dated as of the date hereof, pursuant to which such parties amended and restated the Original Credit Agreement in its entirety, and (ii) Borrower has executed and delivered to the Banks Revolving Notes (collectively, the "Notes"), each dated the date hereof and payable to the order of a Bank in the maximum aggregate principal amount of $150,000,000.00, pursuant to which the Original Notes have been amended and restated in their entirety. F. In connection with the Credit Agreement and the Notes, Borrower has executed a Fourth Amended and Restated Indemnity Agreement (the "Unsecured Indemnity"), which amends and restates the Existing Unsecured Indemnity in its entirety. G. Borrower and the Administrative Agent, with the consent of the Banks, have agreed to modify the Deeds of Trust and the Lease Assignments so as to secure the obligations of Borrower evidenced by the Original Credit Agreement and the Original Notes, as amended and restated by the Credit Agreement and the Notes, respectively. H. The Credit Agreement, the Notes, the Deeds of Trust, the Lease Assignments and all other documents evidencing, securing or otherwise pertaining to the Credit Line (but excluding the Unsecured Indemnity) are hereinafter collectively referred to as the "Loan Documents". This Agreement is a Loan Document. Agreement Therefore, Borrower and the Administrative Agent, as administrative agent for the Banks, agree as follows: 1. The Deeds of Trust are each hereby modified: (a) by deleting Section 1.1(i) in its entirety; and (b) to secure, in addition to the indebtedness and other obligations heretofore secured by the Deeds of Trust, the payment and performance of all of Borrower's obligations under the Credit Agreement, the Notes and the other Loan Documents, and all amendments, modifications, supplements, replacements, extensions, renewals and substitutions of or for any and/or all of the foregoing. 2. The Lease Assignments are each hereby modified so that each reference to the term "credit agreement" or "Agreement" therein shall refer to the Credit Agreement. 3. Among other things, the Original Credit Agreement has been amended and restated by the Credit Agreement and the Original Notes have been amended and restated by the Notes to (i) reduce the maximum aggregate principal amount of the Credit Line from $175,000,000.00 to $150,000,000.00, (ii) extend the maturity date of the Credit Line, and (iii) provide that the maximum aggregate principal amount of the Credit Line may in the future be increased from $150,000,000.00 to $175,000,000.00 on the terms and subject to certain conditions set forth in the Credit Agreement. 4. The Credit Agreement and the Notes are incorporated in this Agreement by this reference, the same as though set forth herein in full. 5. Capitalized terms used herein and not otherwise defined herein shall have the meaning given such terms in the Credit Agreement. The foregoing notwithstanding, certain obligations (including, without limitation, obligations under the Unsecured Indemnity and any amendment or amendment and restatement of the Unsecured Indemnity) continue to be excluded from the "Secured Obligations", as defined in each of the Deeds of Trust. This Agreement may be executed in counterparts, each of which, when taken together, shall constitute the whole of this Agreement. "Borrower" BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By ________________________________ Peter B. Bedford Chairman and Chief Executive Officer "Administrative Agent" BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent By ______________________________ ______________________________ [Printed Name and Title] ACKNOWLEDGMENT State of California ) ) ss. County of ______________ ) On ________________________ before me, _____________________, Notary Public, personally appeared _______________________________, personally known to me or 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. WITNESS my hand and official seal. ____________________________ State of California ) ) ss. County of ______________ ) On ________________________ before me, _____________________, Notary Public, personally appeared _______________________________, personally known to me or proved to me on the basis of satisfactory evidence to be 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. WITNESS my hand and official seal. ____________________________ EXHIBIT A Deeds of Trust and Lease Assignments Arizona Properties 1. Troika (2480 N. Arcadia Ave., Tucson, AZ (Property No. 0265)): Deed of Trust with Assignment of Rents and Leases, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on October 10, 1997, in the Official Records of Pima County, Arizona as Instrument No. 97167094. Assignment of Leases and Rents, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on October 10, 1997, in the Official Records of Pima County, Arizona as Instrument No. 97167095. 2. Butterfield Technology Center (4755-4775 S. Butterfield, Tucson, AZ (Property No. 0282)): Deed of Trust with Assignment of Rents and Leases, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on June 30, 1998, in the Official Records of Pima County, Arizona, as Instrument No. 10828-577. Assignment of Leases and Rents, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on June 30, 1998, in the Official Records of Pima County, Arizona, as Instrument No. 10828-599. 3. Cimarron Business (14305-14525 North 79th St., Scottsdale, AZ (Property No. 0302)): Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on May 27, 1999, in the Official Records of Maricopa County, Arizona, as Instrument No. 99-0505727. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on May 27, 1999, in the Official Records of Maricopa County, Arizona, as Instrument No. 99- 0505728. 4. Phoenix Tech (10232 South 51st St., Phoenix, AZ (Property No. 0315)): Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of the Administrative Agent, recorded on February 16, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01-0117651. Assignment of Leases, executed by Borrower, as assignor, in favor of the Administrative Agent, as assignee, recorded on February 16, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01-0117653. 5. Mountain Pointe (8211 South 48th St., Tempe, AZ (Property No. 0296)): Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of the Administrative Agent, recorded on February 15, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01-0116823. Assignment of Leases, executed by Borrower, as assignor, in favor of the Administrative Agent, as assignee, recorded on February 16, 2001, in the Official Records of Maricopa County, Arizona, as Instrument No. 01-0116825. California Properties 1. Village Green (250, 260 & 276 Lafayette Circle, Lafayette, CA (Property No. 0211)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on July 7, 1994, in the Official Records of Contra Costa County, California, as Instrument No. 94-176593. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on July 7, 1994, in the Official Records of Contra Costa County, California, as Instrument No. 94-176594. 2. Contra Costa Diablo, Bldg. 3 (4040 Pike Lane, Concord, CA (Property No. 0200)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party) executed by ICMPI (Concord Diablo 3), Inc., a Delaware corporation ("Concord 3"), as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215846, and rerecorded on February 13, 1996, as Instrument No. 96-25838. Assignment of Leases executed by Concord 3, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215847, and rerecorded on February 13, 1996 as Instrument No. 96-25839. 3. Contra Costa Diablo, Bldg. 8 (4095 Pike Lane, Concord, CA (Property No. 0201)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party) executed by ICMPI (Concord Diablo 8), Inc., a Delaware corporation ("Concord 8"), as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215848, and rerecorded on February 13, 1996, as Instrument No. 96-25840. Assignment of Leases executed by Concord 8, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215849, and rerecorded on February 13, 1996 as Instrument No. 96-25841. 4. Mason Industrial Park #18 (140 Mason Circle, Concord, CA (Property No. 0202)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (Third Party) executed by ICMPI (Concord Mason 18), Inc., a Delaware corporation ("Concord Mason 18"), as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95-215850. Assignment of Leases executed by Concord Mason 18, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, and recorded on December 14, 1995, in the Official Records of Contra Costa County, California, as Instrument No. 95- 215851. 5. Lundy Avenue (2105-2125 Lundy Drive, San Jose, CA (Property No. 0240)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on December 4, 1996, in the Official Records of Santa Clara County, California, as Instrument No. 13542186. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on December 4, 1996, in the Official Records of Santa Clara County, California, as Instrument No. 13542187. 6. Laguna Hills Square (24401, 24111, 24421 & 24431 Calle de la Louisa, Laguna Niguel, CA (Property No. 0235)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on December 4, 1996, in the Official Records of Orange County, California, as Instrument No. 19960614118. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on December 4, 1996, in the Official Records of Orange County, California, as Instrument No. 19960614119. 7. Spinnaker Court (3777-3797 Spinnaker Court, Fremont, CA (Property No. 0262)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on October 10, 1997, in the Official Records of Alameda County, California, as Instrument No. 97265981. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on October 10, 1997, in the Official Records of Alameda County, California, as Instrument No. 97265982. 8. Petaluma (2277 Pine View Way, Petaluma, CA (Property No. 0266)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on October 10, 1997, in the Official Records of Sonoma County, California, as Instrument No. 1997-00922902. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on October 10, 1997, in the Official Records of Sonoma County, California, as Instrument No. 1997-00922901. 9. Oakridge (2230 Oakridge Way, Vista, CA (Property No. 0277)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on April 30, 1998, in the Official Records of San Diego County, California, as Instrument No. 98-02477-60. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on April 30, 1998, in the Official Records of San Diego County, California, as Instrument No. 98-02477-61. 10. Monterey Commerce Bldgs. 1, 2 & 3 (One Lower Ragsdale Dr., Monterey, CA (Property Nos. 0286, 0287, 0288)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on June 30, 1998, in the Official Records of Monterey County, California, as Instrument No. 9842640. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on June 30, 1998, in the Official Records of Monterey County, California, as Instrument No. 9842641. 11. Canyon Park (2410 Crow Canyon Rd., San Ramon, CA (Property No. 0284)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on June 30, 1998, in the Official Records of Contra Costa County, California, as Instrument No. 98-0149676-00. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on June 30, 1998, in the Official Records of Contra Costa County, California, as Instrument No. 98-0149677-00. 12. Parkpoint Business Center (405 W. College Ave., Santa Rosa, CA (Property No. 0295)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on October 28, 1998, in the Official Records of Sonoma County, California, as Instrument No. 1998-0127315. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on October 28, 1998, in the Official Records of Sonoma County, California, as Instrument No. 1998-0127316. 13. GEOCON (6960 Flanders Dr., San Diego, CA (Property No. 0307)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on May 27, 1999, in the Official Records of San Diego County, California, as Instrument No. 0364052. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on May 27, 1999, in the Official Records of San Diego County, California, as Instrument No. 0364053. 14. Oakmead Business Park (3880 Cypress Dr., Petaluma, CA (Property No. 0312)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068162. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068163. 15. 2180 & 2190 S. McDowell Blvd. (Petaluma, CA (Property Nos. 0313, 0314)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as trustor, for the benefit of Bank of America as the "Administrative Agent", recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068164. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on May 27, 1999, in the Official Records of Sonoma County, California, as Instrument No. 1999-0068165. Washington Property 1. Adobe (701 & 801 North 34th St., Seattle, WA (Property Nos. 0298, 0299)): Deed of Trust with Assignment of Rents, Assignment of Non-Disturbance Agreements, Security Agreement and Fixture Filing, executed by Borrower, as grantor, for the benefit of Bank of America as the "Administrative Agent", recorded on June 4, 1999, in the Official Records of King County, Washington, as Instrument No. 990604-0838. Assignment of Leases, executed by Borrower, as assignor, in favor of Bank of America as the "Administrative Agent", as assignee, recorded on June 4, 1999, in the Official Records of King County, Washington, as Instrument No. 990604-0839. 2. Highlands A & B (21312 &21520 30th Ave. SE, Bothell, WA (Property Nos. 0300, 0332)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as grantor, for the benefit of the Administrative Agent, recorded on February 15, 2001, in the Official Records of Snohomish County, Washington, as Instrument No. 200102150566. Assignment of Leases, executed by Borrower, as assignor, in favor of the Administrative Agent, as assignee, recorded on February 15, 2001, in the Official Records of Snohomish County, Washington, as Instrument No. 200102150570. 3. Federal Way Building II (3455 South 344th Way, Federal Way, WA (Property No. 0326)): Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower, as grantor, for the benefit of the Administrative Agent, recorded on May 11, 2001, in the Official Records of King County, Washington, as Instrument No. 2001-0511001159. Assignment of Leases, executed by Borrower, as assignor, in favor of the Administrative Agent, as assignee, recorded on May 11, 2001, in the Official Records of King County, Washington, as Instrument No. 2001-0511001160. EXHIBIT G Standby Letter of Credit Application See Attached EXHIBIT H ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT (this ("Assignment and Assumption") dated as of _______________, 20__ is made between (the "Assignor") and ____________________________ (the "Assignee"). RECITALS WHEREAS, the Assignor is party to that certain Fifth Amended and Restated Credit Agreement dated as of May 18, 2001 (as amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement"), among Bedford Property Investors, Inc., a Maryland corporation (the "Company"), the several financial institutions from time to time party thereto (including the Assignor, the "Banks"), and Bank of America, National Association, as administrative agent for the Banks, (the "Administrative Agent"). Any capitalized terms defined in the Credit Agreement and not defined in this Assignment and Assumption are used herein as defined in the Credit Agreement; WHEREAS, the Assignor is also a party to that certain Third Amended and Restated Co-Lender Agreement dated as of May 7, 2001 (as amended, amended and restated, modified, supplemented or renewed, the "Co-Lender Agreement"), between the Banks and the Administrative Agent; WHEREAS, as provided under the Credit Agreement, the Assignor has committed to making Loans (the "Committed Loans") to the Company in an aggregate amount not to exceed $___________ (the "Commitment"); WHEREAS, [the Assignor has made Committed Loans in the aggregate principal amount of $_____________ to the Company] [no Committed Loans are outstanding under the Credit Agreement]; and WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, in an amount equal to $____________ (the "Assigned Amount") on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1. Assignment and Assumption. 1.1 Subject to the terms and conditions of this Assignment and Assumption, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Assumption) ___% (the "Assignee's Percentage Share") of (A) the Commitment of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Credit Agreement, the Loan Documents and the Co-Lender Agreement. 1.2 With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the Credit Agreement and the Co-Lender Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the Credit Agreement and the Co-Lender Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which it is required to perform as a Bank under the Credit Agreement or the Co-Lender Agreement. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement and the Co-Lender Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under Section 10.5 of the Credit Agreement or Section 9.4 of the Co-Lender Agreement to the extent such rights relate to the time prior to the Effective Date. 1.3 After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor's Commitment will be $__________. 1.4 After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee's Commitment will be $__________. 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $__________, representing the Assignee's Pro Rata Share of the Principal amount of all Committed Loans. (b) The [Assignor] [Assignee] further agrees to pay to the Administrative Agent a processing fee in the amount specified in Section 10.8.1 of the Credit Agreement. (c) Notwithstanding anything to the contrary contained in Sections 2.8 or 2.13 of the Credit Agreement, for purposes of this Assignment and Assumption, the Administrative Agent shall remit interest payments on Committed Loans outstanding to the Company with respect to the Assignee's Commitment on the basis of an interest rate whose Applicable Margin (as defined in the Credit Agreement) shall be defined as follows: (i) with respect to Prime Rate Loans, ____ basis points; and (ii) with respect to LIBOR Loans, ____ basis points. The Administrative Agent shall retain all additional amounts paid by the Company as a commitment fee or as interest on the Committed Loans outstanding to the Company with respect to the Assignee's Commitment. