Table of Contents

UNITED STATES

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 September 30, 2004.

 

¨ 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 001-32336

 


 

DIGITAL REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

 


 

Maryland   26-0081711

(State or other jurisdiction of

Incorporation or organization)

 

(IRS employer

identification number)

 

2730 Sand Hill Road, Suite 280

Menlo Park, CA

  94025
(Address of principal executive offices)   Zip Code

 

Registrant’s telephone number, including area code (650) 233-3600

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ¨     No   x

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class


 

Outstanding at December 1, 2004


Common Stock, $.01 par value per share   21,421,300

 



Table of Contents

DIGITAL REALTY TRUST, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2004

 

TABLE OF CONTENTS

 

             PAGE NO.

PART I. FINANCIAL INFORMATION

    
    ITEM 1.  

Financial Statements.

   1
       

Combined Balance Sheets for Digital Realty Trust, Inc. and Digital Realty Trust, Inc. Predecessor as of September 30, 2004 (Unaudited) and as of December 31, 2003

   1
       

Combined Statements of Income (Unaudited) for Digital Realty Trust, Inc. and Digital Realty Trust, Inc. Predecessor for the three months ended September 30, 2004 and 2003

   2
       

Combined Statements of Income (Unaudited) for Digital Realty Trust, Inc. and Digital Realty Trust, Inc. Predecessor for the nine months ended September 30, 2004 and 2003

   3
       

Combined Statements of Comprehensive Income (Unaudited) for Digital Realty Trust, Inc. and Digital Realty Trust, Inc. Predecessor for the nine months ended September 30, 2004 and 2003

   4
       

Combined Statements of Cash Flows (Unaudited) for the Digital Realty Trust, Inc. and Digital Realty, Inc. Predecessor for the nine months ended September 30, 2004 and 2003

   5
       

Notes to Combined Financial Statements

   6
    ITEM 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

   11
    ITEM 3.  

Quantitative and Qualitative Disclosure about Market Risk.

   18
    ITEM 4.  

Controls and Procedures.

   19

PART II. OTHER INFORMATION

   19
    ITEM 1.  

Legal Proceedings.

   19
    ITEM 2.  

Unregistered Sales of Equity Securities and Use of Proceeds.

   20
    ITEM 3.  

Defaults Upon Senior Securities.

   21
    ITEM 4.  

Submission of Matters to a Vote of Security Holders.

   21
    ITEM 5.  

Other Information.

   21
    ITEM 6.  

Exhibits.

   21

SIGNATURES

   23

CERTIFICATIONS

    

 

(i)


Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

COMBINED BALANCE SHEETS

(In thousands)

 

     September 30,
2004


    December 31,
2003


 
     (Unaudited)        
Assets                 

Investments in real estate:

                

Land

   $ 103,981     $ 50,715  

Acquired ground lease

     1,477       1,477  

Buildings and improvements

     509,971       323,981  

Tenant improvements

     59,775       28,590  
    


 


       675,204       404,763  

Accumulated depreciation and amortization

     (24,997 )     (13,026 )
    


 


       650,207       391,737  

Cash and cash equivalents

     2,629       5,174  

Restricted cash

     10,212       651  

Accounts and other receivables

     4,203       1,139  

Deferred rent

     9,616       5,178  

Acquired above market leases, net

     24,932       11,432  

Acquired in place lease value and deferred leasing costs, net

     111,422       59,477  

Deferred financing costs, net

     3,927       3,396  

Prepaid offering costs

     4,052       —    

Other assets

     989       1,514  
    


 


     $ 822,189     $ 479,698  
    


 


Liabilities and Owner’s Equity                 

Notes payable under line of credit

   $ 6,117     $ 44,436  

Notes payable under bridge loan

     243,686       —    

Mortgage loans

     246,204       213,429  

Other secured loans

     51,292       40,000  

Unsecured note payable to affiliate

     4,052       —    

Accounts payable and accrued expenses

     9,721       7,117  

Acquired below market leases, net

     28,139       19,258  

Security deposits and prepaid rents

     3,692       3,267  

Asset management fees payable to related party

     796       796  
    


 


       593,699       328,303  

Minority interests

     3,127       3,444  

Owner’s equity

     225,363       147,951  
    


 


     $ 822,189     $ 479,698  
    


 


 

See accompanying notes to combined financial statements

 

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

COMBINED STATEMENTS OF INCOME

(In thousands)

 

     Three months ended
September 30,


     2004

   2003

     (Unaudited)

Revenues:

             

Rental

   $ 24,666    $ 11,965

Tenant reimbursements

     4,658      1,913

Other

     22      92
    

  

       29,346      13,970
    

  

Expenses:

             

Rental property operating and maintenance

     5,336      1,966

Property taxes

     2,417      730

Insurance

     617      121

Interest

     7,926      2,687

Asset management fees to related party

     797      797

Depreciation and amortization

     8,604      3,844

General and administrative

     86      31

Other

     176      86
    

  

       25,959      10,262
    

  

Income before minority interests

     3,387      3,708

Minority interests

     28      53
    

  

Net income

   $ 3,359    $ 3,655
    

  

 

See accompanying notes to combined financial statements

 

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

COMBINED STATEMENTS OF INCOME

(In thousands)

 

     Nine months ended
September 30,


     2004

    2003

     (Unaudited)

Revenues:

              

Rental

   $ 59,127     $ 34,263

Tenant reimbursements

     10,055       6,230

Other

     1,734       4,314
    


 

       70,916       44,807
    


 

Expenses:

              

Rental property operating and maintenance

     11,625       5,604

Property taxes

     6,250       3,146

Insurance

     1,179       329

Interest

     15,804       6,786

Asset management fees to related party

     2,389       2,389

Depreciation and amortization

     20,822       11,031

General and administrative

     243       74

Other

     2,716       2,566
    


 

       61,028       31,925
    


 

Income before minority interests

     9,888       12,882

Minority interests

     (28 )     126
    


 

Net income

   $ 9,916     $ 12,756
    


 

 

See accompanying notes to combined financial statements

 

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

COMBINED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

 

     Nine months ended
September 30,


     2004

   2003

     (Unaudited)

Net income

   $ 9,916    $ 12,756

Other comprehensive income:

             

Foreign currency translation adjustments

     33      490
    

  

Comprehensive net income

   $ 9,949    $ 13,246
    

  

 

See accompanying notes to the combined financial statements

 

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Nine months ended
September 30,


 
     2004

    2003

 
     (Unaudited)  

Cash flows from operating activities:

        

Net income

   $ 9,916     $ 12,756  

Adjustment to reconcile net income to net cash provided by operating activities:

                

Minority interests

     (28 )     126  

Distributions to joint venture partner

     (289 )     (198 )

Write off of net assets due to early lease termination

     2,371       2,393  

Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground lease

     12,271       6,331  

Amortization of deferred financing costs

     3,515       267  

Amortization of debt premium

     (1,111 )     (727 )

Amortization of acquired in place lease value and deferred leasing costs

     8,551       4,700  

Amortization of acquired above market leases and acquired below market leases, net

     (175 )     (1,778 )

Changes in assets and liabilities:

                

Accounts and other receivables

     (3,064 )     (114 )

Deferred rent

     (4,445 )     (2,497 )

Other assets

     525       (1,052 )

Accounts payable and accrued expenses

     3,089       (710 )

Security deposits and prepaid rent

     425       608  

Asset management fee payable to related party

     —         796  
    


 


Net cash provided by operating activities

     31,551       20,901  
    


 


Cash flows from investing activities:

                

Acquisitions of properties

     (306,270 )     (173,036 )

Improvements to investments in real estate

     (5,906 )     (5,934 )

Increase in restricted cash

     (9,561 )     (170 )
    


 


Net cash used in investing activities

     (321,737 )     (179,140 )
    


 


Cash flows from financing activities:

                

Borrowings under line of credit

     99,381       93,575  

Repayments under line of credit

     (137,700 )     (65,000 )

Borrowings under bridge loan

     243,686       —    

Proceeds from mortgage loans

     20,000       57,000  

Principal payments on mortgage loans

     (1,051 )     (2,373 )

Proceeds from other secured loans

     —         22,000  

Principal payments on other secured loans

     (92 )     —    

Borrowings under note payable to affiliate

     4,052       —    

Prepayment of offering costs

     (4,052 )     —    

Payment of loan fees and costs

     (4,046 )     (2,319 )

Contribution from joint venture partner

     —         225  

Contributions from owner

     113,658       96,469  

Distributions to owner

     (46,195 )     (43,009 )
    


 


Net cash provided by financing activities

     287,641       156,568  
    


 


Net decrease in cash and cash equivalents

     (2,545 )     (1,671 )

Cash and cash equivalents, beginning of period

     5,174       3,578  
    


 


Cash and cash equivalents, end of period

   $ 2,629     $ 1,907  
    


 


Supplemental disclosure of cash flow information:

                

Cash paid during the period for interest

   $ 12,717     $ 7,170  

Supplemental disclosure of noncash investing and financing activities:

                

Increase in net assets related to foreign currency translation adjustments

     33       490  

Accrual for additions to investments in real estate included in accounts payable and accrued expenses

     915       544  

Reduction in loan balance from seller and related reduction in purchase price for the property

     500       —    

Allocation of purchase of properties to:

                

Investments in real estate

     242,462       145,816  

Acquired above market leases

     16,381       8,573  

Acquired below market leases

     (12,214 )     (5,369 )

Acquired in place lease value

     60,186       24,016  

Loan premium

     (545 )     —    
    


 


Cash paid for acquisition of properties

     306,270       173,036  

Mortgage loans assumed in connection with the acquisition of a property

     14,392       —    

Other secured loan assumed in connection with the acquisition of a property

     11,884       —    

Purchase deposits applied to acquisitions of properties

     —         600  
    


 


Total purchase price

     332,546       173,636  

 

See accompanying notes to combined financial statements

 

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, INC. PREDECESSOR

NOTES TO COMBINED FINANCIAL STATEMENTS

 

(1) Organization and Description of Business

 

Digital Realty Trust, Inc. (the Company) completed its initial public offering of common stock (the IPO) on November 3, 2004 and commenced operations on that date. The IPO resulted in sale of 20,000,000 shares of common stock at a price per share of $12, generating gross proceeds to the Company of $240 million. The aggregate proceeds to the Company, net of underwriters’ discounts, commissions and financial advisory fees and other offering costs were approximately $214.2 million. On November 30, 2004, an additional 1,421,300 shares of common stock were sold at $12 per share as a result of the underwriters exercising their over-allotment option. This resulted in net proceeds of $15.9 million to the Company.

 

Through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership), which was formed on July 21, 2004 in anticipation of the IPO, the Company is engaged in the business of ownership, acquisition, repositioning and management of technology-related real estate. Effective as of the completion of the IPO, including exercise of the underwriters’ over-allotment option, the Company, as sole general partner, owns a 40.5% interest in the Operating Partnership and has control over major decisions of the Operating Partnership. The limited partners of the Operating Partnership do not have rights to replace the general partner, approve the sale or refinancing of the Operating Partnership’s assets, although they do have certain protective rights.

 

The Company continues to operate and expand the business of its predecessor (the Company Predecessor). The Company Predecessor is not a legal entity; rather it is a combination of certain of the real estate subsidiaries of Global Innovation Partners, LLC, a Delaware limited liability company (GI Partners) along with an allocation of certain assets, liabilities, revenues and expenses of GI Partners related to the real estate held by such subsidiaries.

 

Pursuant to a contribution agreement among the owner of the Company Predecessor and the Operating Partnership, which was executed in July 2004, on October 27, 2004, the Operating Partnership received a contribution of interests in certain of GI Partners’ properties in exchange for limited partnership interests in the Operating Partnership and the assumption of debt and other specified liabilities. Additionally, pursuant to contribution agreements between the Operating Partnership and third parties, which were also executed in July 2004, the Operating Partnership received contributions of interests in certain additional real estate properties in exchange for limited partnership interests in the Operating Partnership and the assumption of specified liabilities.

 

As of the completion of the IPO, the Company’s portfolio consists of 23 properties; 22 are located throughout the United States and one is located in London, England. The Company’s properties are located in a limited number of markets where technology tenants are concentrated, including the Atlanta, Boston, Dallas, Denver, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. The portfolio consists of telecommunications infrastructure properties, information technology properties, technology manufacturing properties and regional or national headquarters of technology companies. As of September 30, 2004, the Company Predecessor’s portfolio consisted of 20 properties.

 

The Company was incorporated in Maryland on March 9, 2004. Prior to the completion of the IPO, GI Partners owned the Company and the Company had no operations until the completion of the IPO. The Company Predecessor commenced operations on January 10, 2002 when it acquired its first investment in real estate. GI Partners was formed on February 28, 2001 by and between California Public Employees’ Retirement System, Global Innovation Contributors, LLC, and Global Innovation Manager, LLC.

 

The Company and the Operating Partnership together with the investors in GI Partners and unrelated third parties (collectively, the Participants) engaged in certain formation transactions (the Formation Transactions) that were completed concurrently with the completion of the IPO. The Formation Transactions were designed to (i) continue the operations of the Company Predecessor, (ii) acquire additional properties or interests in properties from the Participants, (iii) enable the Company to raise the necessary capital to repay certain mortgage debt relating to

 

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certain of the properties and pay other indebtedness, (iv) fund costs, capital expenditures and working capital, (v) provide a vehicle for future acquisitions, (vi) enable the Company to comply with requirements under the federal income tax laws and regulations relating to real estate investment trusts and (vii) preserve tax advantages for certain Participants.

 

The operations of the Company are carried on primarily through the Operating Partnership. It is the intent of the Company to elect the status of and qualify as a REIT under Section 856 through 860 of the Internal Revenue Code of 1986, as amended for the taxable year ending December 31, 2004.

 

The Company purchased a portion of the limited partnership interests that were issued to GI Partners immediately following the completion of the IPO and upon exercise of the underwriters’ over-allotment option, the aggregate purchase of which was $91.9 million. The purchase price was equal to the value of the Operating Partnership units based on the initial public offering price of the Company’s stock, net of underwriting discounts and commissions and financial advisory fees.

 

(2) Summary of Significant Accounting Policies

 

(a) Principles of Combination and Basis of Presentation

 

The accompanying combined financial statements include the wholly owned real estate subsidiaries and two majority owned real estate joint ventures that GI Partners contributed to the Operating Partnership on October 27, 2004 in connection with the IPO. The interests of the joint venture partners, all of whom are third parties, are reflected in minority interests in the accompanying combined financial statements. The accompanying combined financial statements also include the accounts of Digital Realty Trust, Inc., which, as of September 30, 2004, consist primarily of prepaid offering costs and a loan payable to an affiliate in the same amount.

 

The accompanying combined financial statements do not include the real estate subsidiaries for two properties owned by GI Partners that are subject to right of first offer agreements, whereby the Operating Partnership has the right to make the first offer to purchase these properties if GI Partners decides to sell them. The accompanying combined financial statements also do not include any of GI Partners’ investments in privately held companies, which GI Partners did not contribute to the Operating Partnership.

 

The accompanying combined statements include an allocation of GI Partners’ line of credit to the extent that such borrowings and the related interest expense relate to acquisitions of the real estate owned by the subsidiaries and joint ventures that GI Partners contributed to the Operating Partnership. Additionally, the accompanying combined financial statements include an allocation of asset management fees to a related party incurred by GI Partners along with an allocation of the liability for any such fees that are unpaid as of the balance sheet dates and an allocation of GI Partners’ general and administrative expenses. Although neither the Company nor the Operating Partnership are or will be parties to the agreement requiring the payment of the asset management fees, an allocation of such fees has been included in the accompanying combined financial statements since such fees were essentially the Company Predecessor’s historical general and administrative expense. The Company Predecessor did not directly incur personnel costs, home office space rent or other general and administrative expenses that subsequent to the completion of the IPO are incurred directly by the Company and the Operating Partnership. These types of expenses were historically incurred by the asset manager and were passed through to GI Partners via the asset management fee.

 

The Company will continue to account for the properties contributed by GI Partners upon the completion of the IPO using their historical basis of accounting. The Company and the Company Predecessor account for properties purchased from third parties, including properties acquired in exchange for Operating Partnership units upon completion of the IPO, using purchase accounting.

 

The accompanying interim combined financial statements are unaudited; but have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of

 

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the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the full fiscal year. These financial statements should be read in conjunction with the Company’s prospectus dated October 28, 2004 and the combined financial statements and notes thereto of the Company Predecessor included therein.

 

(b) Income Taxes

 

No provision has been made in the Company Predecessor combined financial statements for income taxes, as any such taxes are the responsibility of GI Partners’ members, as GI Partners is a limited liability company. To the extent that any United Kingdom taxes are incurred by the subsidiary invested in real estate located in London, England, a provision is made for such taxes.

 

As a REIT, the Company will be permitted to deduct distributions paid to its stockholders, eliminating the federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.

 

(c) Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current period presentation.

 

(3) Debt

 

(a) Lines of Credit

 

Borrowings under GI Partners’ $100,000,000 revolving credit facility were allocated to the Company Predecessor to the extent that the borrowings related to the Company’s Predecessor’s real estate investments. Upon completion of the IPO, the Company assumed and repaid $6.1 million of such borrowings. Outstanding advances under GI Partners’ line of credit bore interest at variable rates based on LIBOR plus 0.875%.

 

Upon completion of the IPO, the Operating Partnership entered into an unsecured revolving credit facility with a group of banks led by affiliates of Citigroup Global Markets, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The credit facility provides for borrowings up to $200 million and bears interest at a rate ranging between LIBOR + 1.375% and LIBOR + 1.750% depending on the Operating Partnership’s overall leverage. This credit facility matures on November 3, 2007, with an option to extend the term for one year.

 

The terms of the credit facility includes certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness and of liens and the disposition of assets, and which require compliance with financial ratios relating to the minimum amounts of tangible net worth, debt service coverage (both on a combined and unencumbered asset-only basis), and fixed charge coverage and unencumbered property debt service coverage, the maximum amount of unsecured indebtedness, and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT for federal income tax purposes, we will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 95% of funds from operations for such period, subject to certain other adjustments.

 

(b) Bridge Loan

 

As of September 30, 2004, the Company Predecessor borrowed an aggregate of $243.7 million under a bridge loan facility, which was secured by certain of the properties. Upon completion of the IPO, these borrowings were assumed by the Company and repaid with the proceeds of the IPO. An additional $7.95 million was borrowed subsequent to September 30, 2004, related to the acquisition of eBay Data Center and such amount was assumed by the Company and remains outstanding. The borrowings under the bridge loan bear interest at one-month LIBOR plus 2%, payable monthly and any outstanding principal is due at maturity on August 11, 2005.