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment shall be for the account of the Assignor. Subject to the provisions of Section 2(c) hereof, any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred to in Section 6.1 of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Assumption; (b) acknowledges its familiarity with, and approves of, each of the Approved Parcels (as defined in the Credit Agreement); and (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Credit Agreement or the Co-Lender Agreement. 5. Effective Date; Notices. (a) As between the Assignor and the Assignee, the effective date for this Assignment and Assumption shall be __________, 20__ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Assumption shall be executed and delivered by the Assignor and the Assignee; (ii) the consent of the Company and the Administrative Agent required for an effective assignment of the Assigned Amount by the Assignor to the Assignee under Section 10.8.1 of the Credit Agreement shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and (iv) Acceptance; (v) the Assignee shall have complied with Section 10.8.1 of the Credit Agreement (if applicable); (vi) the processing fee referred to in Section 2(b) hereof and in Section 10.8.1 of the Credit Agreement shall have been paid to the Administrative Agent; and (vii) the Assignor shall have assigned and the Assignee shall have assumed a percentage equal to the Assignee's Percentage Share of the rights and obligations of the Assignor under the Credit Agreement. (b) Promptly following the execution of this Assignment and Assumption, the Assignor shall deliver to the Company and the Administrative Agent for acknowledgment by the Administrative Agent, a Notice of Assignment substantially in the form attached hereto as Schedule 1. 6. Administrative Agent. (a) The Assignee hereby appoints and authorizes the Assignor to take such action as administrative agent on its behalf and to exercise such powers under the Credit Agreement and the Co-Lender Agreement as are delegated to the Administrative Agent by the Banks pursuant to the terms of the Credit Agreement or the Co-Lender Agreement. (b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Administrative Agent under the Credit Agreement. 7. Withholding Tax. The Assignee (a) represents and warrants to the Banks, the Administrative Agent and the Company that under applicable law and treaties no tax will be required to be withheld by the Banks with respect to any payments to be made to the Assignee hereunder, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any state thereof) to the Administrative Agent and the Company prior to the time that the Administrative Agent or Company is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax an all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption. 8. Representations and Warranties. (a) The Assignor represents and warrants to the Assignee that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Assumption and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Assumption and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Assumption, and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Assumption has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Company, or the performance or observance by the Company, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants to the Assignor that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Assumption and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Assumption, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Assumption; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Assumption has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. 9. Further Assurances. The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and to take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Assumption, including the delivery of any notices or other documents or instruments to the Company or the Administrative Agent, which may be required in connection with the assignment and assumption contemplated hereby. 10. Miscellaneous. (a) Any amendment or waiver of any provision of this Assignment and Assumption shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Assumption shall be without prejudice to any rights with respect to any other or further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Assumption. (d) This Assignment and Assumption may be executed in any number of counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ASSUMPTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in California over any suit, action or proceeding arising out of or relating to this Assignment and Assumption and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such California State or Federal court. Each party to this Assignment and Assumption hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ASSUMPTION, THE CREDIT AGREEMENT, THE CO-LENDER AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENTS (WHETHER ORAL OR WRITTEN). IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Assumption to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By: _______________________________________ Title: ____________________________________ ___ By: _______________________________________ Title: ____________________________________ ___ Address: [ASSIGNEE] By: _______________________________________ Title: ____________________________________ ___ By: _______________________________________ Title: ____________________________________ ___ Address: SCHEDULE 1 TO EXHIBIT H NOTICE OF ASSIGNMENT AND ASSUMPTION __________, 20__ Bank of America, National Association, as Administrative Agent 600 Montgomery Street, 22nd Floor San Francisco, California 94111 Attention: Frank Stumpf Bedford Property Investors, Inc. 270 Lafayette Circle Lafayette, California 94549 Attention: _______________ Gentlemen: We refer to the Fifth Amended and Restated Credit Agreement dated as of May 18, 2001 (as amended, amended and restated, modified, supplemented or renewed from time to time the "Credit Agreement"), among Bedford Property Investors, Inc., a Maryland corporation (the "Company"), the Banks referred to therein and Bank of America, National Association, as administrative agent for the Banks (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein as therein defined. 1. We hereby give you notice of, and request your consent to, the assignment by _______________________ (the "Assignor") to _____________ (the "Assignee") of ___% of the right, title and interest of the Assignor in and to the Credit Agreement (including, without limitation, the right, title and interest of the Assignor in and to the Commitments of the Assignor and all outstanding Loans made by the Assignor) pursuant to the Assignment and Assumption Agreement attached hereto (the "Assignment and Assumption"). Before giving effect to such assignment the Assignor's Commitment is $__________ [.] [and the aggregate amount of its outstanding Loans is $ __________.] 2. The Assignee agrees that, upon receiving the consent of the Administrative Agent and, if applicable, the Company to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the Credit Agreement. 3. The following administrative details apply to the Assignee: A) Notice Address: Assignee name: ___________________________ Address: ___________________________ ___________________________ ___________________________ Attention: ___________________________ Telephone: ___________________________ Telecopier: ___________________________ (B) Assignee's Payment Instructions to the Administrative Agent: Account Number: ___________________________ At: ___________________________ ___________________________ ___________________________ Reference: ___________________________ Attention: ___________________________ 4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and the Assignee contained in the Assignment and Assumption. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Assumption to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [NAME OF ASSIGNOR] By ____________________________________ ____________________________________ [Printed Name and Title] By ____________________________________ ____________________________________ [Printed Name and Title] [NAME OF ASSIGNEE] By ____________________________________ ____________________________________ [Printed Name and Title] By ____________________________________ ____________________________________ [Printed Name and Title] ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By ____________________________ ____________________________ [Printed Name and Title] BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent By _______________________________ _______________________________ [Printed Name and Title] EXHIBIT I-1 SUPPLEMENTAL SIGNATURE PAGE (EXISTING CO-LENDER) Re: (i) Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of May 18, 2001, among Bedford Property Investors, Inc., the several financial institutions from time to time party thereto (each a "Bank" and collectively, the "Banks"), Bank of America, National Association, individually as a Bank and as administrative agent for the Banks (in such capacity, the "Administrative Agent"), and Union Bank of California, N.A., individually as a Bank and as Co-Agent, and (ii) the Third Amended and Restated Co-Lender Agreement dated as of May 18, 2001, among the Banks and the Administrative Agent (collectively, together with the Credit Agreement, the "Agreements"). Capitalized terms used below and not otherwise defined shall have the meanings given such terms in the Credit Agreement. Pursuant to Section 2.19 of the Credit Agreement, the undersigned agrees to increase its Commitment to $______________ (and accordingly increase the Maximum Commitment Amount to $______________), which represents a revised Pro Rata Share of _______________% of the combined Commitments of all of the Banks, effective as of __________________, 20___ (the "Effective Date"). The undersigned further agrees to continue to be bound by all of the terms and conditions of each of the Agreements. ________________________________ By _____________________________ _____________________________ [Printed Name and Title] ACKNOWLEDGED AND APPROVED: We hereby consent to and approve the foregoing supplement to the Loan Agreement, and acknowledge and agree that as of the Effective Date the Maximum Commitment Amount is increased to $______________, and the Commitment of _______________________________________, is increased to $______________. We further agree that the foregoing supplement to the Credit Agreement, and the amendments effected thereby, shall not alter, diminish or otherwise affect any obligations under the Agreements or any other Loan Document except as expressly set forth above. This acknowledgment and approval may be executed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute a single agreement. Date: __________________, 20___ "Company" BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By __________________________________ __________________________________ [Printed Name and Title] "Administrative Agent" BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent By __________________________________ __________________________________ [Printed Name and Title] EXHIBIT I-2 SUPPLEMENTAL SIGNATURE PAGE (NEW CO-LENDER) Re: (i) Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of May 18, 2001, among Bedford Property Investors, Inc., the several financial institutions from time to time party thereto (each a "Bank" and collectively, the "Banks"), Bank of America, National Association, individually as a Bank and as administrative agent for the Banks (in such capacity, the "Administrative Agent"), and Union Bank of California, N.A., individually as a Bank and as Co-Agent, and (ii) the Third Amended and Restated Co-Lender Agreement dated as of May 18, 2001, among the Banks and the Administrative Agent (collectively, together with the Credit Agreement, the "Agreements"). Capitalized terms used below and not otherwise defined shall have the meanings given such terms in the Credit Agreement. Pursuant to Section 2.19 of the Credit Agreement, the undersigned agrees to become a Bank under the Agreements as if originally named therein, with a Commitment of $______________ (increasing the Maximum Commitment Amount to $______________), which represents a Pro Rata Share of _______________% of the combined Commitments of all of the Banks, effective as of __________________, 20___ (the "Effective Date"). The undersigned further agrees to be bound by all of the terms and conditions of each of the Agreements. ________________________________ By _____________________________ _____________________________ [Printed Name and Title] Offshore and Domestic Lending Offices, Addresses for Notices: as a Bank ______________________________ ______________________________ ______________________________ ______________________________ Attention: ___________________ Telephone: ___________________ Telecopier: ___________________ Payment Information: ABA No.: _____________ Account Number: _____________ At: _______________________ Reference: _______________________ Admin. Contact: _______________________ Telephone: _______________________ Telecopier: _______________________ ACKNOWLEDGED AND APPROVED: We hereby consent to and approve the foregoing supplement to the Loan Agreement, and acknowledge and agree that as of the Effective Date the Maximum Commitment Amount is increased to $______________, and ____________________ has become a Bank under the Agreements as if originally named therein, with a Commitment of _______________________. We further agree that the foregoing supplement to the Credit Agreement, and the amendments effected thereby, shall not alter, diminish or otherwise affect any obligations under the Agreements or any other Loan Document except as expressly set forth above. This acknowledgment and approval may be executed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute a single agreement. Date: __________________, 20___ "Company" BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By __________________________________ __________________________________ [Printed Name and Title] "Administrative Agent" BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent By __________________________________ __________________________________ [Printed Name and Title] Schedule 5.5 Litigation [None, outside of ordinary litigation related to the collection of delinquent rent.] Schedule 5.11 Material Indebtedness Not Disclosed on 12/31/00 Financial Statements [None] Schedule 5.12 Environmental Disclosures [None] Schedule 5.16 (a) List of Subsidiaries ICMPI (Concord Diablo 3), Inc., a Delaware corporation ICMPI (Concord Diablo 8), Inc., a Delaware corporation ICMPI (Concord Mason 18), Inc., a Delaware corporation (b) Other Equity Investments ICMPI (Concord Diablo 3), Inc., a Delaware corporation ICMPI (Concord Diablo 8), Inc., a Delaware corporation ICMPI (Concord Mason 18), Inc., a Delaware corporation FIFTH AMENDED AND RESTATED CREDIT AGREEMENT Among BEDFORD PROPERTY INVESTORS, INC., THE BANKS PARTY HERETO, BANK OF AMERICA, NATIONAL ASSOCIATION, as Administrative Agent for the Banks, UNION BANK OF CALIFORNIA, N.A., as Co-Agent, and BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager Dated as of May 18, 2001 TABLE OF CONTENTS Page 1. Definitions. . . . . . . . . . . . . . . . . . . . . . 2 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . .2 1.2 Other Interpretive Provisions. . . . . . . . . . . . 21 1.2.1 Use of Defined Terms . . . . . . . . . . . . . . . 21 1.2.2 Certain Common Terms.. . . . . . . . . . . . . . . 21 1.2.3 Accounting Principles. . . . . . . . . . . . . . . 22 2. The Credit.. . . . . . . . . . . . . . . . . . . . . .22 2.1 Amount and Terms of Commitment . . . . . . . . . . . 22 2.2 Swing Line.. . . . . . . . . . . . . . . . . . . . . 23 2.3 Loan Accounts; Revolving Notes.. . . . . . . . . . . 25 2.4 Procedure for Obtaining Credit . . . . . . . . . . . 26 2.5 Conversion and Continuation Elections. . . . . . . . 27 2.6 Voluntary Termination or Reduction of Commitment . . . . . . .28 2.7 Principal Payments.. . . . . . . . . . . . . . . . . 28 2.7.1 Optional Repayments. . . . . . . . . . . . . . . . 28 2.7.2 Mandatory Repayments.. . . . . . . . . . . . . . . 29 2.7.3 Repayment at Maturity. . . . . . . . . . . . . . . 30 2.8 Interest.. . . . . . . . . . . . . . . . . . . . . . 30 2.8.1 Accrual Rate . . . . . . . . . . . . . . . . . . . 30 2.8.2 Payment. . . . . . . . . . . . . . . . . . . . . . 30 2.8.3 Default Interest . . . . . . . . . . . . . . . . . 30 2.8.4 Maximum Legal Rate . . . . . . . . . . . . . . . . 30 2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . 31 2.10 Computation of Fees and Interest . . . . . . . . . . 31 2.11 Payments by the Company. . . . . . . . . . . . . . . 32 2.12 Payments by the Banks to the Administrative Agent. . . . . . .32 2.13 Sharing of Payments, Etc.. . . . . . . . . . . . . . 33 2.14 Security; Appraisal of Approved Parcels. . . . . . . 34 2.15 Release of Lien on Approved Parcel.. . . . . . . . . 35 2.15.1 Release Conditions . . . . . . . . . . . . . . . . 35 2.15.2 Application of Release Price . . . . . . . . . . . 35 2.16 Tenant Documents . . . . . . . . . . . . . . . . . . 35 2.17 Collateral Documents . . . . . . . . . . . . . . . . 36 2.18 Increases and Decreases in Pro Rata Shares . . . . . 36 2.19 Increase in Maximum Commitment Amount. . . . . . . . 37 3. Taxes, Yield Protection and Illegality.. . . . . . . .39 3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 39 3.2 Illegality.. . . . . . . . . . . . . . . . . . . . . 39 3.3 Increased Costs and Reduction of Return. . . . . . . 40 3.4 Funding Losses . . . . . . . . . . . . . . . . . . . 40 3.5 Inability to Determine Rates . . . . . . . . . . . . 41 3.6 Certificate of Bank. . . . . . . . . . . . . . . . . 42 3.7 Survival . . . . . . . . . . . . . . . . . . . . . . 42 4. Conditions Precedent.. . . . . . . . . . . . . . . . .42 4.1 Conditions to Approving Parcels. . . . . . . . . . . 42 4.1.1 Fee Ownership. . . . . . . . . . . . . . . . . . . 42 4.1.2 Satisfactory Parcel. . . . . . . . . . . . . . . . 42 4.1.3 No Hazardous Materials . . . . . . . . . . . . . . 42 4.1.4 Appraised Value. . . . . . . . . . . . . . . . . . 43 4.1.5 No Liens . . . . . . . . . . . . . . . . . . . . . 43 4.1.6 Deliveries to the Administrative Agent . . . . . . 43 4.1.7 Recording of the Mortgage. . . . . . . . . . . . . 44 4.1.8 Title Insurance. . . . . . . . . . . . . . . . . . 45 4.1.9 Filing of Financing Statements . . . . . . . . . . 45 4.1.10 Perfection of Liens. . . . . . . . . . . . . . . . 45 4.1.11 Tax Reporting Service. . . . . . . . . . . . . . . 45 4.1.12 Costs. . . . . 45 4.1.13 Expenses . . . . . . . . . . . . . . . . . . . . . 45 4.2 Conditions of Initial Loan . . . . . . . . . . . . . 46 4.2.1 Deliveries to the Administrative Agent . . . . . . 46 4.2.2 Payment of Expenses. . . . . . . . . . . . . . . . 48 4.2.3 Payment of Fees. . . . . . . . . . . . . . . . . . 48 4.2.4 Maximum Commitment Amount. . . . . . . . . . . . . 48 4.3 Conditions to All Borrowings . . . . . . . . . . . . 48 4.3.1 Minimum Number of Approved Parcels . . . . . . . . 48 4.3.2 Notice of Borrowing. . . . . . . . . . . . . . . . 49 4.3.3 Continuation of Representations and Warranties . . . . . . . 49 4.3.4 No Existing Default. . . . . . . . . . . . . . . . 49 4.3.5 No Future Advance Notice . . . . . . . . . . . . . 49 4.3.6 Further Assurances . . . . . . . . . . . . . . . . 49 4.3.7 Title Insurance. . . . . . . . . . . . . . . . . . 49 4.4 Letters of Credit. . . . . . . . . . . . . . . . . . 49 5. Representations and Warranties . . . . . . . . . . . .50 5.1 Existence and Power. . . . . . . . . . . . . . . . . 50 5.2 Corporate Authorization; No Contravention. . . . . . 50 5.3 Governmental Authorization . . . . . . . . . . . . . 51 5.4 Binding Effect . . . . . . . . . . . . . . . . . . . 51 5.5 Litigation . . . . . . . . . . . . . . . . . . . . . 51 5.6 No Default . . . . . . . . . . . . . . . . . . . . . 51 5.7 ERISA Compliance . . . . . . . . . . . . . . . . . . 52 5.8 Use of Proceeds; Margin Regulations. . . . . . . . . 52 5.9 Title to Properties. . . . . . . . . . . . . . . . . 52 5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 52 5.11 Financial Condition. . . . . . . . . . . . . . . . . 52 5.12 Environmental Matters. . . . . . . . . . . . . . . . 53 5.13 Regulated Entities . . . . . . . . . . . . . . . . . 54 5.14 No Burdensome Restrictions . . . . . . . . . . . . . 54 5.15 Solvency . . . . . . . . . . . . . . . . . . . . . . 54 5.16 Subsidiaries; Equity Investments . . . . . . . . . . 54 5.17 Brokers; Transaction Fees. . . . . . . . . . . . . . 54 5.18 Insurance. . . . . . . . . . . . . . . . . . . . . . 55 5.19 Full Disclosure. . . . . . . . . . . . . . . . . . . 55 6. Affirmative Covenants. . . . . . . . . . . . . . . . .55 6.1 Financial Statements . . . . . . . . . . . . . . . . 55 6.2 Certificates; Other Information. . . . . . . . . . . 56 6.3 Notices. . . . . . . . . . . . . . . . . . . . . . . 57 6.4 Preservation of Corporate Existence, Etc . . . . . . 58 6.5 Maintenance of Property. . . . . . . . . . . . . . . 59 6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . 59 6.7 Payment of Obligations . . . . . . . . . . . . . . . 60 6.8 Compliance with Laws . . . . . . . . . . . . . . . . 60 6.9 Inspection of Property and Books and Records . . . . 60 6.10 Environmental Laws . . . . . . . . . . . . . . . . . 61 6.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . 61 6.12 Solvency . . . . . . . . . . . . . . . . . . . . . . 61 6.13 Further Assurances . . . . . . . . . . . . . . . . . 61 6.14 Registration of Capital Stock. . . . . . . . . . . . 62 7. Negative Covenants . . . . . . . . . . . . . . . . . .62 7.1 Limitation on Liens. . . . . . . . . . . . . . . . . 62 7.2 Consolidations and Mergers . . . . . . . . . . . . . 63 7.3 Loans and Investments. . . . . . . . . . . . . . . . 63 7.4 Limitation on Indebtedness . . . . . . . . . . . . . 64 7.5 Transactions with Affiliates . . . . . . . . . . . . 64 7.6 Use of Proceeds. . . . . . . . . . . . . . . . . . . 64 7.7 Contingent Obligations . . . . . . . . . . . . . . . 64 7.8 Creation of Subsidiaries . . . . . . . . . . . . . . 64 7.9 Compliance with ERISA. . . . . . . . . . . . . . . . 65 7.10 Debt to Gross Asset Value Ratio. . . . . . . . . . . 65 7.11 Interest Coverage Ratio. . . . . . . . . . . . . . . 65 7.12 Fixed Charge Coverage Ratio. . . . . . . . . . . . . 65 7.13 Change in Business . . . . . . . . . . . . . . . . . 66 7.14 Accounting Changes . . . . . . . . . . . . . . . . . 66 7.15 Limitation on Dividends. . . . . . . . . . . . . . . 66 7.16 Development Activity . . . . . . . . . . . . . . . . 66 7.17 Undeveloped Land . . . . . . . . . . . . . . . . . . 67 7.18 Tangible Net Worth . . . . . . . . . . . . . . . . . 67 8. Events of Default and Remedies.. . . . . . . . . . . .68 8.1 Event of Default . . . . . . . . . . . . . . . . . . 68 8.1.1 Non-Payment. . . . . . . . . . . . . . . . . . . . 68 8.1.2 Representation or Warranty . . . . . . . . . . . . 68 8.1.3 Specific Defaults. . . . . . . . . . . . . . . . . 68 8.1.4 Other Defaults . . . . . . . . . . . . . . . . . . 68 8.1.5 Cross-Default. . . . . . . . . . . . . . . . . . . 68 8.1.6 Insolvency; Voluntary Proceedings. . . . . . . . . 68 8.1.7 Insolvency; Involuntary Proceedings. . . . . . . . 69 8.1.8 ERISA Plans. . . . . . . . . . . . . . . . . . . . 69 8.1.9 Monetary Judgments . . . . . . . . . . . . . . . . 69 8.1.10 Adverse Change . . . . . . . . . . . . . . . . . . 70 8.1.11 Management Changes . . . . . . . . . . . . . . . . 70 8.1.12 Preferred Dividend Defaults. . . . . . . . . . . . 70 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 70 8.2.1 Termination of Commitment to Lend. . . . . . . . . 70 8.2.2 Acceleration of Loans. . . . . . . . . . . . . . . 70 8.2.3 Security for Letters of Credit . . . . . . . . . . 70 8.2.4 Exercise of Rights and Remedies. . . . . . . . . . 71 8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . 71 9. The Administrative Agent.. . . . . . . . . . . . . . .72 9.1 Appointment and Authorization of the Administrative Agent . . . . . . . . . . . . . . . . . . . . . 72 9.2 The Administrative Agent's Powers. . . . . . . . . . 72 9.3 Limitation on the Administrative Agent's Duties. . . . . 72 9.4 Acknowledgment of Co-Lender Agreement. . . . . . . . 73 9.5 Co-Agents. . . . . . . . . . . . . . . . . . . . . . 73 9.6 Successor Administrative Agent . . . . . . . . . . . 73 10. Miscellaneous. . . . . . . . . . . . . . . . . . . . .74 10.1 Amendments and Waivers . . . . . . . . . . . . . . . 74 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . 74 10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . 75 10.4 Costs and Expenses . . . . . . . . . . . . . . . . . 75 10.5 Indemnity. . . . . . . . . . . . . . . . . . . . . . 76 10.6 Marshaling; Payments Set Aside . . . . . . . . . . . 77 10.7 Successors and Assigns . . . . . . . . . . . . . . . 77 10.8 Assignments, Participations, Confidentiality.. . . . . . 77 10.8.1 Assignments. . . . . . . . . . . . . . . . . . . . 77 10.8.2 Effect of Assignment . . . . . . . . . . . . . . . 78 10.8.3 Participations . . . . . . . . . . . . . . . . . . 78 10.8.4 Pledge to Federal Reserve Bank . . . . . . . . . . 79 10.8.5 Confidentiality. . . . . . . . . . . . . . . . . . 79 10.9 Counterparts . . . . . . . . . . . . . . . . . . . . 79 10.10 Severability . . . . . . . . . . . . . . . . . . . . 80 10.11 No Third Parties Benefited . . . . . . . . . . . . . 80 10.12 Time . . . . . . . . . . . . . . . . . . . . . . . . 80 10.13 Governing Law. . . . . . . . . . . . . . . . . . . . 80 10.14 Arbitration; Reference.. . . . . . . . . . . . . . . 80 10.15 Notice of Claims; Claims Bar . . . . . . . . . . . . 81 10.16 Entire Agreement; Amendment and Restatement. . . . . 82 10.17 Interpretation . . . . . . . . . . . . . . . . . . . 82 Exhibit A Form of Borrowing Notice Exhibit B Form of Conversion/Continuation Notice Exhibit C Form of Revolving Note Exhibit D Form of Opinion of Counsel Exhibit E List of Approved Parcels Exhibit F Form of Modification Agreement (Short Form) Exhibit G Standby Letter of Credit Application Exhibit H Form of Assignment and Assumption Agreement Exhibit I-1 Supplemental Signature Page for a Bank Exhibit I-2 Supplemental Signature Page for an Eligible Assignee EX-10 4 q10q1036.txt Exhibit 10.36 [Loan No.: 04-751-3126554-9] (NOTE: THIS PROMISSORY NOTE MAY REQUIRE A BALLOON PAYMENT AT MATURITY) PROMISSORY NOTE $18,000,000 (U.S.) Seattle, Washington JULY 23, 2001 FOR VALUE RECEIVED, the undersigned (individually and collectively, "Borrower"), jointly and severally, promise to pay to the order of WASHINGTON MUTUAL BANK, a Washington corporation, at its office at 400 East Main Street, STA3MLM, Stockton, California 95290, Attention: Commercial Real Estate Asset Management, or at such other place as the holder of this Note (hereinafter, "holder") may from time to time designate in writing, the sum of EIGHTEEN MILLION DOLLARS ($18,000,000) in lawful money of the United States, with interest thereon from the date of this Note until paid at the rates set forth below, computed on monthly balances. Interest for each full calendar month during the term of this Note shall be calculated on the basis of a 360-day year and twelve 30-day months. Interest for any partial calendar month at the beginning or the end of the term of this Note shall be calculated on the basis of a 365- or 366-day year and the actual number of days in that month. Initial Interest Rate. The per annum interest rate hereunder (the "Note Rate") shall initially be seven and nine hundred eighteen one-thousandths percent (7.918%) (the "Initial Rate"). The Note Rate is subject to adjustment as provided below. Interest Rate Adjustments. Interest Adjustment Date. Beginning on FEBRUARY 1, 2002 (the "Initial Interest Adjustment Date"), and on the first day of every sixth month thereafter, the Note Rate shall be adjusted as provided below. Any date on which the Note Rate is to be adjusted as provided in this Note is referred to herein as the "Interest Adjustment Date." The Index. Beginning with the first Interest Adjustment Date, the Note Rate will be based on an Index plus the Margin (each as defined below). As used in this Note, the term "Index" means the Twelve-Month Average, determined as set forth below, of the annual yields reported monthly on actively traded United States Treasury Securities adjusted to a constant maturity of one year as published by the Federal Reserve Board in the Federal Reserve Statistical Release entitled "Selected Interest Rates (G.13)" (the "Monthly Yields"). The Twelve-Month Average is determined by adding together the Monthly Yields for the most recently available twelve months and dividing by 12. The most recent Index figure available as of fifteen (15) days before each Interest Adjustment Date is referred to in this Note as the "Current Index." If the Index is no longer available, holder shall choose a new index as the Index which is based upon comparable information. Holder shall give Borrower notice of such choice. Interest Rate Adjustment. Before each Interest Adjustment Date, holder will calculate the new Note Rate by adding two and six-tenths percent (2.60%) (the "Margin") to the Current Index. Holder will then round the result of this addition to the nearest one-thousandth of one percentage point (0.001%) provided the Note Rate will never increase or decrease on any single Interest Adjustment Date more than one percentage point (1.00%) from the immediately preceding Note Rate except as set forth in Section 10 below. Subject to the limits stated in Section 2(d) below, this rounded amount will be the Note Rate until the next Interest Adjustment Date. Interest Rate Limit. Except as set forth in Section 10 below, the Note Rate will never be greater than twelve and nine hundred eighteen one-thousandths percent (12.918%) per annum (the "Rate Limit"). Delayed Adjustment. If for any reason holder fails to make an adjustment to the Note Rate or the Monthly Payment Amount as described in this Note, regardless of any notice requirement, holder may, upon discovery of such failure, then make such adjustment as if it had been made on time. Borrower agrees not to hold holder responsible for any damages which may result from holder's failure to make the adjustment and to allow holder, at its option, to apply any excess monies which Borrower may have paid to partial prepayment of the unpaid principal balance of this Note. Monthly Payments. Beginning on SEPTEMBER 1, 2001 and on the first day of each and every calendar month thereafter throughout the term of this Note (the "Monthly Payment Dates"), Borrower shall make monthly payments of principal and interest (the "Monthly Payment Amounts") to holder as follows: Beginning on SEPTEMBER 1, 2001 through and including FEBRUARY 1, 2002, the Monthly Payment Amount shall be ONE HUNDRED FORTY-NINE THOUSAND SIX HUNDRED FORTY-ONE and 92/100 Dollars ($149,641.92); The Monthly Payment Amount shall be adjusted semi-annually beginning on MARCH 1, 2002, and on the same day of every sixth month thereafter, to an amount sufficient to fully repay the unpaid principal balance of this Note as of the last day of the month immediately preceding the date of such adjustment, together with interest at the Note Rate as adjusted on the Immediately Preceding Interest Adjustment Date, by the date that is two hundred forty (240) months from the first day of the first Monthly Payment Date. Maturity. Unless sooner repaid by Borrower, the entire unpaid principal balance of this Note, plus all accrued but unpaid interest, and all other amounts owing hereunder or under the Security Documents (as defined in Section 8) shall be due and payable in full on AUGUST 1, 2011 (the "Maturity Date"). Application of Payments. Payments shall be applied: (a) first, to the payment of accrued interest; (b) second, at the option of holder, to the payment of any other amounts owing under this Note or secured by the Security Documents, other than accrued interest and principal, including, but not limited to advances holder may have made for attorneys' fees or for taxes, assessments, insurance premiums, or other charges on any property given as security for this Note and late charges due hereunder; and (c) third, to the reduction of principal of this Note. Prepayment. Borrower may, upon thirty (30) days' prior written notice to holder, prepay its obligation under this Note in full or in part on any Monthly Payment Date upon payment of a premium (the "Prepayment Premium") as follows: during the First Loan Year (as hereinafter defined) the Prepayment Premium will be one percent (1.00%) of the amount prepaid. Beginning with the Second Loan Year and during each successive Loan Year throughout the remaining term of this Note, Borrower may prepay its obligation under this Note in full upon thirty (30) days prior written notice to holder, or in part on any Monthly Payment Date, without payment of a Prepayment Premium. "Loan Year" shall mean each successive twelve-month period commencing with the first day of the first full calendar month beginning on or after the date of this Note. Borrower expressly waives any right to prepay this Note except as provided in this Section 6. Therefore, if the maturity of this Note is accelerated for any reason, including, without limitation, the occurrence of any event of default hereunder or under the Deed of Trust (as defined in Section 8), including without limitation Section 4.13 of the Deed of Trust, or any other document that evidences or secures the repayment of this Note, then any subsequent tender of payment of this Note, including any redemption following foreclosure of the Deed of Trust, shall constitute an evasion of the restrictions on prepayment set forth herein and shall be deemed a voluntary prepayment. Accordingly, holder may impose as a condition to accepting any such tender, and may bid at any sheriff's or trustee's sale under the Deed of Trust, and/or include in any complaint for judicial foreclosure or for any claim in bankruptcy, as part of the indebtedness evidenced by this Note and secured by the Deed of Trust, the Prepayment Premium that would have otherwise been payable hereunder for prepayment of this Note occurring on the date of such acceleration. The Prepayment Premium will not be payable for prepayment of this Note occurring as a result of the application of insurance and condemnation proceeds to the reduction of the unpaid principal balance of this Note. Borrower acknowledges that: (i) it is a knowledgeable real estate investor, (ii) it fully understands the effect of the above waiver, (iii) the making of the loan evidenced by this Note at the interest rates set forth above is sufficient consideration for such waiver, and (iv) holder would not make the loan evidenced by this Note without such waiver. Borrower acknowledges that any statement made by holder setting forth the amount of the Prepayment Premium shall only be binding upon holder if such statement is made in writing and that the amount of the Prepayment Premium set forth in such statement is subject to change and is valid only for the date of such statement. Late Charge. If any amount payable hereunder is paid more than ten (10) days after the due date thereof, Borrower promises to pay a late charge of five percent (5%) of the delinquent amount as liquidated damages for the extra expense in handling past due payments. Security. This Note is secured by a deed of trust, security agreement, assignment of leases and rents, and fixture filing (the "Deed of Trust") of even date herewith and executed by Borrower, encumbering real property located in King County, Washington, and by an assignment of leases and rents (the "Assignment of Leases and Rents") made by Borrower as assignor in favor of Lender as assignee. The Deed of Trust, the Assignment of Leases and Rents and any and all other documents securing this Note are collectively referred to as the "Security Documents," provided, however, that "Security Documents" specifically shall not mean and shall not include the certificate and indemnity agreement regarding hazardous substances being delivered concurrently herewith to holder by Borrower (the "Indemnity Agreement"). The real property and the other collateral provided for in the Security Documents are collectively referred to as the "Property." Notwithstanding anything to the contrary in this Note or the Security Documents, this Note shall not evidence Borrower's obligations under the Indemnity Agreement and nothing contained in this Note or the Security Documents shall be deemed to limit or expand Borrower's obligations under such Indemnity Agreement. All of such obligations (and all substantial equivalents of such obligations) shall constitute the separate, unsecured recourse obligations of Borrower and shall not be deemed to be evidenced by this Note or secured by the Deed of Trust. Default; Remedies. If default is made in the payment of any amount payable hereunder when due or in the keeping of any covenant of the Security Documents, then, at the option of holder, the entire indebtedness evidenced hereby shall become immediately due and payable. Upon default, and without notice or demand, all amounts owed