 

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(c) Mortgage and Other Secured Loans

 

Mortgage and other secured loans consist of the following as of September 30, 2004 (dollar amounts in thousands):

 

    

Interest Rate


  

Maturity Date


   Principal
Amount


 

100 Technology Center Drive Mortgage

   LIBOR + 1.70%    April 1, 2009    $ 20,000  

36 Northeast Second Street Mortgage (1)

   Greater of 4.00% or one of the two variable rates as defined in the loan agreement    May 1, 2005      17,826  

Ardenwood Corporate Park, VarTec Building and NTT /Verio Premier Data Center Mortgage

   LIBOR +1.59%    August 9, 2006 (6)      43,000  

Ardenwood Corporate Park, VarTec Building and NTT /Verio Premier Data Center Mezzanine

   LIBOR + 5.75%    August 9, 2006 (6)      22,000  

ASM Lithography Facility Mortgage (1)

   Greater of 4.75% or LIBOR +2.75%    June 30, 2006      13,984  

AT&T Web Hosting Facility Mortgage

   LIBOR +1.85%    December 1, 2006      8,775  

Camperdown House Mortgage

   6.845%    October 31, 2009      23,079  (8)

Carrier Center Mortgage (2)

   LIBOR +4.00% (4)    October 4, 2007      14,264  

Carrier Center Mezzanine (2)

   LIBOR +5.25% (5)    July 1, 2005      11,792  

Granite Tower Mortgage

   LIBOR +1.20%    January 1, 2009      21,645  

Maxtor Manufacturing Facility Mortgage

   LIBOR +2.25%    December 31, 2006 (7)      18,000  

Stanford Place II Mortgage

   5.14%    January 10, 2009      26,000  

Univision Tower Mortgage (1)(3)

   7.52%.    January 1, 2005      39,148  

Univision Tower Mezzanine (1)(3)

   8.00%    January 1, 2007      17,500  
              


Total principal outstanding

               297,013  

Loan premium

               483  
              


Total mortgage and other secured loans

             $ 297,496  
              



(1) These loans were repaid upon completion of the IPO.
(2) The Carrier Center loans were refinanced shortly after the completion of the IPO into a single mortgage loan bearing interest at LIBOR + 4.25%.
(3) The Univision loans were refinanced shortly after the completion of the IPO into a single mortgage loan of $58 million bearing interest at 6.04% and maturing on November 6, 2009.
(4) Subject to a 2.5% LIBOR floor.
(5) Subject to a 2.0% LIBOR floor.
(6) A 13 month extension and a one-year extension are available.
(7) Two one-year extensions are available.
(8) Based on our hedged exchange rate of $1.6083 to £1.00.

 

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Upon the completion of the IPO, the Company obtained new mortgage debt totaling $155.0 million with an interest rate of 5.65% and a maturity date of November 3, 2014 and assumed debt related to properties acquired from third parties upon completion of the IPO. The amount of this assumed debt that was not repaid upon completion of the IPO was $209.0 million.

 

(d) Unsecured Note Payable to Affiliate

 

As of September 30, 2004, the Company had borrowed $4.1 million from GI Partners to prepay offering costs. Such loan was non-interest bearing, unsecured and was repaid upon completion of the IPO.

 

(4) Investments in Real Estate Acquired During the Three Months Ended September 30, 2004

 

The Company Predecessor acquired Webb at LBJ for $46.1 million on August 25, 2004 and AboveNet Data Center for $36.8 million on September 17, 2004.

 

(5) Commitments and Contingencies

 

As of September 30, 2004, the Company had entered into agreements to acquire a 75% interest in eBay Data Center for $4.5 million in cash and 200 Paul Avenue and 1100 Space Park Drive in exchange for an aggregate of 5.9 million Operating Partnership units, assumption of debt and cash for a total purchase price of $149.1 million. Additionally, the Company had a commitment to acquire the 10% Univision Tower joint venture interest owned by a third party and an option to acquire the Carrier Center property from GI Partners. The Company exercised the option simultaneously with the IPO and acquired the property for $90.1 million. GI Partners received 2,868,846 units and the Company assumed $56 million of debt, of which $30.1 million was repaid upon completion of the IPO. The third party received 395,665 units as of the IPO in connection with the acquisition. The eBay purchase was consummated on October 14, 2004 and the remaining purchases were consummated upon completion of the IPO.

 

As of September 30, 2004, the Company was committed to award 1,490,560 fully vested special long-term incentive units and an aggregate of 783,902 stock options to certain individuals who became employees of the Operating Partnership upon completion of the IPO and to the executive chairman of the Company.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

 

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following: adverse economic or real estate developments in our markets or the technology industry; general and local economic conditions; defaults on or non-renewal of leases by tenants; increased interest rates and operating costs; failure to obtain necessary outside financing; decreased rental rates or increased vacancy rates; difficulties in identifying properties to acquire and completing acquisitions; failure to successfully operate acquired properties and operations; failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended; possible adverse changes in tax laws; environmental uncertainties; risks related to natural disasters; financial market fluctuations; changes in foreign currency exchange rates; and changes in real estate and zoning laws and increases in real property tax rates.

 

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance including factors and risks included in other sections of this report. In addition, we discussed a number of material risks in our prospectus dated October 28, 2004. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

 

Overview

 

Our company . We completed our initial public offering (IPO) of common stock on November 3, 2004. We own, acquire, reposition and manage technology-related real estate. We expect to qualify as a REIT for federal income tax purposes beginning with our initial taxable year ending December 31, 2004. Our company was formed on March 9, 2004. Through September 30, 2004, we have not had any corporate activity other than the issuance of shares of common stock in connection with the initial

 

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capitalization of our company. Because we believe that a discussion of the results of Digital Realty Trust, Inc. as of and for the quarter ended September 30, 2004 would not be meaningful, we have set forth below a discussion of the historical operations of our predecessor and as such, any reference to “our,” “we” and “us” includes the Digital Realty Trust, Inc. Predecessor, or Company Predecessor. The Company Predecessor is comprised of the real estate activities and holdings of Global Innovation Partners, LLC, or GI Partners, related to the properties in our portfolio.

 

Business and strategy . Our primary business objectives are to maximize sustainable long-term growth in earnings, funds from operations and cash flow per share and maximize returns to our stockholders. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of technology industry tenants. Most of our properties contain fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised floor areas to accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling and high-level security systems.

 

We expect to acquire additional assets as a key part of our growth strategy. We may acquire properties subject to existing mortgage financing and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments. Debt service on such indebtedness will have a priority over any dividends with respect to our common stock.

 

Revenue base . As of September 30, 2004, we owned nineteen properties located throughout the U.S. and one property located in London, England, containing a total of approximately 4.8 million net rentable square feet. We acquired our first portfolio property in January 2002, an additional four properties through December 31, 2002, eight properties during the year ended December 31, 2003 and seven properties during the nine months ended September 30, 2004.

 

Operating expenses. Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground lease. For the Company Predecessor, a significant portion of the general and administrative type expenses have been reflected in the asset management fees that were paid to GI Partners’ related-party asset manager. The asset management fees were based on a fixed percentage of capital commitments made by the investors in GI Partners, a portion of which have been allocated to the Company Predecessor. In the months following the period covered by this report, our asset management function will be internalized and we will incur the majority of our general and administrative expenses directly. We have entered into a transition services agreement with CB Richard Ellis Investors with respect to transitional accounting and other services. In addition, as a public company, we will incur significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of the Sarbanes-Oxley Act of 2002.

 

Factors Which May Influence Future Results of Operations

 

Rental income. The amount of net rental income generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from lease terminations. The amount of rental income generated by us also depends on our ability to maintain or increase rental rates at our properties. In addition, one of our strategies is to convert approximately 181,000 net rentable square feet of data center space with extensive installed tenant improvements that is, or shortly will be, available for lease to multi-tenant collocation use in order to allow us to lease small spaces at rates that are significantly higher than prevailing market rates for other uses. Negative trends in one or more of these factors could adversely affect our rental income in future periods. Future economic downturns or regional downturns affecting our submarkets or downturns in the technology industry that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental income will also partially depend on our ability to acquire additional technology-related real estate that meets our

 

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investment criteria. One of our tenants, VarTec Teleom, Inc. filed for Chapter 11 bankruptcy protection on November 1, 2004. VarTec occupies 135,000 rentable square feet at our Carrollton, Texas property and 8,632 rentable square feet at our Univision Tower property in Dallas, Texas. We are closely monitoring their status and we believe our properties provide a favorable opportunity for consolidation of their operations. They are current in their rental obligations.

 

Scheduled lease expirations. Our ability to re-lease expiring space will impact our results of operations.

 

Conditions in significant markets. Our portfolio is geographically concentrated in the Boston, Dallas, Los Angeles, New York, San Francisco and Silicon Valley metropolitan markets. Positive or negative changes in conditions in our significant markets will impact our overall performance. The Boston, Dallas, San Francisco and Silicon Valley metropolitan real estate markets were adversely affected by the recent downturn in the technology industry and continue to stabilize as the technology industry and broader economy rebound.

 

Operating expenses. Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground lease. We also will incur general and administrative expenses, including expenses relating to the internalization of our asset management function, as well as significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of the Sarbanes-Oxley Act. Increases or decreases in such operating expenses will impact our overall performance. As a public company, we will experience an increase in operating expenses as we internalize our asset management and financial reporting function and begin to incur the majority of our expenses directly.

 

Critical Accounting Policies

 

Our discussion and analysis of financial condition and results of operations are based upon our combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses in the reporting period. Our actual results may differ from these estimates. We have provided a summary of our significant accounting policies in Note 2 to our combined financial statements included in our prospectus dated October 28, 2004. We describe below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and results of operations. Our management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions management believes are reasonable as of the date of this report.

 

Investments in Real Estate

 

Acquisition of real estate. The price that we pay to acquire a property is impacted by many factors including the condition of the buildings and improvements, the occupancy of the building, the existence of above and below market tenant leases, the creditworthiness of the tenants, favorable or unfavorable financing, above or below market ground leases and numerous other factors. Accordingly, we are required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the assets acquired and liabilities assumed based on our estimate of the fair values of such assets and liabilities. This includes determining the value of the buildings and improvements, land, any ground leases, tenant improvements, in-place tenant leases, tenant relationships, the value (or negative value) of above (or below) market leases and any debt assumed from the seller or loans made by the seller to us. Each of these estimates requires a great deal of judgment and some of the estimates involve complex calculations. Our calculation methodology is summarized in Note 2 to our combined financial

 

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statements included in our prospectus dated October 28, 2004. These allocation assessments have a direct impact on our results of operations. For example, if we were to allocate more value to the land, there would be no depreciation with respect to such amount. If we were to allocate more value to the buildings as opposed to allocating to the value of tenant leases, this amount would be recognized as an expense over a much longer period of time. This potential effect occurs because the amounts allocated to buildings are depreciated over the estimated lives of the buildings whereas amounts allocated to tenant leases are amortized over the terms of the leases. Additionally, the amortization of value (or negative value) assigned to above or below market rate leases is recorded as an adjustment to rental revenue as compared to amortization of the value of in-place leases and tenant relationships, which is included in depreciation and amortization in our combined statements of operations.

 

Useful lives of assets. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate we would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

 

Asset impairment valuation. We review the carrying value of our properties when circumstances, such as adverse market conditions, indicate potential impairment may exist. We base our review on an estimate of the future cash flows (excluding interest charges) expected to result from the real estate investment’s use and eventual disposition. We consider factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If our evaluation indicates that we may be unable to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. These losses have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether an asset has been impaired, our strategy of holding properties over the long-term directly decreases the likelihood of recording an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that impairment has occurred, the affected assets must be reduced to their fair value. No such impairment losses have been recognized to date.

 

We estimate the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs, similar to the income approach that is commonly utilized by appraisers.

 

Revenue Recognition

 

Rental income is recognized using the straight-line method over the terms of the tenant leases. Deferred rents included in our combined balance sheets represent the aggregate excess of rental revenue recognized on a straight-line basis over the rental revenue that would be recognized under the terms of the leases. Our leases generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. Such reimbursements are recognized in the period that the expenses are incurred. Lease termination fees are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants. As discussed above, we recognize amortization of the value of acquired above or below market tenant leases as a reduction of rental income in the case of above market leases or an increase to rental revenue in the case of below market leases.

 

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We must make subjective estimates as to when our revenue is earned and the collectibility of our accounts receivable related to minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. We specifically analyze accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness, and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period.

 

Results of Operations

 

As of September 30, 2004, our portfolio was comprised of twenty properties with an aggregate of approximately 4.8 million net rentable square feet compared to a portfolio comprised of thirteen properties with an aggregate of approximately 2.4 million net rentable square feet as of September 30, 2003. The increase in our portfolio reflects the acquisition of seven properties with an aggregate of approximately 2.4 million net rentable square feet.

 

Comparison of Three Months ended September 30, 2004 to Three Months ended September 30, 2003

 

Total revenues increased $15.3 million, or 109%, to $29.3 million for the three months ended September 30, 2004 compared to $14.0 million for the three months ended September 30, 2003. Rental revenue increased $12.7 million, or 106%, to $24.7 million for the three months ended September 30, 2004 compared to $12.0 million for the three months ended September 30, 2003. Revenues from tenant reimbursements increased $2.8 million, or 147%, to $4.7 million for the three months ended September 30, 2004 compared to $1.9 million for the three months ended September 30, 2003. The increase in rental and tenant reimbursement revenues was primarily due to the properties added to our portfolio.

 

Total expenses increased $15.7 million, or 152%, to $26.0 million for the three months ended September 30, 2004 compared to $10.3 million for the three months ended September 30, 2003. The increase in total expenses was primarily due to the properties added to our portfolio since September 30, 2003. The increase in total expenses includes an increase in interest expense of $5.2 million to $7.9 million for the three months ended September 30, 2004 compared to $2.7 million for the three months ended September 30, 2003 associated with new mortgage and other secured debt incurred primarily in connection with the properties added to our portfolio. Interest for the three months ended September 30, 2004 includes $2.2 million of amortization of deferred financing costs related to notes payable under our bridge loan obtained in 2004.

 

Comparison of Nine Months ended September 30, 2004 to Nine Months ended September 30, 2003

 

Total revenues increased $26.1 million, or 58%, to $70.9 million for the nine months ended September 30, 2004 compared to $44.8 million for the nine months ended September 30, 2003. Rental revenue increased $24.8 million, or 72%, to $59.1 million for the nine months ended September 30, 2004 compared to $34.3 million for the nine months ended September 30, 2003. Revenues from tenant reimbursements increased $3.9 million, or 63%, to $10.1 million for the nine months ended September 30, 2004 compared to $6.2 million for the nine months ended September 30, 2003. The increase in rental and tenant reimbursement revenues was primarily due to the properties added to our portfolio. The decrease in other revenue of $2.6 million, or 60%, to $1.7 million for the nine months ended September 30, 2004 compared to $4.3 million for the nine months ended September 30, 2003 was primarily due to a decrease in early lease termination fees.

 

Total expenses increased $29.1 million, or 91%, to $61.0 million for the nine months ended September 30, 2004 compared to $31.9 million for the nine months ended September 30, 2003. The increase in total expenses was primarily due to the properties added to our portfolio. The increase in total expenses includes an increase in interest expense of $9.0 million to $15.8 million for the nine months ended September 30, 2004 compared to $6.8 million for the nine months ended September 30, 2003

 

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associated with new mortgage and other secured debt incurred primarily in connection with the properties added to our portfolio. Interest expense for the nine months ended September 30, 2004 includes $2.3 million of amortization of deferred financing costs related to notes payable under our bridge loan. Other expenses are primarily comprised of write-offs of the carrying amounts for deferred tenant improvements, acquired in place lease value and acquired above and below market lease values as a result of the early termination of tenant leases. The total amount of such write-offs for the nine months ended September 30, 2004 is comparable to the total for the nine months ended September 30, 2003 despite the decrease in lease termination revenue. During the nine months ended September 30, 2004 and 2003, the asset management fee to a related party remained constant as this fee was based on a fixed percentage of capital commitments by the investors in GI Partners, a portion of which have been allocated to the Company Predecessor.

 

Liquidity and Capital Resources

 

As of September 30, 2004, we had $2.6 million of cash and equivalents, excluding $10.2 million of restricted cash. Restricted cash primarily consists of interest bearing cash deposits required by the terms of our bridge and mortgage loans and cash impound accounts for real estate taxes, insurance and anticipated or contractually obligated tenant improvements as required by several of our mortgage loans.

 

Our short term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, dividend payments to our stockholders required to maintain our REIT status, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, restricted cash accounts established for certain future payments, the proceeds of our initial public offering and, if necessary, by drawing upon our unsecured credit facility.

 

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. As of September 30, 2004, we had commitments under leases in effect for $1.36 million of tenant improvement costs and leasing commissions, including $850,000 during the remainder of 2004, $257,000 in 2005 and $250,000 in 2006. We also expect to incur costs related to recurring capital improvements for our properties. Our nonrecurring capital expenditures are discretionary and vary substantially from period to period. We currently own approximately 181,000 net rentable square feet of data center space (22,747 of which relates to 200 Paul Avenue, acquired on November 4, 2004) with extensive installed tenant improvements that we may convert to multi-tenant collocation use during the next two years rather than lease such space to large single tenants. We estimate that the cost to convert this space will be approximately $10 per square foot, on average. We may also spend additional amounts in the next two years related to the build-out of unimproved space for collocation use, depending on tenant demand; however, we currently have no commitments to do so. The cost to build out such unimproved space will vary based on the size and condition of the space.

 

In connection with the consummation of our initial public offering on November 3, 2004, our Operating Partnership entered into a new $200 million unsecured revolving credit facility with a group of banks led by affiliates of Citigroup Global Markets, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Borrowings under the facility bear interest at a rate based on LIBOR plus a premium ranging from 1.375% to 1.750%, depending on our Operating Partnership’s overall leverage. The facility matures in November 2007, subject to a one-year extension option. We intend to use available borrowings under the unsecured credit facility to, among other things, finance the acquisition of other properties (including the right of first offer properties), to provide funds for tenant improvements and capital expenditures, and to provide for working capital and other corporate purposes.

 

We expect to meet our long-term liquidity requirements to pay for scheduled debt maturities and to fund property acquisitions and non-recurring capital improvements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and non-recurring capital improvements using our unsecured credit facility pending permanent financing.

 

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We intend to declare and pay a pro rata dividend for the period from November 3, 2004 through December 31, 2004.

 

Indebtedness

 

The table below summarizes our secured debt as of September 30, 2004 (in thousands). We also had an unsecured, non-interest bearing loan payable to GI Partners with and outstanding balance of $4.1 million as of September 30, 2004.

 

Debt Summary:

        

Fixed rate

   $ 106,210  

Variable rate

     441,089  
    


Total

   $ 547,299  
    


Percent of Total Debt:

        

Fixed rate

     19.4 %

Variable rate

     80.6 %
    


Total

     100.0 %
    


Effective Interest Rate at End of Quarter

        

Fixed rate

     6.9 %

Variable rate

     4.2 %
    


Effective interest rate

     4.8 %
    


 

Off-Balance Sheet Arrangements

 

Our off-balance sheet arrangements consist of interest rate cap agreements in connection with certain of our indebtedness and a currency fluctuation hedge arrangement in connection with our ownership of the Camperdown House property in London, England. As of September 30, 2004, we have no other off-balance sheet arrangements.

 

Effective November 26, 2004 the Company entered into five interest rate swap agreements to fix the floating interest rate associated with a portion of the Company’s debt. The notional amount of the total debt swapped is $140.3 million at a strike rate ranging from 3.1% to 3.8% (with a weighted average effective rate of 5.5%) on debt with maturities ranging from July 2006 to April 2009.

 

Cash Flows

 

Comparison of Nine Months Ended September 30, 2004 to Nine Months Ended September 30, 2003

 

Cash and cash equivalents were $2.6 million and $1.9 million at September 30, 2004 and 2003, respectively.

 

Net cash provided by operating activities increased $10.7 million to $31.6 million for the nine months ended September 30, 2004 compared to $20.9 million for the nine months ended September 30, 2003. The increase was primarily due to the properties added to our portfolio which was partially offset by the increased interest expense incurred on the mortgage and other secured debt related to the acquired properties.

 

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Net cash used in investing activities increased $142.6 million to $321.7 million for the nine months ended September 30, 2004 compared to $179.1 million for the nine months ended September 30, 2003. The increase was primarily the result of the acquisition of seven properties during the nine months ended September 30, 2004, which required a larger investment than the acquisitions of seven properties during the nine months ended September 30, 2003 and an increase in restricted cash as a result of the bridge loan obtained during 2004.

 

Net cash provided by financing activities increased $131.0 million to $287.6 million for the nine months ended September 30, 2004 compared to $156.6 million for the nine months ended September 30, 2003. The increase was primarily due to increased capital contributions, net of distributions, and borrowings made in connection with the acquisition of properties during the nine months ended September 30, 2004 than the capital contributions and debt required for the acquisitions of properties during nine months ended September 30, 2003.

 

Inflation

 

Substantially all of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

 

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors.

 

As of September 30, 2004, our total outstanding secured debt was approximately $547.3 million, which was comprised of $246.2 million of mortgage loans, $243.7 million of notes payable under a bridge loan, $51.3 million of other secured loans and an allocation to it of $6.1 million of amounts outstanding under the GI Partners line of credit. We also had an unsecured, non-interest bearing loan payable to GI Partners related to funds advanced to us to prepay offering costs. This loan had an outstanding balance of $4.1 million as of September 30, 2004. Approximately $441.1 million, or 80.6%, of our total outstanding secured debt was variable rate debt. As of September 30, 2004, the fair value of our outstanding fixed-rate debt approximated $108.0 million compared to the carrying value of $106.2 million.

 

If LIBOR were to increase by 10%, or approximately 24.4 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by approximately $467,600 annually. If LIBOR were to increase by 10%, the fair value of our $108.0 million principal amount of outstanding fixed rate debt would decrease by approximately $870,000. If LIBOR were to decrease by 10%, or approximately 24.4 basis points, the decrease in interest expense on the variable rate debt would be approximately $467,600 annually. If LIBOR were to decrease by 10%, the fair value of our $108.0 million principal amount of outstanding fixed rate debt would increase by approximately $884,000 million.

 

Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic

 

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activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

 

We are also party to a foreign currency hedging contract with a notional value of £7,850,000, which was used to convert the balance of our investment in the Camperdown House property into U.S. dollars. The fair value of this forward contract was $(1,861,403) as of September 30, 2004, using the currency exchange rate in effect as of that date. If the exchange rate of United States Dollars to Great Britain Pounds were to increase by 10%, the fair value of our forward contract would decrease by $1,400,535 to $(3,261,938). If the exchange rate of United States Dollars to Great Britain Pounds were to decrease by 10%, the fair value of our forward contract would increase by $1,400,535 to $(460,869).

 

Interest rate swap agreements were entered into effective November 26, 2004 in the notional amounts of $140.3 million as a hedge against upward interest rate fluctuations.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by SEC Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

 

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

(a) As part of our formation transactions:

 

  on July 31, 2004, our Operating Partnership entered into a contribution agreement with Global Innovation Partners, LLC to acquire its interests in the properties comprising a substantial portion of our portfolio in exchange for 31,930,695 limited partnership units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units were issued on October 27, 2004 in connection with the completion of our initial public offering.

 

  on July 31, 2004, our Operating Partnership entered into a contribution agreement with Pacific-Bryan Partners, L.P., an unrelated party, to acquire the 10% minority interest in the Univision Tower property not held by Global Innovation Partners, LLC in exchange for 395,665 units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units were issued on November 3, 2004 in connection with the completion of our initial public offering.

 

  on July 31, 2004, our Operating Partnership entered into a contribution agreement with San Francisco Wave eXchange, LLC, Santa Clara Wave eXchange, LLC and eXchange colocation, LLC, unrelated parties, to acquire 200 Paul Avenue, 1100 Space Park Drive, the eXchange colocation business and other specified assets and liabilities in exchange for $15.0 million in cash and 5,935,846 units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units were issued on November 3, 2004 in connection with the completion of our initial public offering.

 

  on July 31, 2004, our Operating Partnership entered into an option agreement with Global Innovation Partners to acquire its direct or indirect interest in the Carrier Center property in exchange for 2,868,846 units, subject to adjustment in certain circumstances based upon a formula set forth in the option agreement. The units were issued upon our exercise of the option on November 3, 2004 in connection with the completion of our initial public offering.

 

All of such persons and entities were irrevocably committed to the contribution of such interests and assets prior to the filing of our registration statement on Form S-11 (No. 333-117865) in connection with our initial public offering. In addition, such persons or entities are “accredited investors” as defined under Regulation D of the Securities Act. The issuance of such units was effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act.

 

(b) On November 3, 2004, we consummated the initial public offering of our common stock, $0.01 par value per share. The joint book-running managers for the offering were Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The shares of common stock sold in the offering were registered under the Securities Act of 1933, as amended, on a Registration Statement (Registration No. 333-117865) on Form S-11 that was declared effective by the Securities and Exchange Commission on October 28, 2004. 20,000,000 shares of common stock registered under the Registration Statement were sold at a price to the public of $12.00 per share, generating gross proceeds of $240.0 million. The net proceeds to us were approximately $214.2 million after deducting an aggregate of $16.8 million in underwriting discounts and commissions and financial advisory fees paid to the underwriters and $9.0 million in other estimated expenses incurred in connection with the offering. All of the shares of common stock were sold by us and there were no selling stockholders in the offering. On November 30, 2004, we sold an additional 1,421,300 shares of common stock pursuant to the exercise by the underwriters of their over-allotment option, for net proceeds of $15.9 million. The offering did not terminate until November 30, 2004, following the underwriters’ exercise of their over-allotment option.

 

In addition, concurrently with the completion of our initial public offering, our Operating Partnership or the property-owning entities used the fee simple interests in seven properties to secure approximately $215.0 million of new mortgage loans.

 

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We used the net proceeds from the offering; the new mortgage loans and $31.4 million in borrowings under our unsecured credit facility to:

 

  purchase 6,810,036 Operating Partnership units issued in connection with the formation transactions, and an additional 1,421,300 units in connection with the underwriters’ exercise of their over-allotment option, from the investors in GI Partners at a price per unit equal to the per share public offering price of our common stock in the offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters, or $76.0 million and $15.9 million in the aggregate, respectively;

 

  pay the $15 million cash portion of the consideration to acquire the 200 Paul Avenue and 1100 Space Park Drive properties;

 

  acquire the 75% interest in the eBay Data Center property for $2.3 million;

 

  repay approximately $243.7 million under a bridge loan facility with an affiliate of Citigroup Global Markets Inc.; and

 

  repay an aggregate of approximately $110.3 million of mortgage loans, other secured loans and notes payable under GI Partners’ line of credit, including prepayment penalties.

 

(c) None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

None.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

1.1   Underwriting Agreement among Digital Realty Trust, Inc. and the underwriters named therein.
3.1   Articles of Amendment and Restatement of Digital Realty Trust, Inc.
3.2   Amended and Restated Bylaws of Digital Realty Trust, Inc.
4.1   Certificate for Common Stock for Digital Realty Trust, Inc.
10.1   Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.
10.2   Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein.
10.3   2004 Incentive Award Plan of Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P.

 

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10.10   Non-competition Agreement between Digital Realty Trust, Inc. and Global Innovation Partners, LLC.
10.23   Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein (option and right of first offer agreements).
10.37   Revolving Credit Agreement among Digital Realty Trust, L.P., as borrower, Digital Realty Trust, Inc., as parent guarantor, the subsidiary guarantors named therein, Citicorp North America, Inc., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint book running managers, and the other agents and lenders named therein.
10.38   Loan Agreement, dated as of November 3, 2004, by and among Global Webb, L.P. and Citigroup Global Markets Realty Corp.
10.39   Note, dated as of November 3, 2004, by Global Webb, L.P. in favor of Citigroup Global Markets Realty Corp.
10.40   Loan Agreement, dated as of November 3, 2004, by and among Global Weehawken Acquisition Company, LLC and Citigroup Global Markets Realty Corp.
10.41   Note, dated as of November 3, 2004, by Global Weehawken Acquisition Company, LLC in favor of Citigroup Global Markets Realty Corp.
10.42   Loan Agreement, dated as of November 3, 2004, by and among GIP Wakefield, LLC and Citigroup Global Markets Realty Corp.
10.43   Note, dated as of November 3, 2004, by GIP Wakefield, LLC in favor of Citigroup Global Markets Realty Corp.
10.44   Form of Profits Interest Units Agreements.
10.45   Form of Digital Realty Trust, Inc. Incentive Stock Option Agreement.
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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Table of Contents

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: December 13, 2004

 

DIGITAL REALTY TRUST, INC.

By:

 

/s/    M ICHAEL F. F OUST


   

Michael F. Foust

   

Chief Executive Officer

By:

 

/s/    A. W ILLIAM S TEIN


   

A. William Stein

   

Chief Financial Officer and

   

Chief Investment Officer

Exhibit 1.1

 

D IGITAL R EALTY T RUST , I NC .

 

20,000,000 Shares a /

Common Stock

($0.01 par value)

 

Underwriting Agreement

 

New York, New York

October 28, 2004

 

Citigroup Global Markets Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

As Representatives of the several Underwriters,

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

 

Ladies and Gentlemen:

 

Digital Realty Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Company”), proposes to sell to the several underwriters named in Schedule I hereto (the “Underwriters”), for whom you (the “Representatives”) are acting as representatives, 20,000,000 shares of Common Stock, $0.01 par value (“Common Stock”) of the Company (said shares to be issued and sold by the Company being hereinafter called the “Underwritten Securities”). The Company also proposes to grant to the Underwriters an option to purchase up to 3,000,000 additional shares of Common Stock to cover over-allotments (the “Option Securities”; the Option Securities, together with the Underwritten Securities, being hereinafter called the “Securities”). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Certain terms used herein are defined in Section 17 hereof.

 

The Company is the sole general partner of Digital Realty Trust, L.P., a Maryland limited partnership (the “Operating Partnership”), the Company’s operating partnership subsidiary. On or prior to the Closing Date (as hereafter defined), the Company will complete a series of transactions (the “Formation Transactions”) described in the Prospectus under the captions

 


a / Plus an option to purchase from the Company, up to 3,000,000 additional Securities to cover over–allotments.


“Structure and Formation of Our Company” and “Certain Relationships and Related Transactions” pursuant to which certain persons will contribute their direct and indirect interests in certain properties, and interests in entities holding such properties (the “Property Partnerships”), to the Operating Partnership.

 

As part of the offering contemplated by this Agreement, Citigroup Global Markets Inc. has agreed to reserve out of the Securities set forth opposite its name on Schedule I to this Agreement, up to 93,805 shares (the “Directed Share Program”), for sale to the Company’s employees, officers, and directors and other parties associated with the Company or its subsidiaries (collectively, “Participants”). The Securities to be sold by Citigroup Global Markets Inc. pursuant to the Directed Share Program (the “Directed Shares”) will be sold by Citigroup Global Markets Inc. pursuant to this Agreement at the public offering price. Any Directed Shares not orally confirmed for purchase by any Participants by 8:00 A.M. New York City time on the business day following the date on which this Agreement is executed will be offered to the public by Citigroup Global Markets Inc. as set forth in the Prospectus.

 

1. Representations and Warranties . Each of the Company and the Operating Partnership, jointly and severally, represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1.

 

(a) The Company has prepared and filed with the Commission a registration statement (file number 333-117865) on Form S-11, including a related preliminary prospectus, for registration under the Act of the offering and sale of the Securities. The Company may have filed one or more amendments thereto, including a related preliminary prospectus, each of which has previously been furnished to you. The Company will next file with the Commission one of the following: either (1) prior to the Effective Date of such registration statement, a further amendment to such registration statement (including the form of final prospectus) or (2) after the Effective Date of such registration statement, a final prospectus in accordance with Rules 430A and 424(b). In the case of clause (2), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in such registration statement and the Prospectus. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, and, except for such modifications to which the Representatives do not reasonably object, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other substantive changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein.

 

(b) On the Effective Date, the Registration Statement did or will, and when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a “settlement date”), the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the rules thereunder; on the Effective Date and at the

 

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Execution Time, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement, or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto). No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceeding for that purpose has been instituted or threatened by the Commission or by the state securities authority of any jurisdiction. No order preventing or suspending the use of the Prospectus has been issued and no proceeding for that purpose has been instituted by the Commission or by the state securities authority of any jurisdiction.

 

(c) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of State of Maryland with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and to enter into and perform its obligations under this Agreement and the Formation Transaction Documents (as hereafter defined) to which it is a party and as general partner of the Operating Partnership to cause the Operating Partnership to enter into and perform the Operating Partnership’s obligations under this Agreement and the Formation Transaction Documents to which the Operating Partnership is a party and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(ii) The Operating Partnership has been duly formed and is validly existing as a limited partnership in good standing under the laws of the State of Maryland with full power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement and the Formation Transaction Documents to which it is a party, and is duly qualified to do business and is in good standing as a foreign limited partnership under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. At the Closing Date, the aggregate percentage interests of the Company and the limited partners

 

3


in the Operating Partnership will be as set forth in the Prospectus; provided, that to the extent any portion of the over-allotment option described in Section 2(b) hereof is exercised at the Closing Date, the percentage interest of the Company and of such limited partners in the Operating Partnership will be adjusted accordingly.

 

(iii) Each subsidiary (as defined below) of the Company has been duly formed and is validly existing as a corporation, limited liability company or limited partnership, as the case may be, in good standing under the laws of the jurisdiction in which it is chartered or organized with full power and authority (corporate and other) to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation, limited liability company or limited partnership, as the case may be, and is in good standing under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(d) All the outstanding shares of capital stock or other ownership interests of each subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, as of the Closing Date, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock or other ownership interests of the subsidiaries will be owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, mortgages, pledges, liens, encumbrances or other restrictions of any kind (collectively, “Liens”), except for Liens securing indebtedness as described in the Prospectus and except where such Liens would not individually or in the aggregate materially affect or interfere in any material respect with the Company’s ability to exercise control over each of such subsidiaries. Except as set forth in the Prospectus, there are no outstanding options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities or interests for capital stock or other ownership interests of any subsidiary.

 

(e) The Company’s authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Prospectus; the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Securities have been duly and validly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be fully paid and nonassessable; the Securities are duly listed, and admitted and authorized for trading, subject to official notice of issuance and evidence of satisfactory distribution, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities; and, except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; all

 

4


offers and sales of the Company’s shares of Common Stock prior to the date hereof were at all relevant times duly registered under the Act or were exempt from the registration requirements of the Act and were duly registered or the subject of an available exemption from the registration requirements of the applicable state securities or blue sky laws.

 

(f) The units of limited partnership (“Units”) of the Operating Partnership issued or to be issued in connection with the Formation Transactions, including without limitation, the Units to be issued to the Company, have been duly authorized for issuance by the Operating Partnership to the holders or prospective holders thereof, and at the Closing Date will be validly issued and fully paid. The Units will be exempt from registration or qualification under the Act and applicable state securities laws. None of the Units will be issued in violation of the preemptive or other similar rights of any security holder of the Operating Partnership or any other person or entity. Except as set forth in the Prospectus, there are no outstanding options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities or interests for, Units or other ownership interests of the Operating Partnership.

 

(g) There is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements in the Prospectus under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering,” “Description of the Partnership Agreement of Digital Realty Trust, L.P.,” “Description of Securities,” “Material Provisions of Maryland Law and of Our Charter and Bylaws” and “Federal Income Tax Considerations,” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings.

 

(h) This Agreement and each of (i) the GI Partners contribution agreement, (ii) the eBay Data Center purchase agreement, (iii) the 200 Paul Avenue and 1100 Space Park Drive contribution agreement, (iv) the Univision Tower contribution agreement, (v) the amended and restated agreement of limited partnership of the Operating Partnership, (vi) the Carrier Center option agreement and (vii) the transition services agreement, in each case as identified in the Prospectus under the captions “Certain Relationships and Related Transactions” and/or “Structure and Formation of Our Company” (collectively, the “Formation Transaction Documents”) has been duly authorized, executed and delivered by the Company and the Operating Partnership to which it is a party; each Formation Transaction Document to which it is a party constitutes a legally valid and binding obligation of each of the Company and the Operating Partnership, enforceable against each of the Company and the Operating Partnership in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or affecting creditors’ rights and general principles of equity and except as rights to indemnity and contribution thereunder may be limited by applicable law or policies underlying such law.

 

5


(i) Each of the Company and the Operating Partnership is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be an “investment company” as defined in the Investment Company Act of 1940, as amended.

 

(j) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or by the Formation Transaction Documents, except such as have been obtained under the Act, such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus or such consents, approvals, authorizations, filings or orders that will be obtained or completed by the Closing Date or the absence of which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(k) Neither the issue and sale of the Securities nor the consummation of any other of the transactions herein contemplated or by the Formation Transaction Documents nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or the organizational or other governing documents of any of its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties, except, in the case of clauses (ii) or (iii) above, for such conflicts, breaches, violations, liens, charges or encumbrances that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(l) No holders of securities of the Company have rights to the registration of such securities under the Registration Statement. Except as set forth in the Prospectus, there are no contracts, agreements or understandings between the Company or the Operating Partnership and any person granting such person the right to require the Company or the Operating Partnership to file a registration statement under the Act with respect to any securities of the Company or the Operating Partnership owned or to be owned by such person or to require the Company or the Operating Partnership to include such securities in any securities being registered pursuant to any other registration statement filed by the Company or the Operating Partnership under the Act.

 

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(m) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form in all material respects with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The selected financial data set forth under the caption “Selected Financial Data” in the Prospectus and Registration Statement fairly present in all material respects, on the basis stated in the Prospectus and the Registration Statement, the information included therein. The pro forma financial statements included in the Prospectus and the Registration Statement include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial statements included in the Prospectus and the Registration Statement. The pro forma financial statements included in the Prospectus and the Registration Statement comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements.

 

(n) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement or the Formation Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby or (ii) could reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(o) (i) Upon consummation of the Formation Transactions, except with respect to the Carrier Center property, which the Operating Partnership has an option to acquire and which option is expected to be exercised simultaneously with, or shortly after, the Closing Date, the Company or its subsidiaries will have fee simple title (or in the case of the ASM Lithography property, a leasehold interest, and in the case of the eBay Data Center property, a 75% tenancy in common interest) to all of the properties described in the Prospectus as owned or leased by them and the improvements (exclusive of improvements owned by tenants) located thereon (the “Properties”), in each case, free and clear of all liens, encumbrances, claims, security interests, restrictions and defects, except such as are set forth in the title reports and commitments listed on Schedule 1(o) hereto, are disclosed in the Prospectus or do not affect the value of such Property and do not interfere with the use made and proposed to be made of such Property by the Company and any subsidiary; (ii) except as otherwise set forth in or contemplated in the

 

7


Prospectus, the mortgages and deeds of trust encumbering the Properties described in the Prospectus are not convertible into debt or equity securities of the Company or the Operating Partnership and such mortgages and deeds of trust are not cross-defaulted or cross-collateralized to any property not owned directly or indirectly by the Company or its subsidiaries; (iii) neither the Company nor any of its subsidiaries has received from any governmental authority any written notice of any condemnation of or zoning change affecting the Properties or any part thereof, and none of the Company or any subsidiary knows of any such condemnation or zoning change which is threatened and which if consummated would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; (iv) each of the Properties complies with all applicable codes, laws and regulations (including without limitation, building and zoning codes, laws and regulations and laws relating to access to the Properties), except if and to the extent disclosed in the Prospectus and except for such failures to comply that would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the use made and proposed to be made of such Property by the Company or any subsidiary; (v) the Company or a subsidiary has obtained a title insurance policy on, or a so-called “fairway endorsement” on existing title policies (in states where such endorsement is available) covering, the fee interests (or leasehold interests in the case of the ASM Lithography property) from a title insurance company, or, if such title insurance policy has not yet been issued, a binding commitment by such title insurance company to issue such a policy, in any event covering each Property, with coverage in an amount at least equal to 80% of the cost of acquisition of such Property, including the principal amount of any indebtedness assumed with respect to the Property, provided that for any coverage less than 100% of such Property’s cost (including the principal amount of any indebtedness to be assumed with respect to the Property), such policy includes a so-called “tie-in endorsement” in states where such endorsement is available; (vi) true, correct and complete copies of the leases, exhibits, schedules or other documents that comprise the leases described in the “Business and Properties” section of the Prospectus where the tenant has been specifically identified (the “Major Leases”) have been provided to the Underwriters or their counsel; (vii) except as set forth in the Prospectus, neither the Company nor any subsidiary holds any Property under a ground lease; and (viii) to the knowledge of the Company and the Operating Partnership, except as set forth in or contemplated in the Prospectus, reflected in the pro forma financial statements or as disclosed in any tenant estoppel certificates, and, with respect to (A), (B) and (C) below, except as would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the use made and proposed to be made of such Property by the Company or any subsidiary: (A) no rentals or other amounts due under the Major Leases have been paid more than one (1) month in advance; (B) no tenant has asserted in writing any defense or set-off against the payment of rent in connection with the Major Leases nor has any tenant contested any tax, operating cost or other escalation payment or occupancy charge, or any other amounts payable under its Major Leases; (C) all tenants, licensees, franchisees or other parties under the Major Leases are in possession of their respective premises; (D) none of the

 

8


Major Leases has been assigned, mortgaged, pledged, sublet, hypothecated or otherwise encumbered, except for Liens securing indebtedness described in the Prospectus; (E) neither the Company nor the Operating Partnership has waived in writing any material provision under any Major Lease; (F) there are no uncured events of default, or events that with the giving of notice or passage of time, or both, would constitute an event of default, by any tenant under any of the terms and provisions of the Major Leases; and (G) no tenant under any of the leases at the Properties has a right of first refusal to purchase the premises demised under such lease.