under this Note, including all accrued but unpaid interest, shall thereafter bear interest at a variable rate, adjusted at the times at which the Note Rate would otherwise have been adjusted pursuant to Section 2, of five percent (5%) per annum above the Note Rate which would have been applicable from time to time had there been no default (the "Default Rate") until such default is cured. Failure to exercise any option granted to holder hereunder shall not waive the right to exercise the same in the event of any subsequent default. Interest at the Default Rate shall commence to accrue upon default under this Note, including the failure to pay this Note at maturity. SECTION 1. Attorneys' Fees. In the event of any default under this Note, or in the event that any dispute arises relating to the interpretation, enforcement, or performance of this Note, holder shall be entitled to collect from Borrower on demand all fees and expenses incurred in connection therewith, including but not limited to fees of attorneys, accountants, appraisers, environmental inspectors, consultants, expert witnesses, arbitrators, mediators, and court reporters. Without limiting the generality of the foregoing, Borrower shall pay all such costs and expenses incurred in connection with: (a) arbitration or other alternative dispute resolution proceedings, trial court actions, and appeals; (b) bankruptcy or other insolvency proceedings of Borrower, any guarantor or other party liable for any of the obligations of this Note or any party having any interest in any security for any of those obligations; (c) judicial or nonjudicial foreclosure on, or appointment of a receiver for, any property securing this Note; (d) postjudgment collection proceedings; (e) all claims, counterclaims, cross-claims, and defenses asserted in any of the foregoing whether or not they arise out of or are related to this Note or any security for this Note; (f) all preparation for any of the foregoing; and (g) all settlement negotiations with respect to any of the foregoing. SECTION 2. Miscellaneous. (a) Every person or entity at any time liable for the payment of the indebtedness evidenced hereby waives presentment for payment, demand, and notice of nonpayment of this Note. Every such person or entity further hereby consents to any extension of the time of payment hereof or other modification of the terms of payment of this Note, the release of all or any part of the security herefor, or the release of any party liable for the payment of the indebtedness evidenced hereby at any time and from time to time at the request of anyone now or hereafter liable therefor. Any such extension or release may be made without notice to any of such persons or entities and without discharging their liability. (b) Each person or entity who signs this Note is jointly and severally liable for the full repayment of the entire indebtedness evidenced hereby and the full performance of each and every obligation contained in the Security Documents. (c) The headings to the various sections have been inserted for convenience of reference only and do not define, limit, modify, or expand the express provisions of this Note. (d) Time is of the essence under this Note and in the performance of every term, covenant, and obligation contained herein. (e) This Note is made with reference to and is to be construed in accordance with the laws of the State of Washington. (f) Each married person who executes this Note as a Borrower agrees that recourse hereunder can be had to his or her separate property as well as the assets of his or her marital community. Notwithstanding any contrary provision of applicable law, each general partner in any partnership which is a party hereto, agrees that holder need not exhaust the partnership assets of such partnership before executing upon the assets of such general partner in satisfaction of the obligations evidenced hereby or by any other document, instrument or agreement entered into by such partnership in connection with the loan evidenced by this Note, but may execute upon such general partner's assets prior to, at the same time as, or after executing upon the partnership assets of such partnership. Each such general partner shall be jointly and severally liable for such obligations with all other persons and entities liable therefor. DATED as of the day and year first above written. ORAL AGREEMENTS ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By Hanh Kihara Its Sr. Vice President and Chief Financial Officer AFTER RECORDING RETURN TO: Washington Mutual Bank 400 E. Main St., Dept. 4036 Stockton, California 95290-4036 Attention: Commercial Real Estate Department BE ADVISED THAT THE PROMISSORY NOTE SECURED BY THIS DEED OF TRUST PROVIDES FOR A VARIABLE RATE OF INTEREST. DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING [Loan No.: 04-751-3126554-9] Grantor (Borrower): BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation Grantee (Lender): WASHINGTON MUTUAL BANK, a Washington corporation Grantee (Trustee): FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation Legal Description: Lots 2-3 & 7, Block 5, Burlington Northern Industrial Park, Vol. 111, P. 42-44 Additional Legal(s) on Exhibit A Assessor's Tax Parcel ID Number: 125381-0020-00 & 125381-0055-08 THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING ("Deed of Trust") is made this 23rd day of JULY, 2001 among BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation, the address of which is 270 Lafayette Circle, Lafayette, California 94549 ("Grantor"); FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, the address of which is 2101 Fourth Avenue, Seattle, WA 98121, and its successors in trust and assigns ("Trustee"), and WASHINGTON MUTUAL BANK, a Washington corporation, the address of which is 400 E. Main St., Stockton, California 95290-4036 ("Beneficiary"). GRANTING CLAUSE. Grantor, in consideration of the acceptance by Trustee of the trust hereunder, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the obligations described in Section 3 below, grants, bargains, sells, and conveys to Trustee and its successors in trust and assigns, forever, in trust, with power of sale, all of Grantor's estate, right, title, interest, claim, and demand in and to the property in the county of King, state of Washington, described as follows, whether now existing or hereafter acquired (all of the property described in all parts of this Section 1 and all additional property, if any, described in Section 2 is herein called the "Property"): Land and Appurtenances. The land described on Exhibit A hereto, and all tenements, hereditaments, rights-of-way, easements, appendages, and appurtenances thereto belonging or in any way appertaining, including without limitation all of the right, title and interest of Grantor in and to any avenues, streets, ways, alleys, vaults, strips, or gores of land adjoining that property, and all claims or demands of Grantor either in law or in equity in possession or expectancy of, in, and to that property; and Improvements and Fixtures. All buildings, structures, and other improvements now or hereafter erected on the property described in 1.1 above, and all facilities, fixtures, machinery, apparatus, installations, goods, equipment, inventory, furniture, and other properties of whatsoever nature (including without limitation all heating, ventilating, air conditioning, plumbing and electrical equipment, elevators and escalators, sprinkler systems, engines and motors, lighting, laundry, cleaning, fire prevention and fire extinguishing equipment, ducts and compressors, refrigerators, stoves and other appliances, attached cabinets, partitions, rugs, carpets and draperies, building materials and supplies, and construction forms, tools, and equipment), now or hereafter located in or used or procured for use in connection with that property, it being the intention of the parties that all property of the character hereinabove described that is now owned or hereafter acquired by Grantor and that is affixed or attached to, stored upon, or used in connection with the property described in 1.1 above shall be, remain, or become a portion of that property and shall be covered by and subject to the lien of this Deed of Trust, together with all contracts, agreements, permits, plans, specifications, drawings, surveys, engineering reports, and other work products relating to the construction of the existing or any future improvements on the Property, any and all rights of Grantor in, to, or under any architect's contracts or construction contracts relating to the construction of the existing or any future improvements on the Property, and any performance and/or payment bonds issued in connection therewith, together with all trademarks, trade names, copyrights, computer software, and other intellectual property used by Grantor in connection with the Property; and Enforcement and Collection. Any and all rights of Grantor without limitation to make claim for, collect, receive, and receipt for any and all rents, income, revenues, issues, royalties, and profits, including mineral, oil, and gas rights and profits, insurance proceeds, condemnation awards, and other moneys, payable or receivable from or on account of any of the Property, including interest thereon, or to enforce all other provisions of any other agreement (including those described in Section 1.2 above) affecting or relating to any of the Property, to bring any suit in equity, action at law, or other proceeding for the collection of such moneys or for the specific or other enforcement of any such agreement, award, or judgment, in the name of Grantor or otherwise, and to do any and all things that Grantor is or may be or become entitled to do with respect thereto, provided, however, that no obligation of Grantor under the provisions of any such agreements, awards, or judgments shall be impaired or diminished by virtue hereof, nor shall any such obligation be imposed upon Trustee or Beneficiary; and Accounts and Income. Any and all rights of Grantor in any and all accounts, rights to payment, contract rights, chattel paper, documents, instruments, licenses, contracts, agreements, and general intangibles relating to any of the Property, including, without limitation, income and profits derived from the operation of any business on the Property or attributable to services that occur or are provided on the Property or generated from the use and operation of the Property; and Leases. All of Grantor's rights as landlord in and to all existing and future leases and tenancies, whether written or oral and whether for a definite term or month to month or otherwise, now or hereafter demising all or any portion of the property described in 1.1 and 1.2 above, including all renewals and extensions thereof and all rents, deposits, and other amounts received or receivable thereunder and including all guaranties, supporting obligations, letters of credit and letter of credit rights guaranteeing or supporting any of the foregoing. In accepting this Deed of Trust neither Beneficiary nor Trustee assumes any liability for the performance of any such lease. Books and Records. All books and records of Grantor relating to the foregoing in any form and all computer software necessary or useful to reading such books and records. SECURITY AGREEMENT. To the extent any of the property described in Section 1 is personal property, Grantor, as debtor, grants to Beneficiary, as secured party, a security interest therein together with a security interest in all other personal property of whatsoever nature that is located on, used, or to be used in connection with any of the property described in Section 1, and any products or proceeds of any thereof, pursuant to the Uniform Commercial Code of the state of Washington (the "UCC"), on the terms and conditions contained herein. Beneficiary hereby assigns such security interest to Trustee, in trust, for the benefit of Beneficiary to be dealt with as a portion of the "Property" except as otherwise specified herein. OBLIGATIONS SECURED. This Deed of Trust is given for the purpose of securing: Performance and Payment. The performance of the obligations contained herein and the payment of EIGHTEEN MILLION DOLLARS ($18,000,000) with interest thereon and all other amounts payable according to the terms of a promissory note of even date herewith made by Grantor, payable to Beneficiary or order, and any and all extensions, renewals, modifications, or replacements thereof, whether the same be in greater or lesser amounts (the "Note"), which Note contains provision for a variable rate of interest; and Future Advances. The repayment of any and all sums advanced or expenditures made by Beneficiary subsequent to the execution of this Deed of Trust for the maintenance or preservation of the Property or advanced or expended by Beneficiary pursuant to any provision of this Deed of Trust subsequent to its execution, together with interest thereon. Exclusion From Secured Obligations. Notwithstanding anything to the contrary set forth herein or in any other Loan Document (as hereinafter defined), this Deed of Trust shall not secure the obligations of Grantor under that certain Certificate and Indemnity Agreement Regarding Hazardous Materials dated as of even date herewith made by Grantor in favor of Beneficiary (the "Indemnity Agreement") or the substantial equivalent of the obligations arising under the Indemnity Agreement. All of such obligations (and substantial equivalents thereof) shall constitute the separate, unsecured recourse obligations of Grantor and shall not be deemed to be evidenced by the Note or secured by this Deed of Trust. WARRANTIES AND COVENANTS OF GRANTOR. Grantor warrants, covenants, and agrees: Warranties Grantor has full power and authority to grant the Property to Trustee and warrants the Property to be free and clear of all liens, charges, and other monetary encumbrances except those appearing of record on the date hereof. None of the Property is used principally or at all for agricultural or farming purposes. The Property is free from damage and no matter has come to Grantor's attention (including, but not limited to, knowledge of any construction defects or nonconforming work) that would materially impair the value of the Property as security. The loan evidenced by the Note and secured by this Deed of Trust is primarily for commercial, industrial, or business purposes and is not primarily for personal, family, or household purposes. Preservation of Lien and Perfection; Letters of Credit. Grantor will preserve and protect the priority of this Deed of Trust as a first lien on the Property and all portions thereof, and will take all actions, and execute and deliver to Beneficiary all documents, that Beneficiary may require in order to perfect the liens and security interests granted in this Deed of Trust or in any other Loan Document (as defined below). Without limiting the generality of the foregoing, Grantor will notify Beneficiary in writing prior to becoming the beneficiary under any letter of credit in which a security interest is granted under Section 1.5 of this Deed of Trust and will take all actions, and execute all documents, necessary or appropriate to give Beneficiary control (as defined in the UCC, including but not limited to Section 9-107 thereof) of such letter of credit and all letter of credit rights thereunder and, if so required by Beneficiary, to constitute Beneficiary the transferee beneficiary of such letter of credit. Repair and Maintenance of Property; Compliance With Laws, Etc. Grantor will keep the Property in good condition and repair, which duty shall include but is not limited to continual cleaning, painting, landscaping, repairing, and refurbishing of the Property; will complete and not remove or demolish, alter, or make additions to any building or other improvement that is part of the Property without the express written consent of Beneficiary; will underpin and support when necessary any such building or other improvement and protect and preserve the same; will complete or restore promptly and in good and workmanlike manner any such building or other improvement that may be damaged or destroyed and pay when due all claims for labor performed and materials furnished therefor; will not commit, suffer, or permit any act upon the Property in violation of law; and will do all other acts that from the character or use of the Property may be reasonably necessary for the continued operation of the Property in a safe and legal manner, the specific enumerations herein not excluding the general. Grantor shall comply in all material respects with (a) all laws, statutes, ordinances, rules, regulations, licenses, permits, approvals, orders, judgments and other requirements of governmental authorities relating to the Property or Grantor's use thereof, and (b) all easements, licenses and agreements relating to the Property or Grantor's use thereof. Insurance All Risk/Hazard. Grantor will provide, maintain, and deliver to Beneficiary, as further security for the faithful performance of this Deed of Trust, insurance covering fire, casualty, and such other hazards as may be specified by Beneficiary (including insurance against flood, if the Property is situated in a designated flood zone) in an amount equal to one hundred percent (100%) of the replacement cost of the Property and including a building upgrade and municipal ordinance endorsement. Such insurance policy or policies shall include rental or business interruption and extra expense coverage as more specifically described in Section 4.4.3 below. All policies of insurance on the Property, whether or not required by the terms of this Deed of Trust, shall name Beneficiary as first loss payee pursuant to a standard first-mortgage endorsement on Form 438BFU or on a loss-payee form substantially equivalent to the New York standard mortgage endorsement, with such deductibles as approved by Beneficiary but that are, in any event, not more than Ten Thousand Dollars ($10,000). Grantor shall be responsible for any uninsured losses and any deductibles. All existing and future policies for all insurance required by this Deed of Trust and all other insurance obtained by Grantor with respect to the Property, whether or not required by Beneficiary (including but not limited to earthquake insurance), and the proceeds of all of the foregoing, are hereby assigned to Beneficiary, but no such assignment shall be effective to invalidate or impair any insurance policy. Liability. Grantor will maintain comprehensive general liability insurance covering the legal liability of Grantor against claims for bodily injury, personal injury, death, property damage or advertising injury occurring on, in, or about the Property with coverage of One Million Dollars ($1,000,000) combined single limit, and naming Beneficiary an additional insured. 