 

(p) The Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) reasonably necessary for the conduct of the Company’s and the Operating Partnership’s business as now conducted or as proposed in the Prospectus to be conducted. Except as set forth in the Prospectus; (i) to the Company’s or the Operating Partnership’s best knowledge, there is no material infringement by third parties of any such Intellectual Property and (ii) there is no pending or, to the Company’s or the Operating Partnership’s best knowledge, threatened action, suit, proceeding or claim by others that the Company or the Operating Partnership infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim.

 

(q) Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter, bylaws or other organizational or governing documents, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except, in the case of clauses (ii) or (iii) above, for such violations or defaults that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(r) KPMG LLP, who have certified the financial statements and supporting schedules included in the Prospectus and delivered their reports with respect to the audited financial statements and schedules included in the Prospectus, are independent public accountants within the meaning of the Act and the applicable published rules and regulations thereunder.

 

(s) The Company and each of its subsidiaries has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not reasonably be expected to

 

9


have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such tax, assessment, fine or penalty that is currently being contested in good faith or as would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(t) No material labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent.

 

(u) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(v) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends or distributions to the Company, from making any other distribution on such subsidiary’s capital stock or equity interests, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except with respect to Global Stanford Place III, LLC or except pursuant to the terms of any indebtedness set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(w) The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except for such licenses,

 

10


certificates, permits and other authorizations the absence of which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(x) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(y) The Company has not taken, directly or indirectly, any action designed to or that would constitute or that would reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

 

(z) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability under any Environmental Laws, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, reasonably be expected to have a material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). Except as set forth in the Prospectus, neither the Company nor any of the subsidiaries has been notified that it has been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. Except as otherwise set forth in the Prospectus, and except as would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the

 

11


use made and proposed to be made of such Property by the Company or any subsidiary, to the knowledge of the Company and the Operating Partnership, there have been no and are no (i) aboveground or underground storage tanks; (ii) polychlorinated biphenyls (“PCBs”) or PCB-containing equipment; (iii) asbestos or asbestos containing materials; (iv) lead based paints; (v) mold or other airborne contaminants; or (vi) dry-cleaning facilities in, on, under, or about any Property owned by the Company, the Operating Partnership or their subsidiaries.

 

(aa) In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(bb) Neither the Company nor any of its subsidiaries maintains or contributes to any “pension plan” (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to Title IV of ERISA or any “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA). Each “pension plan” (within the meaning of Section 3(2) of ERISA) maintained by the Company or any of its subsidiaries which is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service that such plan is so qualified. Neither the Company nor any of its subsidiaries maintains or is required to contribute to a “welfare plan” (as defined in Section 3(1) of ERISA) which provides retiree or other post-employment welfare benefits or insurance coverage (other than “continuation coverage” (as defined in Section 602 of ERISA) or as otherwise required by applicable law). Each “employee benefit plan” (within the meaning of Section 3(3) of ERISA) established or maintained by the Company and/or one or more of its subsidiaries is in compliance with the currently applicable provisions of ERISA except for such failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(cc) There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with any applicable provision of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes Oxley Act”) except for such failures to comply that would not individually or in the aggregate reasonably be expected to have

 

12


a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(dd) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (“FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company, its subsidiaries and, to the knowledge of the Company and the Operating Partnership, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith except for such violations or failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(ee) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened except for such failures to comply, actions, suits or proceedings that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(ff) Except as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly

 

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or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(gg) Except as set forth in the Prospectus, the Company and its subsidiaries have good and marketable title to all personal property owned by them, free and clear of all encumbrances and defects; and all personal property held under lease by the Company or any subsidiary are held by it under valid, subsisting and enforceable leases, in each case, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property by the Company or the subsidiary.

 

(hh) No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, or shareholders of the Company on the other hand, which is required to be described in the Prospectus and which is not so described.

 

(ii) The statistical and market-related data included in the Prospectus and the Registration Statement are based on or derived from sources that the Company believes to be reliable and accurate.

 

(jj) Commencing with its taxable year ending December 31, 2004, the Company will be organized and operated in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”) under the Internal Revenue Code 1986, as amended (the “Code”), and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Code. Each of the Company’s corporate subsidiaries qualifies as a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code and all applicable regulations under the Code.

 

(kk) The Company and Operating Partnership and each of their subsidiaries (including any predecessor entities) have not distributed, and prior to the later of the Closing Date and the completion of the distribution of the Underwritten Securities, will not distribute, any offering material in connection with the offering or sale of the Underwritten Securities other than the Registration Statement, the Prospectus or any other materials, if any, permitted by the Act.

 

(ll) Furthermore, the Company and the Operating Partnership represent and warrant to Citigroup Global Markets Inc. that (i) the Registration Statement, the Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and that (ii) no authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed Shares are offered outside the United States. The Company has not offered, or caused the Underwriters to offer, Securities to any

 

14


person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a tenant or vendor of the Company or the Operating Partnership to alter the tenant’s or vendor’s level or type of business with the Company or the Operating Partnership, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its properties.

 

Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities pursuant to this Agreement shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

 

2. Purchase and Sale .

 

(a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $11.25 per share, the amount of the Underwritten Securities set forth opposite such Underwriter’s name in Schedule I hereto.

 

(b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to 3,000,000 Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time on or before the 30th day after the date of the Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares.

 

3. Delivery and Payment . Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third Business Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on November 3, 2004, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

 

15


If the option provided for in Section 2(b) hereof is exercised after the third Business Day prior to the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives, at 388 Greenwich Street, New York, New York, on the date specified by the Representatives (which shall be within three Business Days after exercise of said option) for the respective accounts of the several Underwriters, against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof.

 

4. Offering by Underwriters . It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus.

 

5. Agreements . The Company agrees with the several Underwriters that:

 

(a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement to the Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Prospectus is otherwise required under Rule 424(b), the Company will cause the Prospectus, properly completed, and any supplement thereto to be filed in a form to which the Representatives do not reasonably object with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (1) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (2) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (3) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (4) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (5) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding

 

16


for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof.

 

(b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Act or the rules thereunder, the Company promptly will (1) notify the Representatives of any such event, (2) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance; and (3) supply any supplemented Prospectus to you in such quantities as you may reasonably request.

 

(c) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act.

 

(d) The Company will furnish to the Representatives and counsel for the Underwriters signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Prospectus and the Prospectus and any supplement thereto as the Representatives may reasonably request.

 

(e) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject.

 

(f) Except as set forth in the Prospectus, the Company will not, without the prior written consent of the Representatives, for a period of 180 days after the date of this Agreement, offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or would reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any person controlled by the Company directly or indirectly, including the filing (or participation in the filing) of a registration statement (except for a registration statement on Form S-8 relating to the 2004 Incentive Award Plan or a registration statement on Form S-4 relating to an acquisition of a real property company) with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning

 

17


of Section 16 of the Exchange Act, any other shares of Common Stock or any securities convertible into, or exercisable, or exchangeable for, shares of Common Stock, or publicly announce an intention to effect any such transaction, provided , however , that the Company may (i) grant stock options, restricted stock or long-term incentive units to employees, consultants or directors pursuant to the terms of a plan in effect at the Execution Time, (ii) issue Common Stock pursuant to: (A) the exercise of such options; (B) the redemption of Units issued upon conversion of such long-term incentive units; (C) the exercise of any employee stock options outstanding at the Execution Time; or (D) the redemption of Units issued upon conversion of long-term incentive units outstanding at the Execution Time, (iii) issue Common Stock pursuant to the Company’s dividend reinvestment plan (if any), and (iv) issue Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock in connection with other acquisitions of real property or real property companies.

 

Notwithstanding the foregoing, if: (x) during the last 17 days of the 180-day lock-up period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (y) prior to the expiration of the 180-day lock-up period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 180-day lock-up period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

 

(g) Until and including the Closing Date or the settlement date for the Option Securities (whichever is later), the Company will comply with all applicable securities and other applicable laws, rules and regulations, including, without limitation, the Sarbanes Oxley Act, and will use its reasonable best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes Oxley Act, except for such failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.

 

(h) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

 

(i) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in

 

18


connection with the offering and sale of the Securities; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (v) the registration of the Securities under the Exchange Act and the listing of the Securities on the New York Stock Exchange; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) any filings required to be made with the National Association of Securities Dealers, Inc. (“NASD”) (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such filings); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; (ix) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder.

 

(j) The Company and the Operating Partnership will use the net proceeds received by the Company from the sale of the Securities in the manner specified in the Prospectus under the caption “Use of Proceeds.”

 

(k) The Company will use its best efforts to meet the requirements to qualify, for the taxable year ending December 31, 2004, for taxation as a REIT under the Code.

 

(l) The Company agrees to pay (i) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program, (ii) all costs and expenses incurred by the Underwriters in connection with the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of copies of the Directed Share Program material and (iii) all stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program.

 

Furthermore, the Company covenants with Citigroup Global Markets Inc. that the Company will comply with all applicable securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.

 

6. Conditions to the Obligations of the Underwriters . The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:

 

19


(a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the Business Day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened.

 

(b) The Company shall have requested and caused Latham & Watkins LLP, counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that:

 

(i) Based solely on certificates from public officials, such counsel confirms that the Company is qualified to do business in the States of California, Maryland, Colorado, Florida and Georgia;

 

(ii) Based solely on certificates from public officials, such counsel confirms that the Operating Partnership is qualified to do business in the States of California, Maryland, Colorado, Florida and Georgia;

 

(iii) Each Material Subsidiary (as defined therein) is a limited liability company or limited partnership, as the case may be, under the Corporations Code of the State of California, the Limited Liability Company Act of the State of Delaware or the Revised Uniform Limited Partnership Act of the State of Delaware, with the limited liability company or limited partnership power and authority to own its properties and to conduct its business as described in the Registration Statement and the Prospectus;

 

(iv) Based on certificates from public officials, such counsel confirms that each Material Subsidiary is validly existing and in good standing under the laws of the State of California or the State of Delaware, as the case may be, and is qualified to do business in the States listed on Schedule C thereto. With the consent of the Representatives based solely on an officer’s certificate, such counsel confirms that the Subsidiary Operating Agreement (as defined therein) of each Material Subsidiary is in full force and effect;

 

(v) No registration of the options to purchase shares of Common Stock or the long-term incentive units of the Operating Partnership (the “LTI Units”) under the Act or qualification thereof under the California Corporate Securities Law of 1968 is required for the issuance of the options or the LTI Units to certain executive officers and directors of the Company in the manner contemplated by the Employment Agreements listed on Schedule B thereto;

 

20


(vi) No registration of the limited partnership units of the Operating Partnership (the “OP Units”) under the Act or qualification thereof under the California Corporate Securities Law of 1968 is required for the issuance of the OP Units in the manner contemplated by the Contribution Agreements listed on Schedule A thereto and the Option Agreement (as defined therein);

 

(vii) To the best of such counsel’s knowledge, there are no contracts or documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed;

 

(viii) To the best of such counsel’s knowledge, there are no legal or governmental proceedings of a character required to be described in the Registration Statement or Prospectus that are not so described;

 

(ix) The statements in the Prospectus under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After the Offering,” “Management—Employment Agreements,” “—Executive Chairman Agreement,” “Certain Relationships and Related Transactions—GI Partners Contribution Agreement,” “— eBay Data Center Purchase Agreement,” “—200 Paul Avenue and 1100 Space Park Drive Contribution Agreement,” “—Carrier Center Option and Right of First Offer Agreements,” “—Non-Competition Agreement with Global Innovation Partners, LLC,” “Shares Eligible for Future Sale,” and “ERISA Considerations,” insofar as they purport to describe or summarize certain provisions of the agreements, statutes or regulations referred to therein, are accurate descriptions or summaries in all material respects;

 

(x) The Registration Statement has become effective under the Act. With the consent of the Representatives, based solely on a telephonic confirmation by a member of the Staff of the Commission on November 3, 2004, no stop order suspending the effectiveness of the Registration Statement has been issued under the Act and no proceedings therefor have been initiated by the Commission. Any required filing of the Prospectus pursuant to Rule 424 under the Act has been made in accordance with Rule 424 under the Act;

 

(xi) The Registration Statement, as of the date it was declared effective, and the Prospectus, as of its date and as of the date hereof, appeared on their face to be appropriately responsive in all material respects to the requirements for registration statements on Form S-11 under the Act and the rules and regulations of the Commission thereunder; it being understood, however, that such counsel need express no opinion with respect to Regulation S-T or the financial statements, schedules, or other financial data, included in or omitted from, the Registration Statement or the Prospectus. For purposes of this paragraph, such counsel may assume that the statements made in the Registration Statement and the Prospectus are correct and complete;

 

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(xii) With the consent of the Representatives based solely on a certificate of an officer of the Company as to factual matters, each of the Company and the Operating Partnership is not, and immediately after giving effect to the sale of the Securities in accordance with this Agreement and the application of the proceeds as described in the Prospectus under the caption “Use of Proceeds,” will not be required to be registered as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

 

(xiii) The execution and delivery of this Agreement by the Company and the Operating Partnership, the issuance and sale of the Securities by the Company to the Representatives and the other Underwriters pursuant to this Agreement, the execution and delivery by each of the Company and the Operating Partnership which is a party thereto of the Contribution Agreements, the eBay Purchase Agreement and the Option Agreement (each as defined therein) and the consummation by the Company and the Operating Partnership of the transactions contemplated by the Contribution Agreements, the eBay Purchase Agreement, and the Option Agreement, on the date hereof do not:

 

(A) violate the provisions of any Subsidiary Operating Agreement; or

 

(B) result in the breach of or a default under any of the Material Agreements (as defined therein); or

 

(C) violate any federal or California statute, rule or regulation applicable to the Company, the Operating Partnership or the Material Subsidiaries; or

 

(D) require any consents, approvals, or authorizations to be obtained by the Company, the Operating Partnership or any Material Subsidiary from, or any registrations, declarations or filings to be made by the Company, the Operating Partnership or any Material Subsidiary with, any governmental authority under any federal or California statute, rule or regulation applicable to the Company, the Operating Partnership or any Material Subsidiary, that have not been obtained or made;

 

(xiv) With the consent of the Representatives based solely on a certificate of an officer of the Company as to factual matters and a review of the Material Agreements, neither the Company nor the Operating Partnership nor any Material Subsidiary is a party to any agreement that would require the inclusion in the Registration Statement of shares or other securities owned by any person or entity other than the Company;

 

(xv) Each of the Contribution Agreements, the eBay Purchase Agreement and the Option Agreement is the legally valid and binding agreement of each of the Company and the Operating Partnership which is a party thereto, enforceable against each of them which is a party thereto in accordance with its terms; and

 

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(xvi) With the consent of the Representatives based solely on a written advice from the New York Stock Exchange, the Securities to be issued by the Company and sold pursuant to this Agreement have been listed, subject to official notice of issuance, on the New York Stock Exchange.

 

In rendering such opinion, such counsel may (A) assume the accuracy, as to matters involving the application of laws of any jurisdiction other than the State of California or the Federal laws of the United States, of the opinion of other counsel of good standing who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, may rely on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (b) shall also include any supplements thereto at the Closing Date.

 

In addition, such counsel shall separately state that:

 

No facts came to the attention of such counsel that caused them to believe that the Registration Statement, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus, as of its date, or as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no belief with respect to the financial statements, schedules, or other financial data included in, or omitted from, the Registration Statement or the Prospectus.

 

(c) The Company shall have requested and caused Latham & Watkins LLP, tax counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that:

 

(i) the statements included in the Prospectus under the headings “Federal Income Tax Considerations” and “Restrictions on Ownership of our Stock,” insofar as such statements purport to summarize certain provisions of the agreements, statutes and regulations referred to therein, are accurate summaries in all material respects; and

 

(ii) commencing with its taxable year ending December 31, 2004, the Company will be organized in conformity with the requirements for qualification as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Code.

 

In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of California or the

 

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Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (c) shall also include any supplements thereto at the Closing Date.

 

(d) The Company shall have requested and caused Venable LLP, Maryland counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that:

 

(i) the Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, with full corporate power to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus under the caption “Business and Properties”;

 

(ii) the Operating Partnership is a limited partnership duly formed and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, with full limited partnership power to own or lease, as the case may be, and to operate its properties and to conduct its business as described in the Prospectus under the caption “Business and Properties”. The Company is the sole general partner of the Operating Partnership and the aggregate percentage interests of the Company and the limited partners in the Operating Partnership are as set forth in the Prospectus under the caption “Structure and Formation of Our Company”;

 

(iii) the Company’s authorized equity capitalization is as set forth in the Prospectus under the caption “Capitalization”; the stock of the Company conforms in all material respects to the description thereof contained in the Prospectus under the caption “Description of Securities”; the issuance of the outstanding shares of Common Stock has been duly authorized and such shares are validly issued, fully paid and nonassessable; the issuance of the Securities has been duly authorized and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, the Securities will be validly issued, fully paid and nonassessable; the certificates for the Securities comply in all material respects with the Maryland General Corporation Law; the holders of outstanding shares of stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities arising under the Maryland General Corporation Law or the charter or bylaws of the Company; and, based solely on a certificate executed by an officer of the Company and upon any facts otherwise known to such counsel, and except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for shares of stock of or ownership interests in the Company are outstanding;

 

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(iv) the issuance of the Units issued in connection with the Formation Transactions, including, without limitation, the Units to be issued to the Company, has been duly authorized and such Units are validly issued, fully paid and nonassessable; the holders of outstanding Units are not entitled to preemptive or other rights to subscribe for the Securities arising under the Maryland Revised Uniform Limited Partnership Act or the Operating Partnership Agreement; based solely on a certificate executed by an officer of the Company and upon any facts otherwise known to such counsel, and except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for Units or ownership interests in the Operating Partnership are outstanding; the terms of the Units conform in all material respects to the description thereof contained in the Prospectus under the caption “Description of the Partnership Agreement of Digital Realty Trust, L.P.”;

 

(v) the statements included in the Prospectus under the headings “Risk Factors—Risks Related to Our Organizational Structure—Conflicts of interest exist or could arise in the future with holders of units in our operating partnership,” “Risk Factors—Risks Related to Our Organizational Structure—Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control transaction,” “Risk Factors—Risks Related to Our Organizational Structure—Our rights and the rights of our stockholders to take action against our directors and officers are limited,” “Policies with Respect to Certain Activities—Interested Director and Officer Transactions,” “Description of the Partnership Agreement of Digital Realty Trust, L.P.,” “Description of Securities” and “Material Provisions of Maryland Law and of Our Charter and Bylaws,” insofar as such statements purport to summarize or describe matters of or legal conclusions relating to Maryland law, the charter or bylaws of the Company, or the Operating Partnership Agreement, are accurate and fair summaries of such matters, legal conclusions, the charter or bylaws of the Company, or the Operating Partnership Agreement in all material respects;

 

(vi) this Agreement and each of the Formation Transaction Documents to which the Company or the Operating Partnership is a party have been duly authorized, executed and delivered by the Company and the Operating Partnership; the Operating Partnership Agreement constitutes the legal, valid and binding obligation of each of the Company and the Operating Partnership, enforceable against each of the Company and the Operating Partnership in accordance with its terms;

 

(vii) no consent, approval or authorization of, filing with or order of any court or governmental agency or body in the State of Maryland is required in connection with the transactions contemplated herein or the transactions contemplated by the Formation Transaction Documents, except such as have been obtained or made; and

 

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(viii) neither the issuance and sale of the Securities, nor the consummation of any other transactions herein contemplated, nor the consummation of the transactions contemplated by the Formation Transaction Documents, nor the fulfillment of the terms hereof or thereof, will conflict with or result in a breach or violation of (A) the charter or bylaws of the Company or the Operating Partnership Agreement or (B) any Maryland statute or law or any rule, regulation, judgment, order or decree applicable to the Company or the Operating Partnership of any court, regulatory body, administrative agency, governmental body, or other authority of the State of Maryland having jurisdiction over the Company or the Operating Partnership or any of their properties.