4.4.3 Rental Interruption. Grantor will maintain rental or business interruption and extra expense insurance in an amount equal to at least twelve (12) months' gross rental income from the Property, and naming Beneficiary as first loss payee; provided that Grantor may collect and retain any payments under said policies so long as it is not in default hereunder. Insurance Survey. During the last thirty (30) days of every third year computed from the date hereof, Grantor will have an insurance survey of the Property made. Grantor shall at these times obtain such additional coverages or make such increases in the amounts of existing coverage as may be requested by Beneficiary on the basis of such survey. General Provisions. All policies of insurance required to be maintained by Grantor pursuant to this Section 4.4 shall (i) be primary and noncontributory with any other insurance Grantor may carry; (ii) be in form and substance and with companies acceptable to Beneficiary which are authorized to conduct business in the state in which the Property is located and which have a current rating of A-/X or better from the current Best Key Rating Guide, (iii) contain a mortgagee endorsement acceptable to Beneficiary; and (iv) contain waivers of subrogation and of any co-insurance clauses. Beneficiary reserves the right, in its reasonable discretion, to increase the amount of the required coverages, require insurance against additional risks, or withdraw approval of any insurance company at any time. Grantor shall deliver to Beneficiary an original of all policies of insurance and shall obtain renewals of any policies that expire and deliver evidence of such renewals to Beneficiary no later than ten (10) days prior to the expiration date of the policy being replaced. All policies and renewals thereof shall contain provision for thirty (30) days' notice to Beneficiary prior to any cancellation thereof or material change thereto. In the event of any loss covered by such policies, Grantor shall give immediate written notice to the insurance carrier and to Beneficiary. Grantor hereby authorizes and empowers Beneficiary as attorney-in-fact for Grantor to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Beneficiary's expenses incurred in the collection of such proceeds; provided, however, that nothing contained in this Section 4.4.5 shall require Beneficiary to incur any expense or take any action hereunder. Notwithstanding any of the foregoing, neither Trustee nor Beneficiary shall be responsible for any such insurance or for the collection of any insurance moneys, or for any insolvency of any insurer or insurance underwriter. Any and all unexpired insurance shall inure to the benefit of and pass to the purchaser of the Property at any trustee's or sheriff's sale held hereunder. Damage and Destruction. (a) Trustor's Obligations. In the event of any damage to or loss or destruction of the Property, Grantor shall: (i) promptly notify Beneficiary of such event if the damage to or loss or destruction of the Property is a value in excess of $25,000; (ii) take such steps as shall be necessary to preserve any undamaged portion of the Property; and (iii) unless otherwise instructed by Beneficiary shall, regardless of whether the insurance proceeds, if any, shall be sufficient for the purpose, promptly commence and diligently pursue to completion the restoration, replacement and rebuilding (collectively, "Restoration") of the Property as nearly as possible to its value, condition and character immediately prior to such damage, loss or destruction and in accordance the plans and specifications approved, and with other provisions for the preservation of the security hereunder established , by Beneficiary, which approval shall not be unreasonably withheld or delayed. Beneficiary's Rights: Application of Proceeds. In the event that any portion of the Property is so damaged, destroyed or lost, and any such damage, destruction or loss is covered in whole or in part, by insurance described in subsection 4.4.1, whether or not such insurance is specifically required by the terms of this Deed of Trust, then the following provisions shall apply: If an Event of Default (as defined in Section 5.1) has occurred hereunder and is continuing: (A) Beneficiary may, but shall not be obligated to, make proof of loss to any insurer if not made promptly by Grantor, and Beneficiary is hereby authorized and empowered by Grantor to settle, adjust or compromise any claims for damage, destruction or loss thereunder unless the proposed amount of proceeds from such claims exceeds the then outstanding amount of the indebtedness secured hereby, and (B) each insurance company concerned is hereby authorized and directed to make payment therefor directly to Beneficiary, to be applied, at Beneficiary's option, to the indebtedness secured hereby in such order as Beneficiary may determine, in its sole discretion or to be held by Beneficiary for future application to the obligations secured hereby. Unless otherwise required by law, any application to the indebtedness secured hereby by Beneficiary of such payments shall not, by itself, cure or waive any Event of Default hereunder or notice of default under this Deed of Trust or invalidate any act done pursuant to such notice or waive any collateral encumbered hereby or otherwise securing the Note. (ii) If no Event of Default hereunder has occurred and is continuing, and if the amount of proceeds from any claim for damage, destruction or loss is reasonably expected to be $25,000 or less, Grantor shall be entitled to receive all such proceeds and shall apply such proceeds to the Restoration of that portion of the Property so damaged, destroyed or lost to as nearly the same condition, character and value as may have existed prior to such damage, destruction or loss, with such changes or alterations as may be required to conform to applicable law. (iii) If such proceeds are reasonably expected to exceed $25,0000, and if an Event of Default has not occurred hereunder and is not continuing, Beneficiary shall apply all such insurance proceeds to the Restoration of the damaged portion of the Property, and such Restoration shall be accomplished as provided in this Section 4.4.6 so long as such Restoration can, in the reasonable judgment of Beneficiary, be completed (A) no later than two (2) years prior to the maturity date of the Note, (B) within one (1) year after the date of the casualty, and (C) in such a manner so that the Property will have a value at least equal to its value prior to the casualty. Otherwise, Beneficiary may elect in its sole discretion to apply all such insurance proceeds to reduction of the indebtedness secured hereby. Disbursement of Insurance Proceeds. Insurance proceeds held by Beneficiary for Restoration shall be disbursed from time to time as the Restoration progresses by Beneficiary (or at Beneficiary's election by a disbursing or escrow agent who shall be selected by Beneficiary and whose fees shall be paid by Grantor), upon delivery to Beneficiary of the following: (i) evidence reasonably satisfactory to Beneficiary of the estimated cost of Restoration; (ii) funds (or assurances reasonably satisfactory to Beneficiary that such funds are available) sufficient in addition to the proceeds of insurance to complete and fully pay for the Restoration; and (iii) such architect's certificates, waivers of lien, contractor's sworn statements, title insurance endorsements, plats of survey and such other evidences of cost, payment and performance as Beneficiary may reasonably require and approve. No payment made prior to the final completion of Restoration shall exceed ninety percent of the value of the work performed from time to time, as such value shall be determined by Beneficiary in its reasonable judgment. Prior to commencement of the work, and from time to time thereafter, if so requested by Beneficiary, Grantor shall deposit with Beneficiary an amount of funds in excess of the insurance proceeds which, together with such proceeds, shall at all times be at least sufficient in the reasonable judgment of Beneficiary to pay the entire unpaid cost of the Restoration, free and clear of all liens or claims of lien. Funds so deposited by Grantor shall be disbursed prior to the disbursement of any insurance proceeds. Any surplus which may remain out of insurance proceeds held by Beneficiary after payment of all costs of the Restoration shall be paid to Grantor. No interest shall be allowed to Grantor on account of any insurance proceeds or other funds held by Beneficiary, but Beneficiary agrees that, at Grantor's request, Beneficiary will deposit any proceeds of insurance held by it for Restoration into a blocked interest-bearing account with Beneficiary over which Beneficiary has sole possession, authority and control, in which Beneficiary has a perfected first-priority security interest to secure the indebtedness secured by this Deed of Trust, and otherwise on terms and conditions satisfactory to Beneficiary in its sole discretion. Notwithstanding the above, if an Event of Default occurs prior to full disbursement of the insurance proceeds and any other funds held by Beneficiary to be disbursed to Grantor any undisbursed portion of the insurance proceeds or other such funds may, at Beneficiary's option, be applied against the indebtedness secured by this Deed of Trust, whether or not then due, in such order and manner as Beneficiary shall select. (d) Effect on the Indebtedness. Any reduction in the indebtedness secured hereby resulting from the application to the indebtedness secured hereby of insurance proceeds pursuant to this subsection 4.4.6 shall be deemed to take effect only on the date of receipt by Beneficiary of such proceeds and application thereof to the indebtedness secured hereby; provided that, if, prior to the receipt by Beneficiary of such proceeds, the Property shall have been sold in connection with a trustee's sale under, or foreclosure of this Deed of Trust, or shall have been transferred by a deed in lieu of foreclosure of this Deed of Trust, notwithstanding any limitation on Grantor's liability contained herein or in the Note, Beneficiary shall have the right to receive the same to the extent of any deficiency following such sale or conveyance, together with attorneys' fees and disbursements incurred by Beneficiary in connection with the collection thereof. Right of Inspection. Subject to the rights of Tenants, Grantor shall permit Beneficiary or its agents, at all reasonable times, to enter upon and inspect the Property. Preservation of Licenses, Etc. Grantor shall observe and comply with all requirements necessary to the continued existence and validity of all rights, licenses, permits, privileges, franchises, and concessions relating to any existing or presently contemplated use of the Property, including but not limited to any zoning variances, special exceptions, and nonconforming use permits. Further Assurances. Grantor will, at its expense, from time to time execute and deliver any and all such instruments of further assurance and other instruments and do any and all such acts, or cause the same to be done, as Trustee or Beneficiary deems necessary or advisable to grant to Trustee the Property or to carry out more effectively the purposes of this Deed of Trust. Legal Actions. Grantor will appear in and defend any action or proceeding before any court or administrative body purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and will pay all costs and expenses, including cost of evidence of title, title insurance premiums, and any fees of attorneys, appraisers, environmental inspectors, and others, incurred by Beneficiary or Trustee, in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear and in any suit brought by Beneficiary or Trustee to foreclose this Deed of Trust and in any nonjudicial foreclosure of this Deed of Trust. Taxes, Assessments, and Other Liens. Grantor will pay not later than when due all taxes, assessments, encumbrances, charges, and liens with interest, on the Property or any part thereof, which at any time appear to be or are alleged to be prior and superior hereto, including but not limited to any tax on or measured by rents of the Property, the Note, this Deed of Trust, or any obligation or part thereof secured hereby. Expenses. Grantor will pay all costs, fees, and expenses reasonably incurred by Beneficiary or Trustee in connection with this Deed of Trust. Repayment of Expenditures. Grantor will pay immediately and without demand all amounts secured by this Deed of Trust, other than principal of and interest on the Note, with interest from date of expenditure at the default rate of interest specified in the Note (the "Default Rate") and the repayment thereof shall be secured hereby. Financial & Operating Information. Grantor will, within ninety (90) days of the close of Grantor's fiscal year, furnish to Beneficiary in such form as it may request, financial statements and balance sheets of Grantor and the entities and individuals who are liable for repayment of the Note, and itemized annual statements of income and expense in connection with the operation of the Property, including but not limited to utilization and property inspection reports, and such other financial and operating statements of Grantor as Beneficiary may from time to time require and such operating statements, occupancy reports, variance reports, and financial information for the Property as Beneficiary may from time to time require. If Grantor defaults in its obligation to provide Beneficiary with any of the financial and operating information required to be provided under this subsection 4.12 within the time periods required under this subsection 4.12 and such default continues after Beneficiary has provided Grantor with thirty (30) days' notice and opportunity to cure such default, Grantor shall pay to Beneficiary, as liquidated damages for the extra expense in servicing the loan secured hereby, Five Hundred Dollars ($500) on the first day of the month following the expiration of such thirty (30)-day period and One Hundred Dollars ($100) on the first day of each month thereafter until such default is cured. All such amounts shall be secured by this Deed of Trust. Sale, Transfer, or Encumbrance of Property. Grantor shall not, without the prior written consent of Beneficiary, sell, transfer, or otherwise convey the Property or any interest therein, further encumber the Property or any interest therein, cause or permit any change in the entity, ownership, or control of Grantor or agree to do any of the foregoing without first repaying in full the Note and all other sums secured hereby. Consent to any one such occurrence shall not be deemed a waiver of the right to require consent to any future occurrences. In each instance in which a sale, transfer, or other conveyance of the Property occurs and regardless of whether Beneficiary's consent thereto is given, waived or denied or whether Beneficiary elects to accelerate the maturity date of the Note, Grantor and its successors shall be jointly and severally liable to Beneficiary for the payment of a transfer fee (the "Transfer Fee") of one percent (1%) of the unpaid principal balance of the Note as of the date of such sale, transfer, or other conveyance. Such fee shall be payable on demand, shall bear interest from ten (10) days after such demand to and including the date of collection at the Default Rate (as defined in the Note), and shall be secured by this Deed of Trust. Beneficiary's waiver of such fee in whole or in part for any one sale, transfer, or other conveyance shall not preclude the imposition thereof in any other transaction. Notwithstanding the foregoing, Beneficiary's consent will not be required, and the one percent (1%) Transfer Fee will not be imposed, for the transfer of not more than twenty-five percent (25%) in the aggregate during the term of the Note of partnership interests in Grantor, if Grantor is a partnership, or member interests in Grantor, if Grantor is a limited liability company, or of shares of stock of Grantor, if Grantor is a corporation, provided that none of the persons or entities liable for the repayment of the Note is released from such liability. Information for Participants. Grantor agrees to furnish such information and confirmation as may be required from time to time by Beneficiary on request of potential loan participants and agrees to make adjustments in this Deed of Trust, the Note, the Assignment of Leases and Rents and the other documents evidencing or securing the loan secured hereby to accommodate such participant's requirements, provided that such requirements do not vary the economic terms of the loan secured hereby. Grantor Existence. Except as otherwise provided in Section 4.13: If Grantor is a corporation, Beneficiary is making this loan in reliance on Grantor's continued existence, ownership, and control in its present corporate form. Grantor will not alter such corporate structure, ownership, or control without the prior written consent of Beneficiary and will do all things necessary to preserve and maintain said corporate existence and to insure its continuous right to carry on its business, including but not limited to, filing within the prescribed time all corporate tax returns and reports, and paying when due all such taxes. If Grantor is a partnership, Beneficiary is making this loan in reliance on the continued existence of Grantor partnership and upon the business and financial reputation of Grantor partnership as a business entity and each of the general partners thereof. Therefore, the general partners of Grantor hereby agree that they will take no action to dissolve Grantor partnership and will do all things within their power to prevent the dissolution and winding up of Grantor partnership, notwithstanding the death, withdrawal, or expulsion of any general partner. They further agree that without the prior written consent of Beneficiary, none of the general partners of Grantor will withdraw or be removed as a general partner of Grantor. The withdrawal or expulsion of any general partner from Grantor partnership shall not in any way affect the liability of the withdrawing or expelled general partner hereunder or on the