 

In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Maryland, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (d) shall also include any supplements thereto at the Closing Date.

 

(e) The Company shall have requested and caused Gibson, Dunn & Crutcher LLP, counsel to Global Innovation Partners, LLC (the “Contributor”), to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that:

 

(i) The Transaction Documents (as defined therein) have been duly executed and delivered by the Contributor and are the legal, valid and binding obligations of the Contributor, enforceable against the Contributor in accordance with their terms.

 

In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Delaware or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (e) shall also include any supplements thereto at the Closing Date.

 

(f) The Company shall have requested and caused Richards, Layton & Finger, P.A., Delaware counsel to the Contributor, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that:

 

(i) The Contributor is validly existing in good standing as a limited liability company under the laws of the State of Delaware;

 

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(ii) Under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq. (the “LLC Act”), and the LLC Agreement (as defined therein), the Contributor has all necessary limited liability company power and authority to execute and deliver the Transaction Documents (as defined therein), and to perform its obligations thereunder;

 

(iii) Under the LLC Act and the LLC Agreement, the execution and delivery by the Contributor of the Transaction Documents, and the performance by the Contributor of its obligations thereunder, have been duly authorized by all necessary limited liability company action on the part of the Company, including by all approvals of the members required under the LLC Agreement; and

 

(iv) The execution and delivery by the Contributor of the Transaction Documents, and the performance by the Contributor of its obligations thereunder, do not violate (i) any Delaware law, rule or regulation, or (ii) the LLC Certificate or the LLC Agreement.

 

In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Delaware, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Contributor and public officials. References to the Prospectus in this paragraph (f) shall also include any supplements thereto at the Closing Date.

 

(g) The Representatives shall have received from Goodwin Procter LLP, counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.

 

(h) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Executive Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any supplements to the Prospectus and this Agreement and that:

 

(i) the representations and warranties of the Company and the Operating Partnership in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date and the Company and the Operating Partnership have complied with all the agreements and satisfied all the conditions on their part to be performed or satisfied at or prior to the Closing Date;

 

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(ii) the Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened; and

 

(iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto).

 

(i) The Company shall have requested and caused KPMG LLP to have furnished to the Representatives, at the Execution Time and at the Closing Date, letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance reasonably satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the applicable rules and regulations adopted by the Commission thereunder and that they have performed a review of the unaudited interim financial information of the Company for the six-month period ended June 30, 2004, and as at June 30, 2004 in accordance with Statement on Auditing Standards No. 100 and stating in effect that:

 

(i) in their opinion the audited financial statements and financial statement schedules included in the Registration Statement and the Prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the Commission;

 

(ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; their limited review, in accordance with standards established under Statement on Auditing Standards No. 100, of the unaudited interim financial information for the six-month period ended June 30, 2004, and as at June 30, 2004; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and board committees of the Company and the subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to June 30, 2004, nothing came to their attention which caused them to believe that:

 

(1) any unaudited financial statements included in the Registration Statement and the Prospectus do not comply as to form in all material respects with applicable accounting requirements of the Act and with the related rules and regulations adopted by the Commission with

 

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respect to registration statements on Form S-11; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus;

 

(2) with respect to the period subsequent to June 30, 2004 there were any changes, at a specified date not more than five days prior to the date of the letter, in the long-term debt of the Company and its subsidiaries or capital stock of the Company or decreases in the stockholders’ equity of the Company as compared with the amounts shown on the June 30, 2004 consolidated balance sheet included in the Registration Statement and the Prospectus, or for the period from July 1, 2004 to such specified date there were any decreases, as compared with the amounts shown on the statement of operations for the corresponding period in the previous year, in revenues or in total net income of the Company and its subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and

 

(3) the information included in the Registration Statement and Prospectus in response to Regulation S-K, Item 301 (Selected Financial Data) and Item 402 (Executive Compensation) is not in conformity with the applicable disclosure requirements of Regulation S-K;

 

(iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in the Registration Statement and the Prospectus agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation; and

 

(iv) on the basis of a reading of the unaudited pro forma financial statements included in the Registration Statement and the Prospectus (the “pro forma financial statements”); carrying out certain specified procedures; inquiries of certain officials of the Company who have responsibility for financial and accounting matters; and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial statements, nothing came to their attention which caused them to believe that the pro forma financial statements do not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements.

 

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References to the Prospectus in this paragraph (h) include any supplement thereto at the date of the letter.

 

(j) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (h) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto).

 

(k) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request.

 

(l) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

 

(m) The Securities shall have been listed and admitted and authorized for trading on the New York Stock Exchange, and satisfactory evidence of such actions shall have been provided to the Representatives.

 

(n) The NASD, upon review of the terms of the public offering of the Securities, shall not have objected to such offering, such terms or the Underwriters’ participation in same.

 

(o) The Company shall have furnished to the Representatives a letter in the form of Exhibit A hereto from each director and executive officer of the Company named in the Registration Statement and the Prospectus.

 

(p) An ALTA Owner’s Extended Coverage Policy or, in the case of any Property to be owned after the Closing by the same titleholding entity listed on an existing title policy, a so-called “fairway endorsement” on such existing title policy shall have been issued to the Company or a subsidiary for each of the Properties with coverage in an amount at least equal to 80% of the cost of acquisition of such Property in states where such endorsement is available.

 

(q) Commonwealth Land Title Insurance Company shall have issued its UCC 9 Insurance Policy or the equivalent for each of the Property Partnerships.

 

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(r) The Formation Transactions shall have been, or will be concurrently, consummated.

 

(s) The Credit Facility and other refinancing transactions shall have been, or will be concurrently, consummated.

 

If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.

 

The documents required to be delivered by this Section 6 shall be delivered at the office of Latham & Watkins LLP, counsel for the Company, at 633 West 5 th Street, Suite 4000, Los Angeles, California 90071, on the Closing Date.

 

7. Reimbursement of Underwriters’ Expenses . If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company or the Operating Partnership to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Citigroup Global Markets Inc. on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

 

8. Indemnification and Contribution .

 

(a) The Company and the Operating Partnership, jointly and severally, agree to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company and the Operating Partnership will not be liable in any such case to the extent

 

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that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company and the Operating Partnership may otherwise have.

 

(b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company and the Operating Partnership, each of the Company’s directors, each of the Company’s officers who signs the Registration Statement, and each person who controls the Company and the Operating Partnership within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Operating Partnership to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company and the Operating Partnership acknowledge that the statements set forth in (i) the penultimate paragraph of the cover page regarding delivery of the Securities, (ii) the list of Underwriters and their respective participation in the sale of the Securities under the caption “Underwriting”, (iii) the sentences related to concessions and reallowances under the caption “Underwriting”, (iv) the three bullet-points in the eighth paragraph under the caption “Underwriting” related to stabilization, syndicate covering transactions and penalty bids, (v) the ninth paragraph under the caption “Underwriting” relating to penalty bids and (vi) the last paragraph under the caption “Underwriting” relating to online distribution in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus.

 

(c) The Company and the Operating Partnership agree to indemnify and hold harmless Citigroup Global Markets Inc., the directors, officers, employees and agents of Citigroup Global Markets Inc. and each person, who controls Citigroup Global Markets Inc. within the meaning of either the Act or the Exchange Act (“Citigroup Entities”), from and against any and all losses, claims, damages and liabilities to which they may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim), insofar as such losses, claims damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the prospectus wrapper material prepared by or with the consent of the Company for distribution in foreign jurisdictions in connection with the Directed Share Program attached to the Prospectus or any preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein, when considered in conjunction with the Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of the securities which immediately following the Effective Date

 

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of the Registration Statement, were subject to a properly confirmed agreement to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, except that this clause (iii) shall not apply to the extent that such loss, claim, damage or liability is finally judicially determined to have resulted primarily from the gross negligence or willful misconduct of the Citigroup Entities.

 

(d) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a), (b) or (c) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided , however , that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. Notwithstanding the foregoing, it is understood that the Company and the Operating Partnership shall, in connection with any action or related actions in the same jurisdiction, bear the fees, costs and expenses of only one such separate counsel (in addition to any local counsel) for all the Underwriters, the directors, officers, employees and agents of the Underwriters and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act (collectively, the “Underwriter Indemnified Parties”), provided , however , the Company and the Operating Partnership shall bear the fees, costs and expenses of more than one separate counsel (in addition to any local counsel) if the use of only one separate counsel for all the Underwriter Indemnified Parties would present such counsel with a conflict of interest with respect to one or more of the Underwriter Indemnified Parties. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending

 

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or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (A) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to paragraph (c) of this Section 8 in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for Citigroup Global Markets Inc., the directors, officers, employees and agents of Citigroup Global Markets Inc., and all persons, if any, who control Citigroup Global Markets Inc. within the meaning of either the Act or the Exchange Act for the defense of any losses, claims, damages and liabilities arising out of the Directed Share Program.

 

(e) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company, the Operating Partnership and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively “Losses”) to which the Company, the Operating Partnership and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities; provided , however , that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company, the Operating Partnership and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Operating Partnership on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company and the Operating Partnership shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company or by the Operating Partnership on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company, the Operating Partnership and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable

 

34


considerations referred to above. Notwithstanding the provisions of this paragraph (e), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company or the Operating Partnership within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company and the Operating Partnership, subject in each case to the applicable terms and conditions of this paragraph (e).

 

9. Default by an Underwriter . If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided , however , that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter, the Company or the Operating Partnership. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder.

 

10. Termination . This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such Exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Prospectus (exclusive of any supplement thereto).

 

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11. Representations and Indemnities to Survive . The respective agreements, representations, warranties, indemnities and other statements of the Company, the Operating Partnership or the officers of the Company and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company, the Operating Partnership or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement.

 

12. Notices . All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Citigroup Global Markets Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Citigroup Global Markets Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General Counsel, and to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, New York, New York 10080, Attention: General Counsel, with a copy to Goodwin Procter LLP, attention Ettore A. Santucci (fax no.: (617) 523-1231) and confirmed to it at Goodwin Procter LLP, 53 State Street, Boston, Massachusetts, 02109, Attention: Ettore A. Santucci; or, if sent to the Company or the Operating Partnership, will be mailed, delivered or telefaxed to Digital Realty Trust, Inc. (fax no.: (650) 233-3601) and confirmed to it at Digital Realty Trust, Inc., 2370 Sand Hill Road, Suite 280, Menlo Park, California 94025, Attention: Michael F. Foust, with a copy to Latham & Watkins LLP, attention Julian T.H. Kleindorfer (fax no.: (213) 891-8763) and confirmed to it at Latham & Watkins LLP, 633 West 5 th Street, Suite 4000, Los Angeles, California 90071, Attention: Julian T.H. Kleindorfer.

 

13. Successors . This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.

 

14. Applicable Law . This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.

 

15. Counterparts . This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

 

16. Headings . The section headings used herein are for convenience only and shall not affect the construction hereof.

 

17. Definitions . The terms which follow, when used in this Agreement, shall have the meanings indicated.

 

“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

 

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“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Effective Date” shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or become effective.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

 

“Preliminary Prospectus” shall mean any preliminary prospectus referred to in Section 1(a) above and any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information.

 

“Prospectus” shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities included in the Registration Statement at the Effective Date.

 

“Registration Statement” shall mean the registration statement referred to in Section 1(a) above, including exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A.

 

“Rule 424”, “Rule 430A” and “Rule 462” refer to such rules under the Act.

 

“Rule 430A Information” shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A.

 

“Rule 462(b) Registration Statement” shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof.

 

“subsidiary” shall mean each direct and indirect subsidiary of the Company, including, without limitation, the Operating Partnership and the Property Partnerships contributed to Operating Partnership pursuant to the Formation Transactions.

 

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company, the Operating Partnership and the several Underwriters.

 

Very truly yours,

DIGITAL REALTY TRUST, INC.

By:

 

/s/ Michael F. Foust


Name:

  Michael F. Foust

Title:

  Chief Executive Officer

DIGITAL REALTY TRUST, L.P.

By:

  Digital Realty Trust, Inc., its General Partner

By:

 

/s/ Michael F. Foust


Name:

  Michael F. Foust

Title:

  Chief Executive Officer

 

38


The foregoing Agreement is hereby

confirmed and accepted as of the

date first above written.

 

CITIGROUP GLOBAL MARKETS INC.

MERRILL LYNCH, PIERCE, FENNER & SMITH

INCORPORATED

By:

  Citigroup Global Markets Inc.

By:

 

/s/ John Todd


Name:

  John Todd

Title:

  Vice President

 

For themselves and the other

several Underwriters named in

Schedule I to the foregoing

Agreement.

Exhibit 3.1

 

DIGITAL REALTY TRUST, INC.

 

ARTICLES OF AMENDMENT AND RESTATEMENT

 

FIRST : Digital Realty Trust, Inc., a Maryland corporation (the “Corporation”), desires to amend and restate its charter as currently in effect and as hereinafter amended.

 

SECOND : The following provisions are all the provisions of the charter currently in effect and as hereinafter amended:

 

ARTICLE I

 

NAME

 

The name of the Corporation is:

 

Digital Realty Trust, Inc.

 

ARTICLE II

 

PURPOSE

 

The purposes for which the Corporation is formed are to engage in any lawful act or activity (including, without limitation or obligation, engaging in business as a real estate investment trust under the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”)) for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force. For purposes of these Articles, “REIT” means a real estate investment trust under Sections 856 through 860 of the Code.

 

ARTICLE III

 

PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

 

The address of the principal office of the Corporation in the State of Maryland is c/o National Registered Agents, Inc. of MD, 11 East Chase Street, Baltimore, MD 21202. The name of the resident agent of the Corporation in the State of Maryland is National Registered Agents, Inc. of MD, whose post office address is 11 East Chase Street, Baltimore, MD 21202. The resident agent is Maryland corporation.


ARTICLE IV

 

PROVISIONS FOR DEFINING, LIMITING

AND REGULATING CERTAIN POWERS OF THE

CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

 

Section 4.1 Number of Directors . The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation initially shall be two (2), which number may be increased or decreased only by the Board of Directors pursuant to the Bylaws, but shall never be less than the minimum number required by the Maryland General Corporation Law (the “MGCL”). The names of the directors who shall serve until the first annual meeting of stockholders and until their successors are duly elected and qualify are:

 

Richard Magnuson, Chairman of the Board

 

Michael F. Foust

 

These directors may increase the number of directors and may fill any vacancy, whether resulting from an increase in the number of directors or otherwise, on the Board of Directors occurring before the first annual meeting of stockholders in the manner provided in the Bylaws.

 

The Corporation elects, at such time as it becomes eligible to make the election provided for under Section 3-802(b) of the MGCL, that, except as may be provided by the Board of Directors in setting the terms of any class or series of stock, any and all vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred.

 

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Section 4.2 Extraordinary Actions . Except as specifically provided in Section 4.8 (relating to removal of directors) and in Article VII (relating to amendments and transactions outside the ordinary course of business), notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if declared advisable by the Board of Directors and taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter.

 

Section 4.3 Authorization by Board of Stock Issuance . The Board of Directors may authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafter authorized, or securities or rights convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the charter or the Bylaws.

 

Section 4.4 Preemptive Rights . Except as may be provided by the Board of Directors in setting the terms of classified or reclassified shares of stock pursuant to Section 5.4 or as may otherwise be provided by contract, no holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it may issue or sell.

 

Section 4.5 Indemnification . The Corporation shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former director or officer of the Corporation

 

3


or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves

or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in such capacity. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation.

 

Section 4.6 Determinations by Board . The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with the charter and in the absence of actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its stock: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on its stock; the amount of paid-in surplus, net assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); any interpretation of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of any class or series of stock of the

 

4


Corporation; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation; the number of shares of stock of any class of the Corporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation or required or permitted by applicable law, the charter or Bylaws or otherwise to be determined by the Board of Directors.

 

Section 4.7 REIT Qualification . If the Corporation elects to qualify for federal income tax treatment as a REIT, the Board of Directors shall use its commercially reasonable efforts to take such actions as are necessary or appropriate to preserve the status of the Corporation as a REIT; however, if the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to be qualified as a REIT, the Board of Directors may revoke or otherwise terminate the Corporation’s REIT election.

 

Section 4.8 Removal of Directors . Subject to the rights of holders of one or more classes or series of Preferred Stock to elect or remove one or more directors, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and then only by the affirmative vote of at least two thirds of the votes entitled to be cast generally in the election of directors. For the purpose of this paragraph, “cause” shall mean, with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty.

 

Section 4.9 Rights of Objecting Stockholders . Holders of shares of stock of the Corporation shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine that such rights

 

5


apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares of stock of the Corporation would otherwise be entitled to exercise such rights.

 

ARTICLE V

 

STOCK

 

Section 5.1 Authorized Shares . The Corporation has authority to issue 120,000,000 shares of stock, consisting of 100,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and 20,000,000 shares of Preferred Stock, $.01 par value per share (“Preferred Stock”). The aggregate par value of all authorized shares of stock having par value is $1,200,000. If shares of one class of stock are classified or reclassified into shares of another class of stock pursuant to this Article V, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of stock of all classes that the Corporation has authority to issue shall not be more than the total number of shares of stock set forth in the first sentence of this paragraph. The Board of Directors, with the approval of a majority of the Board and without any action by the stockholders of the Corporation, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue.

 

Section 5.2 Common Stock . Subject to the provisions of Article VI and except as may otherwise be specified in the terms of any class or series of Common Stock, each share of Common Stock shall entitle the holder thereof to one vote. The Board of Directors may reclassify any unissued shares of Common Stock from time to time in one or more classes or series of stock.

 

6


Section 5.3 Preferred Stock . The Board of Directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, in one or more classes or series of stock.

 

Section 5.4 Classified or Reclassified Shares . Prior to issuance of classified or reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Article VI and subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, including, without limitation, restrictions on transferability, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland (“SDAT”). Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 5.4 may be made dependent upon facts or events ascertainable outside the charter (including determinations by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary or other charter document.

 

Section 5.5 Stockholders’ Consent in Lieu of Meeting . Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting by consent, in writing or by electronic transmission, in any manner permitted by the MGCL and (a) set forth in the Bylaws or (b) set forth in the terms of any class or series of Preferred Stock.

 

7


Section 5.6 Charter and Bylaws . The rights of all stockholders and the terms of all stock are subject to the provisions of the charter and the Bylaws.

 

ARTICLE VI

 

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

 

Section 6.1 Definitions . For the purposes of Article VI, the following terms shall have the following meanings:

 

Aggregate Stock Ownership Limit ” shall mean 9.8% in value of the aggregate of the outstanding shares of Capital Stock. Notwithstanding the foregoing, for purposes of determining the percentage ownership of Capital Stock by any Person, shares of Capital Stock that are treated as Beneficially or Constructively owned by such Person shall be deemed outstanding. The value of the outstanding shares of Capital Stock shall be determined by the Board of Directors of the Corporation in good faith, which determination shall be conclusive for all purposes hereof.

 

Beneficial Ownership ” shall mean ownership of Capital Stock either actually (including through a nominee) or constructively through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms “Beneficial Owner,” “Beneficially Own,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

 

Capital Stock ” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

 

Charitable Beneficiary ” shall mean one or more beneficiaries of a Trust, as determined pursuant to Section 6.3.6 of this Article VI.

 

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Code ” shall mean the Internal Revenue Code of 1986, as amended. All section references to the Code shall include any successor provisions thereof as may be adopted from time to time.

 

Common Stock ” shall mean that Common Stock that may be issued pursuant to Article V of the Articles of Amendment and Restatement.

 

Common Stock Ownership Limit ” shall mean 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation, excluding any such outstanding Common Stock which is not treated as outstanding for federal income tax purposes. Notwithstanding the foregoing, for purposes of determining the percentage ownership of Common Stock by any Person, shares of Common Stock that are treated as Beneficially or Constructively owned by such Person shall be deemed to be outstanding. The number and value of shares of outstanding Common Stock of the Corporation shall be determined by the Board of Directors in good faith, which determination shall be conclusive for all purposes hereof.

 

Constructive Ownership ” shall mean ownership of Capital Stock either actually (including through a nominee) or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

 

Corporation ” shall have the meaning set forth in the preamble to the Articles of Amendment and Restatement.

 

Individual ” means an individual, a trust qualified under Section 401(a) or 501(c)(17) of the Code, a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, or a private foundation within the

 

9


meaning of Section 509(a) of the Code, provided that, except as set forth in Section 856(h)(3)(A)(ii) of the Code, a trust described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code shall be excluded from this definition.

 

Initial Date ” means the date upon which the Articles of Amendment and Restatement containing this Article VI are filed with the State Department of Assessments and Taxation of Maryland.

 

IRS ” means the United States Internal Revenue Service.

 

Market Price ” means the last reported sales price reported on the New York Stock Exchange of the Capital Stock on the trading day immediately preceding the relevant date, or if the Capital Stock is not then traded on the New York Stock Exchange, the last reported sales price of the Capital Stock on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Capital Stock may be traded, or if the Capital Stock is not then traded over any exchange or quotation system, then the market price of the Capital Stock on the relevant date as determined in good faith by the Board of Directors of the Corporation.

 

Person ” shall mean an Individual, corporation, partnership, limited liability company, estate, trust, association, joint stock company or other entity; but does not include an underwriter acting in a capacity as such in a public offering of shares of Capital Stock provided that the ownership of such shares of Capital Stock by such underwriter would not result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise result in the Corporation failing to qualify as a REIT.

 

Preferred Stock ” shall mean that Preferred Stock that may be issued from time to time pursuant to Article V of the Articles of Amendment and Restatement.

 

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Purported Beneficial Transferee ” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Section 6.2.2 of this Article VI, the Purported Record Transferee, unless the Purported Record Transferee would have acquired or owned shares of Capital Stock for another Person who is the beneficial transferee or owner of such shares, in which case the Purported Beneficial Transferee shall be such Person.

 

Purported Record Transferee ” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Section 6.2.2 of this Article VI, the record holder of the shares of Capital Stock if such Transfer had been valid under Section 6.2.1 of this Article VI.

 

REIT ” shall mean a real estate investment trust under Sections 856 through 860 of the Code.

 

Restriction Termination Date ” shall mean the first day on which the Board of Directors of the Corporation determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT.

 

Transfer ” shall mean any issuance, sale, transfer, gift, assignment, devise, other disposition of Capital Stock as well as any other event that causes any Person to Beneficially Own or Constructively Own Capital Stock, including (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Capital Stock or (ii) the sale, transfer, assignment or other disposition of any securities (or rights convertible into or exchangeable for Capital Stock), whether voluntary or involuntary, whether such transfer has occurred of record or beneficially or Beneficially or Constructively (including but not limited to transfers of interests in other entities which result in changes in Beneficial or Constructive Ownership of Capital Stock), and whether such transfer has occurred by operation of law or otherwise.

 

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Trust ” shall mean each of the trusts provided for in Section 6.3 of this Article VI.

 

Trustee ” shall mean any Person unaffiliated with the Corporation, or a Purported Beneficial Transferee, or a Purported Record Transferee, that is appointed by the Corporation to serve as trustee of a Trust.

 

Section 6.2 Restriction on Ownership and Transfers .

 

6.2.1 From the Initial Date and prior to the Restriction Termination Date:

 

(a) except as provided in Section 6.9 of this Article VI, (1) no Person shall Beneficially Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit and (2) no Person shall Beneficially Own Common Stock in excess of the Common Stock Ownership Limit;

 

(b) except as provided in Section 6.9 of this Article VI, (1) no Person shall Constructively Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit and (2) no Person shall Constructively Own Common Stock in excess of the Common Stock Ownership Limit; and

 

(c) no Person shall Beneficially or Constructively Own Capital Stock to the extent that such Beneficial or Constructive Ownership would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise failing to qualify as a REIT (including but not limited to ownership that would result in the Corporation owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

 

6.2.2 If, during the period commencing on the Initial Date and prior to the Restriction Termination Date, any Transfer occurs that, if effective, would result in any Person Beneficially or Constructively Owning Capital Stock in violation of Section 6.2.1 of

 

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this Article VI, (i) then that number of shares of Capital Stock that otherwise would cause such Person to violate Section 6.2.1 of this Article VI (rounded up to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Section 6.3, effective as of the close of business on the business day prior to the date of such Transfer or other event, and such Purported Beneficial Transferee shall thereafter have no rights in such shares or (ii) if, for any reason, the transfer to the Trust described in clause (i) of this sentence is not automatically effective as provided therein to prevent any Person from Beneficially or Constructively Owning Capital Stock in violation of Section 6.2.1 of this Article VI, then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 6.2.1 shall, subject to Section 6.12, be void ab initio , and the Purported Beneficial Transferee shall have no rights in such shares.

 

6.2.3 Subject to Section 6.12 of this Article VI and notwithstanding any other provisions contained herein, during the period commencing on the Initial Date and prior to the Restriction Termination Date, any Transfer of Capital Stock that, if effective, would result in the Capital Stock of the Corporation being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio , and the intended transferee shall acquire no rights in such Capital Stock.

 

6.2.4 It is expressly intended that the restrictions on ownership and Transfer described in this Section 6.2 of Article VI shall apply to restrict the rights of any members or partners in limited liability companies or partnerships to exchange their interest in such entities for Capital Stock of the Corporation.

 

Section 6.3 Transfers of Common Stock in Trust .

 

6.3.1 Upon any purported Transfer or other event described in Section 6.2.2 of this Article VI that would result in a transfer of shares of Capital Stock to a

 

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Trust, such Capital Stock shall be deemed to have been transferred to the Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the purported Transfer or other event that results in a transfer to the Trust pursuant to Section 6.2.2. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation, any Purported Beneficial Transferee and any Purported Record Transferee. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 6.3.6 of this Article VI.

 

6.3.2 Capital Stock held by the Trustee shall be issued and outstanding Capital Stock of the Corporation. The Purported Beneficial Transferee or Purported Record Transferee shall have no rights in the shares of Capital Stock held by the Trustee. The Purported Beneficial Transferee or Purported Record Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares of Capital Stock held in the Trust.

 

6.3.3 The Trustee shall have all voting rights and rights to dividends or other distributions with respect to Capital Stock held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Trustee shall be paid to the Trustee upon demand, and any dividend or other distribution declared or authorized but unpaid with respect to such Capital Stock shall be paid when due to the Trustee. Any dividends or distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary. The Purported Record Transferee and Purported Beneficial Transferee shall have no voting rights with respect to the Capital Stock held in the

 

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Trust and, subject to Maryland law, effective as of the date the Capital Stock has been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Purported Record Transferee with respect to such Capital Stock prior to the discovery by the Corporation that the Capital Stock has been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Corporation has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article VI, until the Corporation has received notification that the Capital Stock has been transferred into a Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

 

6.3.4 Within 20 days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Trust, the Trustee of the Trust shall sell the shares of Capital Stock held in the Trust to a person, designated by the Trustee, whose ownership of the shares of Capital Stock will not violate the ownership limitations set forth in Section 6.2.1. Upon such sale, the interest of the Charitable Beneficiary in the shares of Capital Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported Record Transferee and to the Charitable Beneficiary as provided in this Section 6.3.4. The Purported Record Transferee shall receive the lesser of (i) the price paid by the Purported Record Transferee for the shares of Capital Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Capital Stock at Market Price, the Market Price of such shares of Capital Stock on the day of the event which resulted in the transfer of such shares of Capital Stock to the Trust)

 

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and (ii) the price per share received by the Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares of Capital Stock held in the Trust. The Trustee may reduce the amount payable to the Purported Record Transferee by the amount of dividends and distributions which have been paid to the Purported Record Transferee and are owed by the Purported Record Transferee to the Trustee pursuant to Section 6.3.3 of this Article VI. Any net sales proceeds in excess of the amount payable to the Purported Record Transferee shall be immediately paid to the Charitable Beneficiary together with any dividends or other distributions thereon. If, prior to the discovery by the Corporation that shares of such Capital Stock have been transferred to the Trustee, such shares of Capital Stock are sold by a Purported Record Transferee then (x) such shares of Capital Stock shall be deemed to have been sold on behalf of the Trust and (y) to the extent that the Purported Record Transferee received an amount for such shares of Capital Stock that exceeds the amount that such Purported Record Transferee was entitled to receive pursuant to this Section 6.3.4, such excess shall be paid to the Trustee upon demand.

 

6.3.5 Capital Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price paid by the Purported Record Transferee for the shares of Capital Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Capital Stock at Market Price, the Market Price of such shares of Capital Stock on the day of the event which resulted in the transfer of such shares of Capital Stock to the Trust) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the amount payable to the Purported Record Transferee by the amount of dividends and distributions which has been paid to the Purported Record Transferee and are owed by the Purported Record

 

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Transferee to the Trustee pursuant to Section 6.3.3 of this Article VI. The Corporation will pay the amount of such reduction to the Trustee for the benefit of the Charitable Beneficiary. The Corporation shall have the right to accept such offer until the Trustee has sold the shares of Capital Stock held in the Trust pursuant to Section 6.3.4. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares of Capital Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported Record Transferee, and any dividends or other distributions held by Trustee with respect to such Capital Stock shall thereupon be paid to the Charitable Beneficiary.

 

6.3.6 By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that (i) the shares of Capital Stock held in the Trust would not violate the restrictions set forth in Section 6.2.1 in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.

 

Section 6.4 Remedies For Breach . If the Board of Directors or a committee thereof or other designees if permitted by the MGCL shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 6.2 of this Article VI or that a Person intends to acquire, has attempted to acquire or may acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any shares of the Corporation in violation of Section 6.2 of this Article VI (whether or not such violation is intended), the Board of Directors or a committee thereof or other designees if permitted by the MGCL shall take such action as it deems or they deem advisable to refuse to give effect or to prevent such Transfer, including, but not limited to, causing the Corporation to redeem shares of Capital Stock, refusing to give effect to such

 

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Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfers (or, in the case of events other than a Transfer, ownership or Constructive Ownership or Beneficial Ownership) in violation of Section 6.2.1 of this Article VI shall automatically result in the transfer to a Trust as described in Section 6.2.2 and any Transfer in violation of Section 6.2.3 shall, subject to Section 6.12, automatically be void ab initio irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

 

Section 6.5 Notice of Restricted Transfer . Any Person who acquires or attempts or intends to acquire shares in violation of Section 6.2 of this Article VI, or any Person who is a Purported Beneficial Transferee such that an automatic transfer to a Trust results under Section 6.2.2 of this Article VI, shall immediately give written notice to the Corporation of such event or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer on the Corporation’s status as a REIT.

 

Section 6.6 Owners Required to Provide Information . From the Initial Date and prior to the Restriction Termination Date, each Person who is a beneficial owner or Beneficial Owner or Constructive Owner of shares of Capital Stock and each Person (including the stockholder of record) who is holding shares of Capital Stock for a beneficial owner or Beneficial Owner or Constructive Owner shall, on demand, provide to the Corporation a completed questionnaire containing the information regarding their ownership of such shares, as set forth in the regulations (as in effect from time to time) of the U.S. Department of Treasury under the Code. In addition, each Person who is a beneficial owner or Beneficial Owner or Constructive Owner of shares of Capital Stock and each Person (including the stockholder of

 

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record) who is holding shares of Capital Stock for a beneficial owner or Beneficial Owner or Constructive Owner shall, on demand, be required to disclose to the Corporation in writing such information as the Corporation may request in order to determine the effect, if any, of such stockholder’s Beneficial Ownership and Constructive Ownership of shares of Capital Stock on the Corporation’s status as a REIT and to ensure compliance with the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, any other ownership limit or as otherwise permitted by the Board of Directors.

 

Section 6.7 Remedies Not Limited . Nothing contained in this Article VI (but subject to Section 6.12 of this Article VI) shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation’s status as a REIT.

 

Section 6.8 Ambiguity . In the case of an ambiguity in the application of any of the provisions of this Article VI, including any definition contained in Section 6.1, the Board of Directors shall have the power to determine the application of the provisions of this Article VI with respect to any situation based on the facts known to it (subject, however, to the provisions of Section 6.12 of this Article VI). In the event Article VI requires an action by the Board of Directors and the charter of the Corporation does not provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Article VI. Absent a decision to the contrary by the Board of Directors (which the Board may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Section 6.2.2) acquired Beneficial or Constructive Ownership of Common Stock in violation of Section 6.2.1, such remedies (as applicable) shall apply first to the shares of Capital Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Capital

 

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Stock which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Capital Stock based upon the relative number of the shares of Capital Stock held by each such Person.

 

Section 6.9 Exceptions .

 

6.9.1 Subject to Section 6.2.1(c) of this Article VI, the Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the limitation on a Person Beneficially Owning shares of Capital Stock in excess of the Aggregate Stock Ownership Limit or Common Stock in excess of the Common Stock Ownership Limit, as set forth in Section 6.2.1(a) of this Article VI, if the Board determines that such exemption will not cause any Individual’s Beneficial Ownership of shares of Capital Stock to violate the Capital Stock Ownership Limit and that any such exemption will not cause the Corporation to fail to qualify as a REIT under the Code.

 

6.9.2 Subject to Section 6.2.1(c) of this Article VI, the Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the limitation on a Person Constructively Owning Capital Stock in excess of the Aggregate Stock Ownership Limit or Common Stock in excess of the Common Stock Ownership Limit, as set forth in Section 6.2.1(b) of this Article VI, if the Board determines that such Person does not and will not own, actually or Constructively, an interest in a tenant of the Corporation (or a tenant of any entity owned in whole or in part by the Corporation) that would cause the Corporation to own, actually or Constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant or that any such ownership would not cause the Corporation to fail to qualify as a REIT under the Code.

 

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6.9.3 Subject to Section 6.2.1(c) and the remainder of this Section 6.9.3, the Board of Directors may from time to time increase the Aggregate Stock Ownership Limit and/or the Common Stock Ownership Limit for one or more Persons and decrease the Aggregate Stock Ownership Limit and/or the Common Stock Ownership Limit for all other Persons; provided, however, that the decreased Aggregate Stock Ownership Limit and/or the Common Stock Ownership Limit will not be effective for any Person whose percentage ownership in Capital Stock or Common Stock, as the case may be, is in excess of such decreased Aggregate Stock Ownership Limit and/or the Common Stock Ownership Limit until such time as such Person’s percentage of Capital Stock or Common Stock, as the case may be, equals or falls below the decreased Aggregate Stock Ownership Limit and/or the Common Stock Ownership Limit, but any further acquisition of Capital Stock or Common Stock, as the case may be, in excess of such percentage ownership of Capital Stock or Common Stock, as the case may be, will be in violation of the Aggregate Stock Ownership Limit and/or Common Stock Ownership Limit, and, provided further, that the new Aggregate Stock Ownership Limit and/or Common Stock Ownership Limit would not allow five or fewer Persons to Beneficially Own more than 49% in value of the outstanding Capital Stock.

 

6.9.4 In granting a person an exemption under Section 6.9.1 or 6.9.2 above, the Board of Directors may require such Person to make certain representations or undertakings or to agree that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Section 6.2 of this Article VI) will result in such Capital Stock being transferred to a Trust in accordance with Section 6.2.2 of this Article VI. Prior to granting any exception pursuant to Section 6.9.1 or 6.9.2 of this Article VI, the Board of Directors may require a ruling from the IRS, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT.

 

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Section 6.10 Legends . Each certificate for Common Stock shall bear the following legends:

 

Restriction on Ownership and Transfer

 

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE CORPORATION’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (“REIT”) UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION’S ARTICLES OF AMENDMENT AND RESTATEMENT, (i) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK OF THE CORPORATION IN EXCESS OF 9.8% OF THE VALUE OF THE TOTAL OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION AND NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION’S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE CORPORATION; (ii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iii) NO PERSON MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP SET FORTH IN (i) OR (ii) IS VIOLATED, THE SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES, AND ANY TRANSFER THAT WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS SHALL BE VOID AB INITIO . IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE CHARTER OF THE CORPORATION SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE CHARTER OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME

 

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TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

 

Section 6.11 Severability . If any provision of this Article VI or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provision shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of such court.

 

Section 6.12 NYSE Transactions . Nothing in this Article VI shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VI and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VI.

 

Section 6.13 Enforcement . The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VI.

 

Section 6.14 Non-Waiver . No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors, as the case may be, except to the extent specifically waived in writing.

 

ARTICLE VII

 

AMENDMENTS AND TRANSACTIONS OUTSIDE

THE ORDINARY COURSE OF BUSINESS

 

The Corporation reserves the right from time to time to make any amendment to its charter, now or hereafter authorized by law, including any amendment altering the terms or

 

23


contract rights, as expressly set forth in the charter, of any shares of outstanding stock. All rights and powers conferred by the charter on stockholders, directors and officers are granted subject to this reservation. Any amendment to Section 4.8 and to this sentence, shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter. All other amendments to this charter shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of a majority of all the votes entitled to be cast on the matter. In addition, the Corporation shall not dissolve, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless declared advisable by the Board of Directors and approved by the affirmative vote of a majority of all votes entitled to be cast on the matter.

 

ARTICLE VIII

 

LIMITATION OF LIABILITY

 

To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no present or former director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Article XIII, nor the adoption or amendment of any other provision of the charter or Bylaws inconsistent with this Article XIII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

 

THIRD : The amendment to and restatement of the charter as hereinabove set forth have been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law. The total number of shares of stock which the Corporation had authority to issue immediately prior to this amendment and restatement was 100,000,000 shares,

 

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consisting solely of 100,000,000 shares of Common Stock, $.01 par value per share. The aggregate par value of all shares of stock having par value was $1,000,000. The total number of shares of stock which the Corporation has authority to issue pursuant to the foregoing amendment and restatement of the charter is 120,000,000 shares, consisting of 100,000,000 shares of Common Stock, $.01 par value per share, and 20,000,000 shares of Preferred Stock, $.01 par value per share. The aggregate par value of all authorized shares of stock having par value is $1,200,000.

 

FOURTH : The current address of the principal office of the Corporation is as set forth in Article III of the foregoing amendment and restatement of the charter.

 

FIFTH : The name and address of the Corporation’s current resident agent is as set forth in Article III of the foregoing amendment and restatement of the charter.