Note. If Grantor is a limited liability company, Beneficiary is making this loan in reliance on Grantor's continued existence, ownership, and control in its present limited liability company form. Grantor will not alter such limited liability company structure, ownership, or control without the prior written consent of Beneficiary and will do all things necessary to preserve and maintain said limited liability company existence and to insure its continuous right to carry on its business. Tax and Insurance Reserves. In addition to the payments required by the Note, Grantor agrees to pay Beneficiary, at Beneficiary's request, such sums as Beneficiary may from time to time estimate will be required to pay, at least thirty (30) days before due, the next due taxes, assessments, insurance premiums, and similar charges affecting the Property, less all sums already paid therefor divided by the number of months to elapse before one month prior to the date when such taxes, assessments, and premiums will become delinquent, such sums to be held by Beneficiary without interest or other income to the Grantor to pay such taxes, assessments and premiums. Should this estimate as to taxes, assessments, and premiums prove insufficient, the Grantor upon demand agrees to pay Beneficiary such additional sums as may be required to pay them before delinquent. If the total of the above-described payments in any one year shall exceed the amounts actually paid by Beneficiary for taxes, assessments, and premiums, such excess may be credited by Beneficiary on subsequent payments under this section. If there shall be a default hereunder for which Beneficiary elects to realize upon this Deed of Trust, then at any time after default and prior to the trustee's sale or sheriff's sale, Beneficiary may apply any balance of funds it may hold pursuant to this Section 4.16 to any amount secured by this Deed of Trust and in such order as Beneficiary may elect. If Beneficiary does not so apply such funds at or prior to the trustee's sale or sheriff's sale, the purchaser at such sale shall be entitled to all such funds. If Beneficiary acquires the Property in lieu of realizing on this Deed of Trust, the balance of funds it holds shall become the property of Beneficiary. Any transfer in fee of all or a part of the Property shall automatically transfer to the grantee all or a proportionate part of Grantor's rights and interest in the fund accumulated hereunder. Performance of Rental Agreements. Grantor will in all respects promptly and faithfully keep, perform, and comply with all of the terms, provisions, covenants, conditions, and agreements in each of the agreements pursuant to which any tenant of any part of the Property is occupying such Property (the "rental agreements") to be kept, performed, and complied with by the lessor therein, and will require, demand, and strictly enforce, by all available means, the prompt and faithful performance of and compliance with all of the terms, provisions, covenants, conditions, and agreements in the rental agreements to be performed and complied with by the lessees therein. No Prepayment of Rent. With respect to the rental agreements, Grantor is not authorized to collect in advance more than one month's rental plus a security deposit not to exceed two months' rental. DEFAULT. Definition. Any of the following shall constitute an "Event of Default" as that term is hereinafter used: Any representation or warranty made by or for the benefit of Grantor herein or elsewhere in connection with the loan secured hereby, including but not limited to any representations in connection with the security therefor, shall prove to have been incorrect or misleading in any material respect; Grantor or any other person or entity liable therefor shall fail to pay when due any indebtedness secured hereby; Grantor or any other signatory thereto shall default in the performance of any covenant or agreement contained in this Deed of Trust, the Note, or any other agreement securing the indebtedness secured hereby; Grantor or any other person or entity liable for the repayment of the indebtedness secured hereby shall become unable or admit in writing its inability to pay its debts as they mature, or file, or have filed against it, a voluntary or involuntary petition in bankruptcy, or make a general assignment for the benefit of creditors, or become the subject of any other receivership or insolvency proceeding; Grantor or any other signatory thereto shall default in the performance of any covenant or agreement contained in any mortgage or deed of trust encumbering the Property, or the note or any other agreement evidencing or securing the indebtedness evidenced thereby; A tax, charge, or lien shall be placed upon or measured by the Note, this Deed of Trust, or any obligation secured hereby that Grantor does not or may not legally pay in addition to the payment of all principal and interest as provided in the Note; or There shall occur any default under the Indemnity Agreement. Beneficiary's and Trustee's Right To Perform. Upon the occurrence of any Event of Default, Beneficiary or Trustee, but without the obligation so to do and without notice to or demand upon Grantor and without releasing Grantor from any obligations hereunder, may make any payments or do any acts required of Grantor hereunder in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon the Property for such purposes; commence, appear in, and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; pay, purchase, contest,or compromise any encumbrance, charge, or lien in accordance with the following paragraph; and in exercising any such powers, pay necessary expenses, employ counsel, and pay a reasonable fee therefor. All sums so expended shall be payable on demand by Grantor, be secured hereby and bear interest at the Default Rate from the date advanced or expended until repaid. Beneficiary or Trustee in making any payment herein is hereby authorized, in the place and stead of the Grantor, in the case of a payment of taxes, assessments, water rates, sewer rentals, and other governmental or municipal charges, fines, impositions, or liens asserted against the Property, to make such payment in reliance on any bill, statement, or estimate procured from the appropriate public office without inquiry into the accuracy of the bill, statement, or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien, or title or claim thereof; in the case of any apparent or threatened adverse claim of title, lien, statement of lien, encumbrance, deed of trust, claim, or charge Beneficiary or Trustee, as the case may be, shall be the sole judge of the legality or validity of same; and in the case of a payment for any other purpose herein and hereby authorized, but not enumerated in this paragraph, such payment may be made whenever, in the sole judgment and discretion of Trustee or Beneficiary, as the case may be, such advance or advances shall seem necessary or desirable to protect the full security intended to be created by this instrument, provided further, that in connection with any such advance, Beneficiary at its option may and is hereby authorized to obtain a continuation report of title prepared by a title insurance company, the cost and expenses of which shall be repayable by the Grantor without demand and shall be secured hereby. Remedies on Default. Upon the occurrence of any Event of Default all sums secured hereby shall become immediately due and payable, without notice or demand, at the option of Beneficiary and Beneficiary may: Have a receiver appointed as a matter of right, without regard to the sufficiency of the Property or any other security for the indebtedness secured hereby and, without the necessity of posting any bond or other security, such receiver shall take possession and control of the Property and shall collect and receive all of the rents, issues, and profits thereof; Foreclose this Deed of Trust as a mortgage or otherwise realize upon the Property; Cause Trustee to exercise its power of sale; Sue on the Note according to law; or To the extent permitted by law, including, without limitation, RCW 61.24.100, seek and obtain a deficiency judgment following the completion of a judicial foreclosure or a trustee's sale of all or a portion of the security for the obligations secured by this Deed of Trust. No Waiver. By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare an Event of Default for failure to do so. Remedies Cumulative. The rights and remedies accorded by this Deed of Trust shall be in addition to, and not in substitution of, any rights or remedies available under now existing or hereafter arising applicable law. All rights and remedies provided for in this Deed of Trust or afforded by law or equity are distinct and cumulative and may be exercised concurrently, independently or successively. The failure on the part of Beneficiary to promptly enforce any right hereunder shall not operate as a waiver of such right and the waiver of any default shall not constitute a waiver of any subsequent or other default. Beneficiary shall be subrogated to the claims and liens of those whose claims or liens are discharged or paid with the loan proceeds hereof. CONDEMNATION. Any award of damages, whether paid as a result of judgment or prior settlement, in connection with any condemnation or other taking of any portion of the Property, for public or private use, or for injury to any portion of the Property is hereby assigned and shall be paid to Beneficiary, which may apply such moneys received by it in the same manner and with the same effect as provided in Section 4.4.6 above for disposition of proceeds of hazard insurance, provided that if the taking results in a loss of the Property to an extent which, in the reasonable opinion of Beneficiary, renders or will render the Property not economically viable or which substantially impairs Beneficiary's security or lessens to any extent the value, marketability of intended use of the Property, Beneficiary may apply the condemnation proceeds to reduce the unpaid indebtedness secured hereby in such order as Beneficiary may determine, and without any adjustment in the amount of installments due under the Note.. If so applied, any proceeds in excess of the unpaid balance of the Note and other sums due to Beneficiary shall be paid to Grantor or Grantor's assignee. Beneficiary shall in no case by obligated to see to the proper application of any amount paid over to Grantor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. Should the Property or any part or appurtenance thereof or right or interest therein be taken or threatened to be taken by reason of any public or private improvement, condemnation proceeding (including change of grade), or in any other manner, Beneficiary may, at its option, commence, appear in, and prosecute, in its own name, any action or proceeding, or make any reasonable compromise or settlement in connection with such taking or damage, and obtain all compensation, awards, or other relief therefor, and Grantor agrees to pay Beneficiary's costs and reasonable attorneys' fees incurred in connection therewith. No condemnation award at any time assigned to or held by Beneficiary shall be deemed to be held in trust, and Beneficiary may commingle such award with its general assets and shall not be liable for the payment of any interest thereon. TRUSTEE. General Powers and Duties of Trustee. At any time or from time to time, without liability therefor and without notice and without affecting the liability of any person for the payment of the indebtedness secured hereby, upon written request of Beneficiary, payment of its own fees and presentation of this Deed of Trust and the Note for endorsement (in case of full reconveyance, for cancellation or retention), Trustee may: Consent to the making of any map or plat of the Property; Join in granting any easement or creating any restriction thereon; Join in any subordination or other agreement affecting this Deed of Trust or the lien or charge thereof; or Reconvey, without warranty, all or any part of the Property. Reconveyance. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the Property then held hereunder. The recitals in any reconveyance executed under this Deed of Trust of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto." Powers and Duties on Default. Upon written request therefor by Beneficiary specifying the nature of the default, or the nature of the several defaults, and the amount or amounts due and owing, Trustee shall execute a written notice of default and of its election to cause the Property to be sold to satisfy the obligation secured hereby, and shall cause such notice to be recorded and otherwise given according to law. Notice of sale having been given as then required by law and not less than the time then required by law having elapsed after recordation of such notice of breach, Trustee, without demand on Grantor, shall sell the Property at the time and place of sale specified in the notice, as provided by statute, either as a whole or in separate parcels and in such order as it may determine, at public auction to the highest and best bidder for cash in lawful money of the United States, payable at time of sale. Grantor agrees that such a sale (or a sheriff's sale pursuant to judicial foreclosure) of all the Property as real estate constitutes a commercially reasonable disposition thereof, but that with respect to all or any part of the Property that may be personal property Trustee shall have and exercise, at Beneficiary's sole election, all the rights and remedies of a secured party under the UCC. Whenever notice is permitted or required hereunder or under the UCC, ten (10) days shall be deemed reasonable. Trustee may postpone sale of all or any portion of the Property, and from time to time thereafter may postpone such sale, as provided by statute. Trustee shall deliver to the purchaser its deed and bill of sale conveying the Property so sold, but without any covenant or warranty, express or implied. The recital in such deed and bill of sale of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person other than Trustee, including Grantor or Beneficiary, may purchase at such sale. After deducting all costs, fees, and expenses of Trustee and of this trust, including the cost of evidence of title search and title insurance and reasonable counsel fees in connection with sale, Trustee shall apply the proceeds of sale to payment of all sums secured hereby in such order as Beneficiary may determine; and the remainder, if any, to the clerk of the superior court of the county in which the sale took place, as provided in RCW 61.24.080. Reassignment of Security Interest. At the request of Beneficiary, Trustee shall reassign to Beneficiary the security interest created hereby and after such reassignment Beneficiary shall have the right, upon the occurrence or continuance of any Event of Default, to realize upon the personal property subject to this Deed of Trust, independent of any action of Trustee, pursuant to the UCC. Acceptance of Trust. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto except Beneficiary of pending sale under any other deed of trust or of any action or proceeding in which Grantor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Reliance. Trustee, upon presentation to it of an affidavit signed by Beneficiary setting forth facts showing a default by Grantor under this Deed of Trust, is authorized to accept as true and conclusive all facts and statements therein, and to act thereon hereunder. Replacement of Trustee. Beneficiary may, from time to time, as provided by statute, appoint another trustee in place and stead of Trustee herein named, and thereupon Trustee herein named shall be discharged and the trustee so appointed shall be substituted as Trustee hereunder, with the same effect as if originally named Trustee herein. No Impairment of Right to Pursue Unsecured Obligations. The foreclosure of this Deed of Trust or sale by Trustee of the Property through the exercise of its power of sale granted hereunder shall not preclude or impair any action to collect or enforce any obligation of Grantor or any guarantor or other party liable for any of the obligations secured by this Deed of Trust, or the substantial equivalent of such obligation, which obligation is not secured by this Deed of Trust including, without limitation, the obligations of Grantor under the Indemnity Agreement and the obligations of each such guarantor under its guaranty. All of such obligations (and all substantial equivalents of such obligations) shall constitute separate recourse obligations of Grantor and each such guarantor or other party and shall not be deemed to be evidenced by the Note or secured by this Deed of Trust. APPLICATION OF RENTS. Grantor hereby gives to and confers upon Beneficiary the right, power, and authority during the continuance of this Deed of Trust to collect the rents, issues, and profits of the Property, reserving unto Grantor the right, prior to any default in payment of any indebtedness secured hereby or hereunder, to collect and retain such rents, issues, and profits as they become due and payable. Upon any such default, Grantor's right to spend or retain any rents, issues, or profits of the Property shall cease immediately and without notice or demand and Beneficiary may at any time and without notice, either in person, by agent, or by a receiver to be appointed by a court, without regard to the adequacy of any security for the indebtedness hereby secured and without the necessity for posting any bond or other security, enter upon and take possession of the Property or any part thereof, or in its own name sue for or otherwise collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys' fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such rents, issues, and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. NOTICES. Trustee. Any notice or demand upon Trustee may be given or made at: First American Title Insurance Company 2101 Fourth Avenue Seattle, Washington 98121 Grantor and Beneficiary. Any notice to or demand upon Grantor (including any notice of default or notice of sale) or notice to or demand upon Beneficiary shall be deemed to have been sufficiently made for all purposes when deposited in the United States Mail, postage prepaid, registered or certified, return receipt requested, addressed as follows: Grantor: Bedford Property Investors, Inc. 270 Lafayette Circle Lafayette, California 94549 Attention: Hanh Kihara Beneficiary: Washington Mutual Bank 400 E. Main