 

SIXTH : The number of directors of the Corporation and the names of those currently in office are as set forth in Article IV of the foregoing amendment and restatement of the charter.

 

SEVENTH : The undersigned President acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

 

(signature page follows)

 

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IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its President and attested to by its Secretary on this 26th day of October, 2004.

 

ATTEST:    DIGITAL REALTY TRUST, INC.

/s/ Michael F. Foust


   By:  

/s/ Richard A. Magnuson


  (SEAL)
Michael F. Foust        Richard A. Magnuson
Chief Executive Officer and Secretary        Executive Chairman

 

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Exhibit 3.2

 

DIGITAL REALTY TRUST, INC.

 

AMENDED AND RESTATED BYLAWS

 

ARTICLE I

 

OFFICES

 

Section 1. PRINCIPAL OFFICE . The principal office of the Corporation in the State of Maryland shall be located at such place as the Board of Directors may designate.

 

Section 2. ADDITIONAL OFFICES . The Corporation may have additional offices, including a principal executive office, at such place or places as the Board of Directors may from time to time determine or the business of the Corporation may require.

 

ARTICLE II

 

MEETINGS OF STOCKHOLDERS

 

Section 1. PLACE . All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set by the Board of Directors and stated in the notice of the meeting.

 

Section 2. ANNUAL MEETING . An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on a date and at the time set by the Board of Directors during the month of [May] in each year. Failure to hold an annual meeting does not invalidate the Corporation’s existence or affect any otherwise valid corporate acts.

 

Section 3. SPECIAL MEETINGS .

 

(a) General . The chairman of the board, chief executive officer or Board of Directors may call a special meeting of the stockholders. Subject to subsection (b) of this Section 3, a special meeting of stockholders shall also be called by the secretary of the Corporation upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.

 

(b) Stockholder Requested Special Meetings .

 

(1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “Request Record Date”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set


forth all information relating to each such stockholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the secretary.

 

(2) In order for any stockholder to request a special meeting, one or more written requests for a special meeting signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority (the “Special Meeting Percentage”) of all of the votes entitled to be cast at such meeting (the “Special Meeting Request”) shall be delivered to the secretary. In addition, the Special Meeting Request (a) shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), (b) shall bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) shall set forth the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), the class, series and number of all shares of stock of the Corporation which are owned by each such stockholder, and the nominee holder for, and number of, shares by such stockholder beneficially but not of record, (d) shall be sent to the secretary by registered mail, return receipt requested, and (e) shall be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation or the Special Meeting request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.

 

(3) The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Corporation’s proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting.

 

(4) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the chairman of the board, chief executive officer or Board of Directors, whoever has called the meeting. In the case of any special meeting called by the secretary upon the request of stockholders (a “Stockholder Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided , however , that the date of any Stockholder Requested Meeting shall be not more than 90 days after the record date for such meeting (the “Meeting Record Date”); and provided , further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the “Delivery Date”),

 

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a date and time for a Stockholder Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day; and provided , further that in the event that the Board of Directors fails to designate a place for a Stockholder Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any special meeting, the chairman of the board, chief executive officer or Board of Directors may consider such factors as he, she or it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 3(b).

 

(5) If written revocations of requests for the special meeting have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing) as of the Request Record Date entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting to the secretary, the secretary shall: (i) if the notice of meeting has not already been mailed, refrain from mailing the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for the special meeting, or (ii) if the notice of meeting has been mailed and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting written notice of any revocation of a request for the special meeting and written notice of the secretary’s intention to revoke the notice of the meeting, revoke the notice of the meeting at any time before ten days before the commencement in writing of the meeting. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

 

(6) The chairman of the board, the chief executive officer or the Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the secretary until the earlier of (i) ten Business Days after receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent at least a majority of the issued and outstanding shares of stock that would be entitled to vote at such meeting. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such ten Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

 

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(7) For purposes of these Bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of California are authorized or obligated by law or executive order to close.

 

Section 4. NOTICE . Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid.

 

Subject to Section 11(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

 

Section 5. ORGANIZATION AND CONDUCT . Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following officers present at the meeting: the vice chairman of the board, if there be one, the chief executive officer, president, the vice presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary, or, in the secretary’s absence, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the Board of Directors or, in the absence of such appointment, a person appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of the stockholders, an assistant secretary, or in the absence of assistant secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) determining when the polls should be opened and closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth

 

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by the chairman of the meeting; and (h) concluding a meeting or recessing or adjourning the meeting to a later date and time and place announced at the meeting. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 6. QUORUM . At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the chairman of the meeting, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

 

The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

 

Section 7. VOTING . A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the charter of the Corporation or the rules and regulations of the New York Stock Exchange. Unless otherwise provided by statute or by the charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot.

 

Section 8. PROXIES . A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven months after its date unless otherwise provided in the proxy.

 

Section 9. VOTING OF STOCK BY CERTAIN HOLDERS . Stock of the Corporation registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his or her name as such fiduciary, either in person or by proxy.

 

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Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

 

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.

 

Section 10. INSPECTORS . The Board of Directors, in advance of any meeting, may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

 

Section 11. ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS .

 

(a) Annual Meetings of Stockholders .

 

(1) Nominations of individuals for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 11(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with this Section 11(a).

 

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(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 11, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required under this Section 11 and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150th day nor later than 5:00 p.m., Pacific Time, on the 120th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting (for purposes of the Corporation’s 2005 annual meeting, notice of the prior year’s annual meeting shall be deemed to have been mailed on March 31, 2004; provided , however , that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date for such annual meeting and not later than 5:00 p.m., Pacific Time, on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (i) as to each individual whom the stockholder proposes to nominate for election or reelection as a director, (A) the name, age, business address and residence address of such individual, (B) the class, series and number of any shares of stock of the Corporation that are beneficially owned by such individual, (C) the date such shares were acquired and the investment intent of such acquisition and (D) all other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder (including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a description of such business desired to be brought before the meeting, the reasons for proposing such business at the meeting and any material interest in such business of such stockholder and any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder and the Stockholder Associated Person therefrom; (iii) as to the stockholder giving the notice and any Stockholder Associated Person, the class, series and number of all shares of stock of the Corporation which are owned by such stockholder and by such Stockholder Associated Person, if any, and the nominee holder for, and number of, shares owned beneficially but not of record by such stockholder and by any such Stockholder Associated Person; (iv) as to the stockholder giving the notice and any Stockholder Associated Person covered by clauses (ii) and (iii) of this paragraph (2) of this Section 11(a), the name and address of such stockholder, as they appear on the Corporation’s stock ledger and current name and address, if different, and of such Stockholder Associated Person; and (v) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.

 

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(3) Notwithstanding anything in this subsection (a) of this Section 11 to the contrary, in the event the Board of Directors increases or decreases the maximum or minimum number of directors in accordance with Article III, Section 2 of these Bylaws, and there is no announcement of such action at least 130 days prior to the first anniversary of the date of mailing of the notice of the preceding year’s annual meeting, a stockholder’s notice required by this Section 11(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m., Pacific Time, on the tenth day following the day on which such public announcement is first made by the Corporation.

 

(4) For purposes of this Section 11, “Stockholder Associated Person” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person.

 

(b) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 11 and at the time of the special meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the Board of Directors, any such stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (2) of this Section 11(a) shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150th day prior to such special meeting and not later than 5:00 p.m., Pacific Time, on the later of the 120th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

 

(c) General .

 

(1) Upon written request by the secretary or the Board of Directors or any committee thereof, any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall provide, within five Business Day of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 11. If a stockholders fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 11.

 

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(2) Only such individuals who are nominated in accordance with this Section 11 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 11. The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 11.

 

(3) For purposes of this Section 11, (a) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of directors and (b) “public announcement” shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable news service or (ii) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

 

(4) Notwithstanding the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, nor the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.

 

Section 12. MEETING BY CONFERENCE TELEPHONE . The Board of Directors or chairman of the meeting may permit stockholders to participate in meetings of the stockholders by means of a conference telephone or other communications equipment by which all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at the meeting.

 

Section 13. CONTROL SHARE ACQUISITION ACT . Notwithstanding any other provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

 

Section 14. STOCKHOLDERS’ CONSENT IN LIEU OF MEETING . Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting (a) if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders, (b) if the action is advised, and submitted to the stockholders for approval, by the Board of Directors and a consent in writing or by electronic transmission of stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of stockholders is delivered to the Corporation in accordance with the MGCL, or (c) in any manner set forth in the terms of any class or series of

 

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preferred stock of the Corporation. The Corporation shall give notice of any action taken by less than unanimous consent to the applicable stockholders not later than ten days after the effective time of such action.

 

ARTICLE III

 

DIRECTORS

 

Section 1. GENERAL POWERS . The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

 

Section 2. NUMBER, TENURE AND QUALIFICATIONS . At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided , that the number thereof shall never be less than the minimum number required by the Maryland General Corporation Law, nor more than 15, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors.

 

Section 3. ANNUAL AND REGULAR MEETINGS . An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.

 

Section 4. SPECIAL MEETINGS . Special meetings of the Board of Directors may be called by or at the request of the chairman of the board or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

 

Section 5. NOTICE . Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, United States mail or courier to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting. Notice by United States mail shall be given at least three days prior to the meeting. Notice by courier shall be given at least two days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

 

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Section 6. QUORUM . A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided , further , that if, pursuant to applicable law, the charter of the Corporation or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group.

 

The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

 

Section 7. VOTING . The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws. If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws.

 

Section 8. ORGANIZATION . At each meeting of the Board of Directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting. In the absence of both the chairman and vice chairman of the board, the chief executive officer or in the absence of the chief executive officer, the president or in the absence of the president, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, a person appointed by the Chairman, shall act as secretary of the meeting.

 

Section 9. TELEPHONE MEETINGS . Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

 

Section 10. CONSENT BY DIRECTORS WITHOUT A MEETING . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the Board of Directors.

 

Section 11. VACANCIES . If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than three directors remain). Except as may be provided by the Board of Directors in setting the terms of any class or series of stock, any vacancy on the Board of Directors may be filled only by a majority of the remaining directors,

 

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even if the remaining directors do not constitute a quorum. Any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies.

 

Section 12. COMPENSATION . Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

 

Section 13. LOSS OF DEPOSITS . No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited.

 

Section 14. SURETY BONDS . Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his or her duties.

 

Section 15. RELIANCE . Each director, officer, employee and agent of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director.

 

Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS . The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer, employee or agent of the Corporation, in his or her personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the Corporation.

 

ARTICLE IV

 

COMMITTEES

 

Section 1. NUMBER, TENURE AND QUALIFICATIONS . The Board of Directors shall appoint from among its members a Nominating and Corporate Governance Committee, an Audit Committee and a Compensation Committee and may appoint such other committees as it deems appropriate to serve at the pleasure of the Board of Directors. All committees shall be composed of one or more directors; provided , however , that the exact composition of each committee, including the total number of directors and the number of Independent Directors (as defined below) on each such committee, shall at all times comply with the listing requirements and rules and regulations of the New York Stock Exchange, as modified or amended from time

 

12


to time and the rules and regulations of the Securities and Exchange Commission, as modified or amended from time to time. For purposes of this section, “Independent Director” shall have the definition set forth in Section 303.01 of the New York Stock Exchange Listed Company Manual, as amended from time to time, or such superseding definition as is hereafter promulgated by the New York Stock Exchange.

 

Section 2. POWERS . The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law.

 

Section 3. MEETINGS . Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the Committee) may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.

 

Section 4. TELEPHONE MEETINGS . Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

 

Section 5. CONSENT BY COMMITTEES WITHOUT A MEETING . Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and filed with the minutes of proceedings of such committee.

 

Section 6. VACANCIES . Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

 

ARTICLE V

 

OFFICERS

 

Section 1. GENERAL PROVISIONS . The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, a chief executive officer, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such

 

13


powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

 

Section 2. REMOVAL AND RESIGNATION . Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Board of Directors, the chairman of the board, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

 

Section 3. VACANCIES . A vacancy in any office may be filled by the Board of Directors for the balance of the term.

 

Section 4. CHIEF EXECUTIVE OFFICER . The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the board shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time.

 

Section 5. CHIEF OPERATING OFFICER . The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

 

Section 6. CHIEF FINANCIAL OFFICER . The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

 

Section 7. CHAIRMAN OF THE BOARD . The Board of Directors shall designate a chairman of the board. The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him or her by the Board of Directors.

 

14


Section 8. PRESIDENT . In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.

 

Section 9. VICE PRESIDENTS . In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the president or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president, senior vice president or as vice president for particular areas of responsibility.

 

Section 10. SECRETARY . The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the Board of Directors.

 

Section 11. TREASURER . The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.

 

The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.

 

If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.

 

15


Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS . The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.

 

Section 13. SALARIES . The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director.

 

ARTICLE VI

 

CONTRACTS, LOANS, CHECKS AND DEPOSITS

 

Section 1. CONTRACTS . The Board of Directors or a committee of the Board of Directors, within the scope of its delegated authority, may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified by action of the Board of Directors or such other committee and executed by an authorized person.

 

Section 2. CHECKS AND DRAFTS . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

 

Section 3. DEPOSITS . All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate.

 

ARTICLE VII

 

STOCK

 

Section 1. CERTIFICATES . Except as otherwise provided in these Bylaws, this Section shall not be interpreted to limit the authority of the Board of Directors to issue some or all of the shares of any or all of the Corporation’s classes or series without certificates. Each stockholder, upon written request to the secretary of the Corporation, shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of stock held by him in the Corporation. Each certificate shall be signed by the chairman of the board, the vice chairman of the board, the chief executive officer, the chief operating officer, the president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Corporation or a

 

16


facsimile thereof. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate shall be valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the face or back of the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. If any class of stock is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge.

 

Section 2. TRANSFERS . Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

 

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

 

Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the charter of the Corporation and all of the terms and conditions contained therein.

 

Section 3. REPLACEMENT CERTIFICATE . Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner’s legal representative to advertise the same in such manner as he shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.

 

17


Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE . The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.

 

In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting.

 

If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted.

 

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

 

Section 5. STOCK LEDGER . The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

 

Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS . The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

 

18


ARTICLE VIII

 

ACCOUNTING YEAR

 

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

 

ARTICLE IX

 

DISTRIBUTIONS

 

Section 1. AUTHORIZATION . Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter.

 

Section 2. CONTINGENCIES . Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.

 

ARTICLE X

 

INVESTMENT POLICY

 

Subject to the provisions of the charter of the Corporation, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

 

ARTICLE XI

 

SEAL

 

Section 1. SEAL . The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

 

Section 2. AFFIXING SEAL . Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL”) adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

 

19


ARTICLE XII

 

INDEMNIFICATION AND ADVANCE OF EXPENSES

 

To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. The Corporation may, with the approval of its Board of Directors or any duly authorized committee thereof, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The indemnification and payment of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment of expenses may be or may become entitled under any bylaw, regulation, insurance, agreement or otherwise.

 

Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or charter of the Corporation inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

 

ARTICLE XIII

 

WAIVER OF NOTICE

 

Whenever any notice is required to be given pursuant to the charter of the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

 

ARTICLE XIV

 

AMENDMENT OF BYLAWS

 

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.

 

20


ARTICLE XV

 

MISCELLANEOUS

 

Section 1. BOOKS AND RECORDS . The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of an executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the for of a reproduction. The original or a certified copy of these Bylaws shall be kept at the principal office of the Corporation.

 

Section 2. VOTING STOCK IN OTHER COMPANIES . Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the President, a Vice President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.

 

Section 3. MAIL . Any notice or other document which is required by these Bylaws to be mailed shall be deposited in the United States mails, postage prepaid.

 

Section 4. EXECUTION OF DOCUMENTS . A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.

 

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THIS IS TO CERTIFY:

 

That I am the duly elected, qualified and acting Secretary of Digital Realty Trust, Inc. and that the foregoing Amended and Restated Bylaws were adopted as the Bylaws of the Corporation as of October 24 , 2004 by the Board of Directors of the Corporation.

 

Dated: October 24, 2004

 

   

By:

 

/s/ Michael F. Foust


   

Name:

 

Michael F. Foust

   

Title:

 

Chief Executive Officer and Secretary

 

 

22

Exhibit 4.1

 

NUMBER

DRT

COMMON STOCK

PAR VALUE $0.01

THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY

[LOGO]

CUSIP 253868 10    3

SEE REVERSE FOR CERTAIN RESTRICTIONS

DIGITAL REALTY TRUST, INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

THIS CERTIFIES THAT

IS THE OWNER OF

 

FULLY-PAID AND NON-ASSESSABLE COMMON STOCK, PAR VALUE $0.01 PER SHARE OF DIGITAL REALTY TRUST, INC. (the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Articles of Amendment and Restatement of the Corporation (the “Charter”) and the Bylaws of the Corporation and any amendments thereto. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.

 

In Witness Whereof, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized officers.

 

Dated:

 

COUNTERSIGNED AND REGISTERED:

 

AMERICAN STOCK TRANSFER & TRUST COMPANY

(NEW YORK, NY) TRANSFER AGENT

AND REGISTRAR

BY

 

 


   

AUTHORIZED SIGNATURE

   

[SEAL]

   

/s/


   

MICHAEL F. FOUST

   

CHIEF EXECUTIVE OFFICER AND SECRETARY

   

/s/


   

A. WILLIAM STEIN

   

CHIEF FINANCIAL OFFICER

 

DIGITAL REALTY TRUST, INC.

 

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE CORPORATION’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (“REIT”) UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION’S ARTICLES OF AMENDMENT AND RESTATEMENT, (I) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK OF THE CORPORATION IN EXCESS OF 9.8% OF THE VALUE OF THE TOTAL OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION AND NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION’S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE CORPORATION; (II) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (III) NO PERSON MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO


BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP SET FORTH IN (I) OR (II) IS VIOLATED, THE SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES, AND ANY TRANSFER THAT WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS SHALL BE VOID AB INITIO. IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE CHARTER OF THE CORPORATION SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE CHARTER OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

 

The Corporation will furnish to any stockholder, on request and without charge, a full statement of the information required by Section 2-211(b) of the Corporations and Associations Article of the Annotated Code of Maryland with respect to the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation has authority to issue and, if the Corporation is authorized to issue any preferred or special class in series, (i) the differences in the relative rights and preferences between the shares of each series to the extent set, and (ii) the authority of the Board of Directors to set such rights and preferences of subsequent series. The foregoing summary does not purport to be complete and is subject to and qualified in its entirety by reference to the charter of the Corporation, a copy of which will be sent without charge to each stockholder who so requests. Such requests must be made to the Secretary of the Corporation at its principal office or to the Transfer Agent.

 

TEN COM – as tenants in common

TEN ENT – as tenants by the entireties

JT TEN – as joint tenants with right of survivorship and not as tenants in common

UNIF GIFT/TRANS MIN ACT – (Cust) Custodian (Minor) under Uniform Gifts/Transfers to Minors Act (State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)

shares of the shares represented by the within Certificate, and do hereby irrevocably constitute and appoint

Attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises.

 

Dated

 

NOTICE: The Signature To This Assignment Must Correspond With The Name As Written Upon The Face Of The Certificate In Every Particular, Without Alteration Or Enlargement Or Any Change Whatever.

 

SIGNATURE(S) GUARANTEED:

 

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.


KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

Exhibit 10.1

 

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

DIGITAL REALTY TRUST, L.P.


TABLE OF CONTENTS

 

                Page

ARTICLE 1.   DEFINED TERMS    1
     Section 1.1     

Definitions.