St., Dept. 4036 Stockton, California 95290-4036 Attention: Commercial Real Estate Department or to such other address as may be filed in writing by Grantor or Beneficiary with Trustee. Waiver of Notice. The giving of notice may be waived in writing by the person or persons entitled to receive such notice, either before or after the time established for the giving of such notice. MODIFICATIONS. Upon written request of any party then liable for any sum secured hereby, Beneficiary reserves the right to extend the term, or otherwise modify the terms, hereof or of the Note as Beneficiary and such person may from time to time deem appropriate and any such change shall not operate to release, in any manner, the liability of the original Grantor or Grantor's successors in interest. SUCCESSORS AND ASSIGNS. All provisions herein contained shall be binding upon and inure to the benefit of the respective successors and assigns of the parties. GOVERNING LAW; SEVERABILITY. This Deed of Trust shall be governed by the law of the state of Washington. In the event that any provision or clause of this Deed of Trust or the Note conflicts with applicable law, the conflict shall not affect other provisions of this Deed of Trust or the Note that can be given effect without the conflicting provision and to this end the provisions of this Deed of Trust and the Note are declared to be severable. GRANTOR'S RIGHT TO POSSESSION. Grantor may be and remain in possession of the Property for so long as it is not in default hereunder or under the terms of the Note and Grantor may, while it is entitled to possession of the Property, use the same. MAXIMUM INTEREST. No provision of this Deed of Trust or of the Note shall require the payment or permit the collection of interest in excess of the maximum permitted by law. If any excess of interest in such respect is herein or in the Note provided for, neither Grantor nor its successors or assigns shall be obligated to pay that portion of such interest that is in excess of the maximum permitted by law, and the right to demand the payment of any such excess shall be and is hereby waived and this Section 14 shall control any provision of this Deed of Trust or the Note that is inconsistent herewith. ATTORNEYS' FEES AND LEGAL EXPENSES. In the event of any default under this Deed of Trust, or in the event that any dispute arises relating to the interpretation, enforcement, or performance of any obligation secured by this Deed of Trust, Beneficiary shall be entitled to collect from Grantor on demand all fees and expenses incurred in connection therewith, including but not limited to fees of attorneys, accountants, appraisers, environmental inspectors, consultants, expert witnesses, arbitrators, mediators, and court reporters. Without limiting the generality of the foregoing, Grantor shall pay all such costs and expenses incurred in connection with (a) arbitration or other alternative dispute resolution proceedings, trial court actions, and appeals; (b) bankruptcy or other insolvency proceedings of Grantor, any guarantor or other party liable for any of the obligations secured by this Deed of Trust, or any party having any interest in any security for any of those obligations; (c) judicial or nonjudicial foreclosure on, or appointment of a receiver for, any of the Property; (d) postjudgment collection proceedings; (e) all claims, counterclaims, cross-claims, and defenses asserted in any of the foregoing whether or not they arise out of or are related to this Deed of Trust; (f) all preparation for any of the foregoing; and (g) all settlement negotiations with respect to any of the foregoing. PREPAYMENT PROVISIONS. If at any time after default and acceleration of the indebtedness secured hereby there shall be a tender of payment of the amount necessary to satisfy such indebtedness by or on behalf of the Grantor, its successors or assigns, the same shall be deemed to be a voluntary prepayment such that the sum required to satisfy such indebtedness in full shall include, to the extent permitted by law, the additional payment required under the prepayment privilege as stated in the Note. TIME IS OF THE ESSENCE. Time is of the essence under this Deed of Trust and in the performance of every term, covenant, and obligation contained herein. MISCELLANEOUS. Whenever the context so requires the singular number includes the plural herein, and the impersonal includes the personal. The headings to the various sections have been inserted for convenient reference only and shall not modify, define, limit, or expand the express provisions of this Deed of Trust. This Deed of Trust, the Note, the Assignment of Leases and Rents and the other documents, instruments, and agreements entered into by Grantor and Beneficiary in connection therewith (collectively, the "Loan Documents") constitute the final expression of the entire agreement of the parties with respect to the transactions set forth therein. No party is relying upon any oral agreement or other understanding not expressly set forth in the Loan Documents. The Loan Documents may not be amended or modified except by means of a written document executed by the party sought to be charged with such amendment or modification. [END OF TEXT] DATED as of the day and year first above written. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW GRANTOR: BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation By Hanh Kihara Its Sr. Vice President and Chief Financial Officer STATE OF CALIFORNIA ) ) ss. COUNTY OF CONTRA COSTA ) On July ___, 2001, before me, ____________________________, a Notary Public in and for said County and State, personally appeared _______________________, known to me or 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/she executed the same in his/her authorized capacity, and that by his/her signature on this instrument the person, or the entity on behalf of which the person acted, executed the instrument. WITNESS my hand and official seal __________________________ Notary Public EXHIBIT A The land is located in the county of King, state of Washington, and is described as follows: PARCEL A: LOT 2 IN BLOCK 5 OF BURLINGTON NORTHERN INDUSTRIAL PARK, RENTON II, ACCORDING TO PLAT RECORDED IN VOLUME 111 OF PLATS AT PAGE(S) 42, 43 AND 44, IN KING COUNTY, WASHINGTON; TOGETHER WITH LOT 3 IN BLOCK 5 OF BURLINGTON NORTHERN INDUSTRIAL PARK, RENTON 11, ACCORDING TO PLAT RECORDED IN VOLUME 111 OF PLATS AT PAGE(S) 42, 43 AND 44, IN KING COUNTY, WASHINGTON; ALSO TOGETHER WITH THAT PORTION OF LOT 7 OF SAID BLOCK 5, AND OF THE BURLINGTON NORTHERN RAILROAD RIGHT-OF-WAY ADJOINING ON THE SOUTHEAST, ALL DESCRIBED AS FOLLOWS; COMMENCING AT THE MOST NORTHERLY CORNER OF SAID LOT 7; THENCE SOUTH 42 DEGREES 36'37" EAST ALONG THE LINE COMMON TO LOT 7 AND LOT 8 OF SAID BLOCK, A DISTANCE OF 290.00 FEET TO THE MOST EASTERLY CORNER OF SAID LOT 7; THENCE CONTINUING SOUTH 42 DEGREES 36'37" EAST ALONG THE SOUTHEASTERLY PROLONGATION OF SAID COMMON LINE 26.55 FEET TO INTERSECT THE ARC OF A CURVE, BEING THE NORTHWESTERLY LINE OF LOT 2 OF SAID BLOCK 5, AT A POINT FROM WHICH THE CENTER BEARS SOUTH 34 DEGREES 18'58" EAST; THENCE SOUTHWESTERLY ALONG SAID CURVE TO THE LEFT HAVING A RADIUS OF 625.84 FEET, ALSO BEING THE SOUTHEASTERLY MARGIN OF SAID RAILROAD RIGHT-OF-WAY. THROUGH A CENTRAL ANGLE OF 08 DEGREES 17'39", AN ARC DISTANCE OF 90.60 FEET TO A POINT OF TANGENCY; THENCE SOUTH 47 DEGREES 23'23" WEST ALONG THE SOUTHEASTERLY MARGIN OF SAID RAILROAD RIGHT-OF-WAY, A DISTANCE OF 233.72 FEET; THENCE NORTH 42 DEGREES 36'37" WEST, 310.00 FEET TO THE NORTHWESTERLY LINE OF SAID LOT 7; THENCE NORTH 47 DEGREES 23'23" EAST ALONG THE SAID NORTHWESTERLY LINE, A DISTANCE OF 324.00 TO THE TRUE POINT OF BEGINNING; (ALSO KNOWN AS LOT A OF CITY OF RENTON LOT LINE ADJUSTMENT NO. LLA-004-86, RECORDED UNDER RECORDING NO. 8604240962.) PARCEL B: LOT 7 IN BLOCK 5 OF BURLING TON NORTHERN INDUSTRIAL PARK RENTON II, ACCORDING TO PLAT RECORDED IN VOLUME 111 OF PLATS AT PAGE(S) 42, 43 AND 44, IN KING COUNTY, WASHINGTON; EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL OF LAND: COMMENCING AT THE MOST NORTHERLY CORNER OF SAID LOT 7; THENCE SOUTH 42 DEGREES 36'37" EAST ALONG THE LINE COMMON TO SAID LOT 7 AND LOT 8 OF SAID BLOCK A DISTANCE OF 290.00 FEET TO THE MOST EASTERLY CORNER OF SAID LOT; THENCE SOUTH 47 DEGREES 23'23" WEST ALONG THE SOUTHEASTERLY LINE OF SAID LOT. A DISTANCE OF 324.00 FEET; THENCE NORTH 42 DEGREES 36'37" WEST 290.00 FEET TO THE NORTHWESTERLY LINE OF SAID LOT; THENCE NORTH 47 DEGREES 23'23" EAST ALONG THE SAID NORTHWESTERLY LINE, A DISTANCE OF 324.00 TO THE TRUE POINT OF BEGINNING; TOGETHER WITH THAT PORTION OF THE BURLINGTON NORTHERN RAILROAD RIGHT-OF- WAY ADJOINING SAID LOT 7 TO THE SOUTHEAST, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE MOST SOUTHERLY CORNER OF SAID LOT 7, BEING THE POINT OF INTERSECTION OF THE NORTHERLY RIGHT-OF-WAY MARGIN OF SOUTHWEST 39TH STREET; AND THE NORTHWESTERLY MARGIN OF SAID RAILROAD RIGHT-OF-WAY; THENCE NORTH 47 DEGREES 23'23" EAST ALONG SAID MARGIN OF SAID RAILROAD RIGHT-OF-WAY, A DISTANCE OF 619.43 FEET TO A POINT SOUTH 47 DEGREES 23'23" WEST, A DISTANCE OF 324.00 FEET FROM THE MOST EASTERLY CORNER OF SAID LOT 7; THENCE SOUTH 42 DEGREES 36'37" EAST 20.00 FEET TO THE SOUTHEASTERLY MARGIN OF SAID RAILROAD RIGHT-OF-WAY; THENCE SOUTH 47 DEGREES 23'23" WEST ALONG SAID SOUTHEASTERLY MARGIN, A DISTANCE OF 598.38 FEET TO SAID NORTHERLY RIGHT-OF-WAY MARGIN OF SOUTHWEST 39TH STREET; THENCE NORTH 89 DEGREES 05'08" WEST ALONG SAID MARGIN 29.04 FEET TO THE TRUE POINT OF BEGINNING; (ALSO KNOWN AS LOT B OF CITY OF RENTON LOT LINE ADJUSTMENT NO. LLA-004-86, RECORDED UNDER RECORDING NO. 8604240962). EX-10 5 q10q1037.txt Exhibit 10.37 Sanwa Sanwa Bank Plaza Bank 601 South Figueroa Street California Los Angeles, California 90017-5704 TO: Bedford Property Investors, Inc. 270 Lafayette Circle Lafayette, CA 94549 Contact: Hanh Kihara, Chief Financial Officer RE: INTEREST RATE PROTECTION AGREEMENT DATE: June 18, 2001 Dear Ms. Kihara, The purpose of this letter is to confirm the terms and conditions of the Derivative Transaction entered into between us on the Trade Date specified below (the "Specified Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the 1992 ISDA definitions. The definitions and provisions contained in the 1992 ISDA Definitions (as published by the International Swap Dealers Association - ISDA) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Each party will make payment specified in the Confirmation as being payable by it, no later than the due date for value on that date in the place of the account specified below, in freely transferable funds and in the manner customary for payment in the required currency. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement and Schedule dated as of May 15, 2001, and as amended and supplemented from time to time (the "Master Agreement"), between you and us. All provisions contained in the Master Agreement govern this Confirmation except as expressly modified below. The terms of the particular Rate Protection Transaction to which this Confirmation relates are as follows: TYPE OF TRANSACTION: Interest Rate Swap Transaction NOTIONAL AMOUNT: $7,386,063 (see amortization schedule) TRADE DATE: June 14, 2001 EFFECTIVE DATE: June 18, 2001 TERMINATION DATE: July 1, 2002 FIXED AMOUNTS: FIXED RATE PAYER: Bedford Property Investors, Inc. FIXED RATE PAYER PAYMENT DATE: The 1st of each month commencing July 1, 2001, to and including the Termination Date, subject to adjustment in accordance with the Following Modified Business Day Convention. FIXED AMOUNT: Notional x Fixed x Fixed Rate Day Amount Rate Count Fraction FIXED RATE: 4.15% FIXED RATE DAY COUNT FRACTION: Actual/360 FLOATING AMOUNTS: FLOATING RATE PAYER: Sanwa Bank California FLOATING RATE PAYER PAYMENT DATES: The 1st of each month commencing July 1, 2001, to and including the Termination Date, subject to adjustment in accordance with the Following Modified Business Day Convention. FLOATING RATE FOR INITIAL CALCULATION PERIOD: 4.08% FLOATING RATE OPTION: USD-LIBOR-BBA DESIGNATED MATURITY: One (1) Month SPREAD: None FLOATING RATE DAY COUNT FRACTION: Actual/360 RESET DATES: First Day of each calculation period, based on Libor rate setting five (5) London Banking days prior to calculation period. COMPOUNDING: Not Applicable CALCULATION AGENT: Sanwa Bank California BUSINESS DAY CENTERS: London/New York ROUNDING CONVENTION: The simple arithmetic mean of rates expressed as a percentage rounded to five decimal places. SANWA BANK PAYMENT INSTRUCTIONS: Sanwa Bank California (SBCL) Settlement payment format to be determined. BEDFORD PROPERTY INVESTORS, INC. PAYMENT INSTRUCTIONS: Bedford Property Investors, Inc. Settlement payment format to be determined. Each party represents to the other party on the date hereof that (absent a written agreement between the parties that expressly imposes affirmative obligation to the contrary for this transaction): (A) Non Reliance. It has made its own independent decision to enter into this transaction, is acting at arm's length for its own account, and is not relying on any communication (written or oral) of the other party as a recommendation or investment advice regarding this transaction. (B) Evaluation and understanding. It has the capability to evaluate and understand (on its own behalf or through independent professional advice), and does understand, the terms, conditions and risks of this transaction and is willing to accept those terms and conditions and to assume (financially and otherwise) those risks. Each party hereby agrees to make payments to the other in accordance with this Confirmation and the Master Agreement. Please confirm your Agreement to be bound by the terms of the foregoing by executing this Confirmation and returning it to: Sanwa Bank - Treasury Operations Attention: Edith Villasenor 1977 Saturn St., Mail Sort OC4-12 Monterey Park, CA 91755 Telephone number (213) 727-6630 We are very pleased to have executed this Rate Protection Transaction with Bedford Property Investors, Inc. For and on behalf of: SANWA BANK CALIFORNIA By: /s/Carlos Acosta Name: Carlos Acosta Title: VP & Treasury Compliance Manager Confirmed as of the date first above written: Bedford Property Investors, Inc. By: /s/Hanh Kihara Name: Hanh Kihara Title: Chief Financial Officer SANWA BANK CALIFORNIA INDICATIVE SWAP AMORTIZATION SCHEDULE 1-Month LIBOR/Swap to a fixed LIBOR set (5) London Banking days prior to the first paid and reset monthly on the first DETAILS SETTLEMENT DATE 6/18/01 1ST PAYMENT DATE 7/1/01 AMOUNT $7,386,063.00 LOAN RATE 5.48000% BASIS TOP (30,ACT) 30 BASIS BOTTOM (360,365) 360 AMORTIZATION TYPE (p&i or p) P&I PAYMENT # OF PRINCIPAL * REMAINING DATE DAYS (Estimated) BALANCE 06/18/01 $7,386,063.00 07/01/01 30 $12,272.65 $7,373,790.35 08/01/01 30 $12,328.70 $7,361,461.65 09/01/01 30 $12,385.00 $7,349,076.65 10/01/01 30 $12,441.56 $7,336,635.09 11/01/01 30 $12,498.37 $7,324,136.72 12/01/01 30 $12,555.45 $7,311,581.27 01/01/02 30 $12,612.79 $7,298,968.48 02/01/02 30 $12,670.38 $7,286,298.10 03/01/02 30 $12,728.25 $7,273,569.85 04/01/02 30 $12,786.37 $7,260,783.48 05/01/02 30 $12,844.76 $7,247,938.72 06/01/02 30 $12,903.42 $7,235,035.30 07/01/02 30 Swap Matures * - Principal payments are estimated, and are subject to re-forecast to match loan payment changes. EX-10 6 q10q1038.txt Exhibit 10.38 Sanwa Sanwa Bank Plaza Bank 601 South Figueroa Street California Los Angeles, California 90017-5704 TO: Bedford Property Investors, Inc. 270 Lafayette Circle Lafayette, CA 94549 Contact: Hanh Kihara, Chief Financial Officer RE: INTEREST RATE PROTECTION AGREEMENT DATE: June 18, 2001 Dear Ms. Kihara, The purpose of this letter is to confirm the terms and conditions of the Derivative Transaction entered into between us on the Trade Date specified below (the "Specified Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the 1992 ISDA definitions. The definitions and provisions contained in the 1992 ISDA Definitions (as published by the International Swap Dealers Association - ISDA) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Each party will make payment specified in the Confirmation as being payable by it, no later than the due date for value on that date in the place of the account specified below, in freely transferable funds and in the manner customary for payment in the required currency. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement and Schedule dated as of May 15, 2001, and as amended and supplemented from time to time (the "Master Agreement"), between you and us. All provisions contained in the Master Agreement govern this Confirmation except as expressly modified below. The terms of the particular Rate Protection Transaction to which this Confirmation relates are as follows: TYPE OF TRANSACTION: Interest Rate Swap Transaction NOTIONAL AMOUNT: $23,136,410 (see amortization schedule) TRADE DATE: June 14, 2001 EFFECTIVE DATE: June 18, 2001 TERMINATION DATE: July 1, 2002 FIXED AMOUNTS: FIXED RATE PAYER: Bedford Property Investors, Inc. FIXED RATE PAYER PAYMENT DATE: The 1st of each month commencing July 1, 2001, to and including the Termination Date, subject to adjustment in accordance with the Following Modified Business Day Convention. FIXED AMOUNT: Notional x Fixed x Fixed Rate Day Amount Rate Count Fraction FIXED RATE: 4.15% FIXED RATE DAY COUNT FRACTION: Actual/360 FLOATING AMOUNTS: FLOATING RATE PAYER: Sanwa Bank California FLOATING RATE PAYER PAYMENT DATES: The 1st of each month commencing July 1, 2001, to and including the Termination Date, subject to adjustment in accordance with the Following Modified Business Day Convention. FLOATING RATE FOR INITIAL CALCULATION PERIOD: 4.08% FLOATING RATE OPTION: USD-LIBOR-BBA DESIGNATED MATURITY: One (1) Month SPREAD: None FLOATING RATE DAY COUNT FRACTION: Actual/360 RESET DATES: First Day of each calculation period, based on Libor rate setting five (5) London Banking days prior to calculation period. COMPOUNDING: Not Applicable CALCULATION AGENT: Sanwa Bank California BUSINESS DAY CENTERS: London/New York ROUNDING CONVENTION: The simple arithmetic mean of rates expressed as a percentage rounded to five decimal places. SANWA BANK PAYMENT INSTRUCTIONS: Sanwa Bank California (SBCL) Settlement payment format to be determined. BEDFORD PROPERTY INVESTORS, INC. PAYMENT INSTRUCTIONS: Bedford Property Investors, Inc. Settlement payment format to be determined. Each party represents to the other party on the date hereof that (absent a written agreement between the parties that expressly imposes affirmative obligation to the contrary for this transaction): (A) Non Reliance. It has made its own independent decision to enter into this transaction, is acting at arm's length for its own account, and is not relying on any communication (written or oral) of the other party as a recommendation or investment advice regarding this transaction. (B) Evaluation and understanding. It has the capability to evaluate and understand (on its own behalf or through independent professional advice), and does understand, the terms, conditions and risks of this transaction and is willing to accept those terms and conditions and to assume (financially and otherwise) those risks. Each party hereby agrees to make payments to the other in accordance with this Confirmation and the Master Agreement. Please confirm your Agreement to be bound by the terms of the foregoing by executing this Confirmation and returning it to: Sanwa Bank - Treasury Operations Attention: Edith Villasenor 1977 Saturn St., Mail Sort OC4-12 Monterey Park, CA 91755 Telephone number (213) 727-6630 We are very pleased to have executed this Rate Protection Transaction with Bedford Property Investors, Inc. For and on behalf of: SANWA BANK CALIFORNIA By: /s/Carlos Acosta Name: Carlos Acosta Title: VP & Treasury Compliance Manager Confirmed as of the date first above written: Bedford Property Investors, Inc. By: /s/Hanh Kihara Name: Hanh Kihara Title: Chief Financial Officer SANWA BANK CALIFORNIA INDICATIVE SWAP AMORTIZATION SCHEDULE 1-Month LIBOR/Swap to a fixed LIBOR set (5) London Banking days prior to the first paid and reset monthly on the first DETAILS SETTLEMENT DATE 6/18/01 1ST PAYMENT DATE 7/1/01 AMOUNT $23,136,410.02 LOAN RATE 5.48000% BASIS TOP (30,ACT) 30 BASIS BOTTOM (360,365) 360 AMORTIZATION TYPE (p&i or p) P&I PAYMENT # OF PRINCIPAL * REMAINING DATE DAYS (Estimated) BALANCE 06/18/01 $23,136,410.02 07/01/01 30 $38,443,35 $23,097,966.67 08/01/01 30 $38,618.91 $23,059,347.76 09/01/01 30 $38,795.27 $23,020,552.49 10/01/01 30 $38,972.43 $22,981,580.06 11/01/01 30 $39,150.40 $22,942,429.66 12/01/01 30 $39,329.19 $22,903,100.47 01/01/02 30 $39,508.79 $22,863,591.68 02/01/02 30 $39,689.22 $22,823,902.46 03/01/02 30 $39,870.47 $22,784,031.99 04/01/02 30 $40,052.54 $22,743,979.45 05/01/02 30 $40,235.45 $22,703,744.00 06/01/02 30 $40,419.19 $22,663,324.81 07/01/02 30 Swap Matures * - Principal payments are estimated, and are subject to re-forecast to match loan payment changes. EX-10 7 q10q1039.txt Exhibit 10.39 (Local Currency - Single Jurisdiction) ISDA International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of MAY 15, 2001 SANWA BANK CALIFORNIA and BEDFORD PROPERTY INVESTORS, INC. have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: -- 1. Interpretation (a) Definitions. The terms defined in Section 12 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable: - (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically be satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of branches or offices through which the parties make and receive payments or deliveries. (d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. Representations Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into) that: -- (a) Basic Representations. (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. 4. Agreements Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: -- (a) Furnish Specified Information. It will deliver to the other party any forms, documents or certificates specified in the Schedule or any Confirmation by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party: -- (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice of a Termination Event) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) Misrepresentation. A representation made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:-- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: -- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (ii) below or an Additional Termination Event if the event is specified pursuant to (iii) below: -- (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4 (b)) for such party (which will be the Affected Party): -- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (iii) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iii) Right to Terminate. If: -- (1) an agreement under Section 6(b)(ii) has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality other than that referred to in Section 6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs, either party in the case of an Illegality, any Affected Party in the case of an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) Calculations. (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment), from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) Payments on Early Termination. If an Early Termination Date occurs the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) Events of Default. If the Early Termination Date results from an Event of Default:-- (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party over (B) the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non- defaulting Party, if a positive number, the Non- defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party less (B) the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non- defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non- defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) Termination Events. If the Early Termination Date results from a Termination Event: -- (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: -- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Unpaid Amounts owing to X less (II) the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date Occurs because "Automatic Early Termination" Applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. Transfer Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: -- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) the parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 9. Expenses A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 10. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: -- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 11. Governing Law and Jurisdiction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably: -- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 12. Definitions As used in this Agreement: -- "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means: -- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non- defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iii). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "law" includes any treaty, law, rule or regulation and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) of (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of: -- (a) the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Event" means an Illegality or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that become payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. SANWA BANK CALIFORNIA BEDFORD PROPERTY INVESTORS, INC. (Name of Party) (Name of Party) By: /s/Monica Williams By:/s/Hanh Kihara Name: MONICA WILLIAMS Name: HANH KIHARA Title: FSVP & TREASURER Title: SENIOR VICE PRESIDENT & CFO Date: 6-11-01 Date: 6-12-01 NOTE: For Local Currency - Single Jurisdiction Agreements SCHEDULE to the Master Agreement dated as of MAY 15, 2001 between SANWA BANK CALIFORNIA ("Party A") and ("Party B") Part 1. Termination Provisions. In this Agreement: (a) "Specified Entity" means in relation to Party A for the purpose of: Section 5 (a) (v): Not Applicable Section 5 (a) (vi): Not Applicable Section 5 (a) (vii): Not Applicable Section 5 (b) (ii): Not Applicable and in relation to Party B for the purpose of: Section 5 (a) (v): Not Applicable Section 5 (a) (vi): Not Applicable Section 5 (a) (vii): Not Applicable Section 5 (b) (ii): Not Applicable (b) "Specified Transaction" will have the meaning specified in Section 12 of this Agreement. (c) The "Cross Default" provisions of Section 5 (a) (vi) will apply to Party A and to Party B. "Specified Indebtedness" will have the meaning specified in Section 12 of this Agreement. "Threshold Amount" means, in relation to a party, an amount equal to 3 percent of such party's shareholders' equity (determined in accordance with generally accepted accounting principles in such party's jurisdiction of incorporation or organization) as at the end of such party's most recently completed fiscal year. For purposes of this definition, any Specified Indebtedness of a party denominated in a currency other than the currency in which the financial statements of such party are denominated will be converted into the currency in which such financial statements are denominated at the exchange rate therefor reasonably chosen by the other party. (d) The "Credit Event Upon Merger" provisions of Section 5 (b) (ii) will apply to Party A and to Party B. (e) The "Automatic Early Termination" provisions of Section 6 (a) will not apply to Party A and will not apply to Party B. (f) Payments on Early Termination. For the purpose of Section 6 (e) of the Agreement: (i) Market Quotation will apply. (ii) The Second Method will apply and, notwithstanding the provisions of Section 6 (e) (i) (3), if the amount referred to therein is a positive number, the Defaulting Party will pay such amount to the Non- Defaulting Party, and if the amount referred to therein is a negative number, the Non-defaulting Party's obligation to pay any amount to the Defaulting Party shall be conditioned upon and subject to the satisfaction of the conditions precedent set forth in (A) and (B) below, at which time there shall arise an obligation of the Non-defaulting Party to pay to the Defaulting Party an amount equal to the absolute value of such negative number less any and all amounts which the Defaulting Party may be obligated to pay under Section 9: (A) the Non-defaulting Party shall have received confirmation satisfactory to it in its sole discretion (which may include an unqualified opinion of its counsel) the (x) all Transactions are terminated in accordance with Section 6 (c) and no further payments or deliveries under Section 2 (a) (i) in respect of Terminated Transactions will be required to be made in accordance with Section 6 (c) (ii), and (y) each Specified Transaction shall have termination date or through the exercise by a party of a right to terminate and all amounts due and obligations owing under each Specified Transaction shall have been fully and finally paid and performed. With respect to the foregoing clause (y), it is expressly agreed that neither the Non-defaulting Party nor any Affiliate of the Non-defaulting Party shall have any obligation to exercise any right it may have to terminate a Specified Transaction prior to its specified termination date; and (B) all obligations (contingent or absolute, matured or unmatured) of the Defaulting Party and any Affiliate of any Defaulting Party to make any payment or delivery to the Non-defaulting Party or any Affiliate of the Non-defaulting Party shall have fully and finally paid and performed. (g) "Termination Currency" means United States Dollars. (h) "Additional Termination Event" will not apply. Part 2. Agreement to Deliver Documents For the purpose of Section 4 (a) of this Agreement, each party agrees to deliver to the other party the following documents, as applicable: - -- (i) Tax forms, documents or certificates to be delivered are: Each party agrees to complete, accurately and in a manner reasonably satisfactory to the other party, execute, arrange for any required certification of and deliver to the other party, or such government or taxing authority as the other party directs, any form, document or certificate that may be required or reasonably requested by the other party in order to allow the other party to make a payment under this Agreement without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (the "Requested Form or Document") promptly upon the earlier of (1) before the first Payment Date on which any such payment is or may be so connected or attributable, (2) promptly upon reasonable demand by the other party, and (3) promptly upon learning that any such form previously provided has become obsolete or incorrect. (ii) Other Documents to be delivered are: (1) Certificate evidencing the authority of each party to enter into this Agreement and the names of each person authorized to execute this Agreement and any documents required to be executed pursuant to this Agreement, together with the specimen signatures of each such person, upon execution and delivery of this Agreement; (2) Annual Report, containing audited financial statements for each of its fiscal years certified by its independent public accountants as fairly presenting its financial condition and results of operations for and as at the close of such fiscal year, as soon as available and, in any event, on or before the 180th day after the close of each of its fiscal years; and (3) Such other information respecting each party's condition or operations, financial or otherwise, as may be reasonably requested from time to time, promptly after a request by the other party. The documents delivered are pursuant to the representations set forth in Section 3 (d). Part 3. Miscellaneous (a) Addresses for Notices. For the purpose of Section 10 (a) of this Agreement. Address for notices or communications to Party A with respect to this Agreement and relating to any Transaction shall be given to it at the following address: Address: Sanwa Bank California Treasury Operations, OC4-12 1977 Saturn St. Monterey Park, CA 91755 Attention: Derivatives Documentation Specialist US$ Book Operations Telex No: 674710 Answerback: SANWACALALA Facsimile No: (323) 727-6634 Telephone No. (323) 727-6639 Address for notices or communications to Party B with respect to this Agreement and relating to any Transaction shall be given to it at the following address: Address: Bedford Property Investors, Inc. 270 Lafayette Circle Lafayette, CA 94549 Attention: Hanh Kihara/CFO Telephone No: (925) 283-8910 Facsimile No: (925) 283-5697 (b) Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in a Confirmation in relation to the relevant Transaction. With respect to Section 5 (a) (ii) of the Agreement, if a party hereto is designated as the Calculation Agent for any Transaction, then Section 5 (a) (ii) shall not include any failure by that party to comply with its obligations as Calculation Agent and the sole remedy of the other party for such failure shall be the right, upon notice to the Calculation Agent, to designate itself or a third party as a replacement Calculation Agent. (c) Credit Support Document. The provisions of Section 5 (a) (iii) will not apply to this Agreement. (d) Credit Support Provider. Details of any Credit Support provider: In relation to Party A, not applicable. In relation to Party B, not applicable. (e) Governing Law. This Agreement will be governed by and construed in accordance with the law of the State of New York (without reference to choice of law doctrine). (f) Netting of Payments. Subparagraph (ii) of Section 2 (c) of this Agreement will not apply to all Transactions. (g) "Affiliate" will have the meaning specified in Section 12 of this Agreement. Part 4. Other Provisions. (a) Termination Payments (Full Two Way Payments). For the sole purposes of calculating and making payments due in respect of an Early Termination Date under Section 6 (d) and (e) of this Agreement, any Event of Default specified in Section 5 (a) of this Agreement shall be treated as if it were a Termination Event with the Defaulting Party Treated as the Affected Party (and for such purposes the provision of the definition of "Settlement Amount" shall be deemed to be of no force and effect). (b) Set-off. The following provision shall be added as Section 6 (f): Any Amount (the "Early Termination Amount") payable to one party (the Payee) by the other party (the Payer) under Section 6 (e), in circumstances where there is a Defaulting Party will, at the option of the non-Defaulting Party, be reduced by its set-off against any amounts (the "Other Agreement Amount") payable (whether at such time or in the future) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) issued or executed by one party to, or in favor of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). The non- Defaulting Party will give notice as soon as reasonably practicable to the other party of any set-off effective under this Section 6 (f). For this purpose, either the Early Termination Amount of the Other Agreement Amount (or the relevant portion of such amounts) may be converted by the non-Defaulting Party into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner, in good faith and with the consultation of the other party, to purchase the relevant amount of such currency. Nothing in this Section 6 (f) shall be effective to create a charge or other security interest. This Section 6 (f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (c) Waiver of Right to Trial by Jury. Each of the parties hereto hereby irrevocably waives any and all right to a trial by jury with respect to any legal proceeding arising out of or relating to this Agreement or any transaction contemplated hereby. (d) Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, or unenforceable in any respect other than in manner dealt with in Section 5 (b), the validity and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (e) Consent to Recording. Each party (i) consents to the monitoring or recording, at any time and from time to time, by the other party of any and all communications between officers or employees of the parties, (ii) waives any further notice of such monitoring or recording, and (iii) agrees to notify (and, if required by law, obtain the monitoring or recording). (f) Definitions. This Agreement, each Confirmation, and each Transaction are subject to the 1991 ISDA definitions ("the Definitions"), as published by the International Swaps and Derivatives Association, Inc., and will be governed in all respects by the provisions set forth in the Definitions with references to "Swap Transactions" therein being a reference to "Transaction" for purposes of this Agreement. The Provisions of the Definitions are incorporated by reference in, and made part of, this Agreement as if set forth in full in this Agreement and each Confirmation. SANWA BANK CALIFORNIA BEDFORD PROPERTY INVESTORS, INC. (Name of Party) (Name of Party) By: /s/Monica Williams By: /s/Hanh Kihara Name: Monica Williams Name: Hanh Kihara Title: FSVP & Treasurer Title: Senior Vice President and CFO Date: 6/11/01 Date: 6/12/01
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