   1
     Section 1.2     

Rules of Construction

   18
ARTICLE 2.   ORGANIZATIONAL MATTERS    18
     Section 2.1     

Organization

   18
     Section 2.2     

Name

   18
     Section 2.3     

Registered Office and Agent; Principal Office

   18
     Section 2.4     

Power of Attorney

   19
     Section 2.5     

Term

   20
ARTICLE 3.   PURPOSE    20
     Section 3.1     

Purpose and Business

   20
     Section 3.2     

Powers

   20
     Section 3.3     

Partnership Only for Purposes Specified

   21
     Section 3.4     

Representations and Warranties by the Parties

   21
     Section 3.5     

Certain ERISA Matters

   23
ARTICLE 4.   CAPITAL CONTRIBUTIONS    23
     Section 4.1     

Capital Contributions of the Partners

   23
     Section 4.2     

Loans by Third Parties

   24
     Section 4.3     

Additional Funding and Capital Contributions

   24
     Section 4.4     

Other Contribution Provisions

   27
     Section 4.5     

Profit Interest Units

   27
     Section 4.6     

No Preemptive Rights

   29
ARTICLE 5.   DISTRIBUTIONS    29
     Section 5.1     

Requirement and Characterization of Distributions

   29
     Section 5.2     

Distributions in Kind

   30
     Section 5.3     

Distributions Upon Liquidation

   30
     Section 5.4     

Distributions to Reflect Issuance of Additional Partnership Interests

   30
ARTICLE 6.   ALLOCATIONS    31
     Section 6.1     

Timing and Amount of Allocations of Net Income and Net Loss

   31
     Section 6.2     

General Allocations

   31
     Section 6.3     

Additional Allocation Provisions

   33
     Section 6.4     

Tax Allocations

   35
ARTICLE 7.   MANAGEMENT AND OPERATIONS OF BUSINESS    35
     Section 7.1     

Management

   35
     Section 7.2     

Certificate of Limited Partnership

   39
     Section 7.3     

Restrictions on General Partner’s Authority

   40

 

i


                Page

     Section 7.4     

Reimbursement of the General Partner

   41
     Section 7.5     

Outside Activities of the General Partner

   42
     Section 7.6     

Contracts with Affiliates

   43
     Section 7.7     

Indemnification

   44
     Section 7.8     

Liability of the General Partner

   46
     Section 7.9     

Other Matters Concerning the General Partner

   47
     Section 7.10     

Title to Partnership Assets

   48
     Section 7.11     

Reliance by Third Parties

   48
ARTICLE 8.   RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS    49
     Section 8.1     

Limitation of Liability

   49
     Section 8.2     

Management of Business

   49
     Section 8.3     

Outside Activities of Limited Partners

   49
     Section 8.4     

Return of Capital

   49
     Section 8.5     

Rights of Limited Partners Relating to the Partnership

   50
     Section 8.6     

Redemption Rights

   50
     Section 8.7     

Conversion of Profits Interest Units.

   57
     Section 8.8     

Voting Rights of Profits Interest Units

   60
ARTICLE 9.   BOOKS, RECORDS, ACCOUNTING AND REPORTS    61
     Section 9.1     

Records and Accounting

   61
     Section 9.2     

Fiscal Year

   61
     Section 9.3     

Reports

   61
     Section 9.4     

Nondisclosure of Certain Information

   62
ARTICLE 10.   TAX MATTERS    62
     Section 10.1     

Preparation of Tax Returns

   62
     Section 10.2     

Tax Elections

   62
     Section 10.3     

Tax Matters Partner

   62
     Section 10.4     

Organizational Expenses

   63
     Section 10.5     

Withholding

   64
ARTICLE 11.   TRANSFERS AND WITHDRAWALS    64
     Section 11.1     

Transfer

   64
     Section 11.2     

Transfer of General Partner’s Partnership Interest

   65
     Section 11.3     

Limited Partners’ Rights to Transfer

   66
     Section 11.4     

Substituted Limited Partners

   67
     Section 11.5     

Assignees

   68
     Section 11.6     

General Provisions

   69
ARTICLE 12.   ADMISSION OF PARTNERS    71
     Section 12.1     

Admission of Successor General Partner

   71
     Section 12.2     

Admission of Additional Limited Partners

   71
     Section 12.3     

Amendment of Agreement and Certificate of Limited Partnership

   72

 

ii


                Page

ARTICLE 13.   DISSOLUTION AND LIQUIDATION    72
     Section 13.1     

Dissolution

   72
     Section 13.2     

Winding Up

   73
     Section 13.3     

Capital Contribution Obligation

   74
     Section 13.4     

Compliance with Timing Requirements of Regulations

   74
     Section 13.5     

Deemed Distribution and Recontribution

   74
     Section 13.6     

Rights of Limited Partners

   75
     Section 13.7     

Notice of Dissolution

   75
     Section 13.8     

Cancellation of Certificate of Limited Partnership

   75
     Section 13.9     

Reasonable Time for Winding-Up

   75
     Section 13.10     

Waiver of Partition

   75
ARTICLE 14.   AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS    75
     Section 14.1     

Amendments

   75
     Section 14.2     

Action by the Partners

   76
ARTICLE 15.   GENERAL PROVISIONS    77
     Section 15.1     

Addresses and Notice

   77
     Section 15.2     

Titles and Captions

   77
     Section 15.3     

Pronouns and Plurals

   77
     Section 15.4     

Further Action

   77
     Section 15.5     

Binding Effect

   77
     Section 15.6     

Creditors

   77
     Section 15.7     

Waiver

   77
     Section 15.8     

Counterparts

   78
     Section 15.9     

Applicable Law

   78
     Section 15.10     

Invalidity of Provisions

   78
     Section 15.11     

Entire Agreement

   78
     Section 15.12     

No Rights as Stockholders

   78

 

iii


AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

DIGITAL REALTY TRUST, L.P.

 

THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Digital Realty Trust, L.P., dated as of October 27, 2004, is entered into by and among Digital Realty, Inc., a Maryland corporation (the “ Company ”), as the General Partner and the Persons whose names are set forth on Exhibit A attached hereto, as the Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein.

 

WHEREAS, the limited partnership was formed on July 21, 2004 and an original agreement of limited partnership was entered into between the Company, as general partner, and Global Innovation Partners, LLC (“ GIP ”), as limited partner;

 

WHEREAS, the Company proposes to effect a public offering of its common stock and to contribute the net proceeds from the public offering to the Partnership, to cause the Partnership to acquire direct and indirect interests in certain properties and other assets, and to cause the Partnership to enter into certain financing transactions;

 

WHEREAS, the Partnership will issue Partnership Interests to the Company and other persons in connection with the foregoing transactions;

 

WHEREAS, upon the completion of the foregoing transactions, the Partnership shall return the original capital contributions made by the Company and GIP, and any ongoing interest in the Partnership of the Company and GIP shall be based on their respective contributions as contemplated below;

 

WHEREAS, by virtue of their respective execution of this Agreement the Company and GIP hereby consent to the amendment and restatement of the original agreement of limited partnership;

 

NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1.

DEFINED TERMS

 

Section 1.1 Definitions .

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

Act ” means the Maryland Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.

 

Additional Funds ” shall have the meaning set forth in Section 4.3.A .


Additional Limited Partner ” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as such on the books and records of the Partnership.

 

Adjusted Capital Account Deficit ” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

 

  (i) decrease such deficit by any amounts which such Partner is obligated to restore pursuant to this Agreement or is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and

 

  (ii) increase such deficit by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. A positive balance in a Partner’s Capital Account, after giving effect to the adjustments described above in clauses (i) and (ii), is referred to in this Agreement as an “Adjusted Capital Account Balance.”

 

Adjustment Date ” means, with respect to any Capital Contribution, the close of business on the Business Day last preceding the date of the Capital Contribution, provided , that if such Capital Contribution is being made by the General Partner in respect of the proceeds from the issuance of REIT Shares (or the issuance of the General Partner’s securities exercisable for, convertible into or exchangeable for REIT Shares), then the Adjustment Date shall be as of the close of business on the Business Day last preceding the date of the issuance of such securities.

 

Adjustment Event ” shall have the meaning set forth in Section 4.5.A .

 

Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. Control of any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Agreed Value ” means (i) in the case of any Contributed Property set forth in Exhibit A and as of the time of its contribution to the Partnership, the Agreed Value of such property as set forth in Exhibit A ; (ii) in the case of any Contributed Property not set forth in Exhibit A and as of the time of its contribution to the Partnership, the fair market value of such property or other consideration as determined by the General Partner, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (iii) in the case of any property distributed to a Partner by the Partnership, the fair market value of such property as determined by the General Partner at the time such property is distributed, reduced by any liabilities either assumed by such Partner upon such distribution or to which such property is subject at the time of the distribution as determined under Section 752 of the Code and the Regulations thereunder.

 

2


Agreement ” means this Amended and Restated Agreement of Limited Partnership, as it may be amended, modified, supplemented or restated from time to time.

 

Appraisal ” means with respect to any assets, the opinion of an independent third party experienced in the valuation of similar assets, selected by the General Partner in good faith; such opinion may be in the form of an opinion by such independent third party that the value for such property or asset as set by the General Partner is fair, from a financial point of view, to the Partnership.

 

Assignee ” means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 .

 

Available Cash ” means, with respect to any period for which such calculation is being made,

 

  (i) the sum of:

 

a. the Partnership’s Net Income or Net Loss (as the case may be) for such period,

 

b. Depreciation and all other noncash charges deducted in determining Net Income or Net Loss for such period,

 

c. the amount of any reduction in reserves of the Partnership referred to in clause (ii)(f) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary),

 

d. the excess of the net proceeds from the sale, exchange, disposition, or refinancing of Partnership property for such period over the gain (or loss, as the case may be) recognized from any such sale, exchange, disposition, or refinancing during such period (excluding any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership), and

 

e. all other cash received by the Partnership for such period that was not included in determining Net Income or Net Loss for such period;

 

  (ii) less the sum of:

 

a. all principal debt payments made during such period by the Partnership,

 

b. capital expenditures made by the Partnership during such period,

 

c. investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clauses (ii)(a) or (b),

 

3


d. all other expenditures and payments not deducted in determining Net Income or Net Loss for such period,

 

e. any amount included in determining Net Income or Net Loss for such period that was not received by the Partnership during such period,

 

f. the amount of any increase in reserves established during such period which the General Partner determines are necessary or appropriate in its sole and absolute discretion,

 

g. the amount of any working capital accounts and other cash or similar balances which the General Partner determines to be necessary or appropriate in its sole and absolute discretion, and

 

h. any amount paid in redemption of any Limited Partner Interest or Partnership Units, including any Cash Amount paid.

 

Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves, established, after commencement of the dissolution and liquidation of the Partnership.

 

Base Amount ” shall have the meaning set forth in Section 8.6.C(2) .

 

Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to be closed.

 

Capital Account ” means, with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions:

 

(a) To each Partner’s Capital Account there shall be added such Partner’s Capital Contributions, such Partner’s share of Net Income and any items in the nature of income or gain which are specially allocated pursuant to Section 6.3 , and the amount of any Partnership liabilities assumed by such Partner or which are secured by any property distributed to such Partner.

 

(b) From each Partner’s Capital Account there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement, such Partner’s distributive share of Net Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 6.3 , and the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership (except to the extent already reflected in the amount of such Partner’s Capital Contribution).

 

(c) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement (which does not result in a termination of the Partnership for federal income tax purposes), the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.

 

4


(d) In determining the amount of any liability for purposes of subsections (a) and (b) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

 

(e) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article 13 of this Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.

 

Capital Account Limitation ” shall have the meaning set forth in Section 8.7.B .

 

Capital Contribution ” means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership by such Partner (net of any liabilities assumed by the Partnership relating to such property and any liability to which such property is subject).

 

Cash Amount ” means, with respect to any Partnership Units subject to a Redemption, an amount of cash equal to the Deemed Partnership Interest Value attributable to such Partnership Units.

 

Certificate ” means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Maryland State Department of Assessments and Taxation on July 20, 2004, as amended from time to time in accordance with the terms and the Act.

 

Charter ” means the Articles of Incorporation of the General Partner filed with the Maryland State Department of Assessments and Taxation on March 9, 2004, as amended or restated from time to time.

 

Code ” means the Internal Revenue Code of 1986, as amended from time to time or any successor statute thereto. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

 

Common Unit Economic Balance ” shall have the meaning set forth in Section 6.2.C .

 

5


Common Units ” means Partnership Units that are not entitled to any preferences with respect to any other class or series of Partnership Units as to distribution or voluntary or involuntary liquidation, dissolution or wind up of the Partnership and shall not include any Profits Interest Units.

 

Consent ” means the consent to, approval of, or vote on a proposed action by a Partner given in accordance with Article 14 .

 

Consent of the Limited Partners ” means the Consent of a Majority in Interest of the Limited Partners, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by a Majority in Interest of the Limited Partners, unless otherwise expressly provided herein, in their sole and absolute discretion.

 

Consent of the Partners ” means the Consent of Partners holding Percentage Interests that in the aggregate are equal to or greater than thirty-five percent (35%) of the aggregate Percentage Interests of all Partners, which consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withhold by such Partners, in their sole and absolute discretion

 

Constituent Person ” shall have the meaning set forth in Section 8.7.F .

 

Constructively Own ” means ownership under the constructive ownership rules described in Exhibit C .

 

Contributed Property ” means each property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership (or, to the extent provided in applicable Regulations, deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code).

 

Conversion Date ” shall have the meaning set forth in Section 8.7.B .

 

Conversion Notice ” shall have the meaning set forth in Section 8.7.B .

 

Conversion Right ” shall have the meaning set forth in Section 8.7.A .

 

Debt ” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds, guarantees and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized.

 

6


Deemed Partnership Interest Value ” means, as of any date with respect to any class of Partnership Interests, the Deemed Value of the Partnership Interests of such class multiplied by the applicable Percentage Interest of such class.

 

Deemed Value of the Partnership Interests ” means, as of any date with respect to any class or series of Partnership Interests, (i) the total number of Partnership Units of the General Partner in such class or series of Partnership Interests (as provided for in Sections 4.1 and 4.3.B ) issued and outstanding as of the close of business on such date multiplied by the Fair Market Value determined as of such date of a share of capital stock of the General Partner which corresponds to such class or series of Partnership Interests, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distribution of warrants or options and distributions of evidences of indebtedness or assets not received by the General Partner pursuant to a pro rata distribution by the Partnership; (ii) divided by the Percentage Interest of the General Partner in such class or series of Partnership Interests on such date; provided , that if no outstanding shares of capital stock of the General Partner correspond to a class of series of Partnership Interests, the Deemed Value of the Partnership Interests with respect to such class or series shall be equal to an amount reasonably determined by the General Partner.

 

Depreciation ” means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided , however , that if the federal income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner.

 

Distribution Payment Date ” means the dates upon which the General Partner makes distributions in accordance with Section 5.1 .

 

Distribution Period ” means the period from the day immediately following a Distribution Payment Date through the date that is the subsequent Distribution Payment Date.

 

“Economic Capital Account Balance” shall have the meaning set forth in Section 6.2.C.

 

Effective Date ” means the date of closing of the initial public offering of REIT Shares upon which date contributions set forth on Exhibit A shall become effective.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

7


Excess Units ” means Partnership Units which have been tendered for Redemption to the extent the issuance of REIT Shares in exchange for such units would violate the restrictions on ownership or transfer of the REIT Shares set forth in the Charter.

 

Fair Market Value ” means, with respect to any share of capital stock of the General Partner, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date with respect to which “Fair Market Value” must be determined hereunder or, if such date is not a Business Day, the immediately preceding Business Day. The market price for each such trading day shall be: (i) if such shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, (ii) if such shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or (iii) if such shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided that , if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Fair Market Value of such shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount for such shares includes rights that a holder of such shares would be entitled to receive, then the Fair Market Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; and provided , further that , in connection with determining the Deemed Value of the Partnership Interests for purposes of determining the number of additional Partnership Units issuable upon a Capital Contribution funded by any offering of shares of capital stock of the General Partner by the General Partner, whether registered under the Securities Act or exempt from such registration, underwritten, offered and sold directly to investors or through agents or other intermediaries or otherwise distributed, the Fair Market Value of such shares shall be the gross offering price per share of such class of capital stock sold. Notwithstanding the foregoing, the General Partner in its reasonable discretion may use a different “Fair Market Value” for purposes of making the determinations under subparagraph (b) of the definition of “Gross Asset Value” and Section 4.3.D in connection with the contribution of Property or cash to the Partnership by a third party, provided such value shall be based upon the value per REIT Share (or per Partnership Unit) agreed upon by the General Partner and such third party for purposes of such contribution.

 

Forced Conversion ” shall have the meaning set forth in Section 8.7.C .

 

Forced Conversion Notice ” shall have the meaning set forth in Section 8.7.C .

 

8


General Partner ” means the Company or its successor as general partner of the Partnership.

 

General Partner Interest ” means a Partnership Interest held by the General Partner. A General Partner Interest may be expressed as a number of Partnership Units.

 

Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the contributing Partner and the General Partner (as set forth on Exhibit A attached hereto, as such Exhibit may be amended from time to time); provided , that if the contributing Partner is the General Partner then, except with respect to the General Partner’s initial Capital Contribution which shall be determined as set forth on Exhibit A , the determination of the fair market value of the contributed asset shall be determined (i) by the price paid by the General Partner if the asset is acquired by the General Partner contemporaneously with its contribution to the Partnership, (ii) by Appraisal, if otherwise acquired by the General Partner, (iii) by the amount of cash if the asset is cash, and (iv) as reasonably determined by the General Partner if the asset is REIT Shares or other shares of capital stock of the Company.

 

(b) The Gross Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the General Partner using such reasonable method of valuation as it may adopt, provided , however , that for such purpose, the net value of all of the Partnership assets, in the aggregate, shall be equal to the Deemed Value of the Partnership Interests of all classes of Partnership Interests then outstanding, regardless of the method of valuation adopted by the General Partner, immediately prior to the times listed below:

 

  (i) the acquisition of an additional interest in the Partnership by a new or existing Partner in exchange for more than a de minimis Capital Contribution, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;

 

  (ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property as consideration for an interest in the Partnership if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;

 

  (iii) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and

 

  (iv) at such other times as the General Partner shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2.

 

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(c) The Gross Asset Value of any Partnership asset distributed to a Partner shall be the gross fair market value of such asset on the date of distribution as determined by the distributee and the General Partner, or if the distributee and the General Partner cannot agree on such a determination, by Appraisal.

 

(d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided , however , that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that the General Partner reasonably determines that an adjustment pursuant to subparagraph (b) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d).

 

(e) If the Gross Asset Value of a Partnership asset has been determined or adjusted pursuant to subparagraph (a), (b), (d) or (f), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses.

 

(f) If any unvested Profit Interest Units are forfeited, as described in Section 4.5.C(b) , upon such forfeiture, the Gross Asset Value of the Partnership’s assets shall be reduced by the amount of any Capital Account attributable to such forfeited Profit Interest Units.

 

Holder ” means either the Partner or Assignee owning a Partnership Unit.

 

Immediate Family ” means, with respect to any natural Person, such natural Person’s estate or heirs or current spouse or former spouse, parents, parents-in-law, children (whether natural, adopted or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such Person or such Person’s spouse, or former spouse, parents, parents-in-law, children, siblings or grandchildren.

 

Incapacity ” or “ Incapacitated ” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him or her incompetent to manage his or her Person or his or her estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership which is a Partner, the dissolution and commencement of winding up of the partnership; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations

 

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of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof, (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment, or (h) an appointment referred to in clause (g) is not vacated within 90 days after the expiration of any such stay.

 

Indemnitee ” means (i) any Person made a party to a proceeding by reason of his or her status as (A) the General Partner or (B) a director or officer, employee or agent of the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

 

IRS ” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

 

Limited Partner ” means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

 

Limited Partner Interest ” means a Partnership Interest of a Limited Partner representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Partnership Units.

 

Liquidating Event ” shall have the meaning set forth in Section 13.1 .

 

Liquidator ” shall have the meaning set forth in Section 13.2.A .

 

Majority in Interest of the Limited Partners ” means Limited Partners (other than any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by the General Partner) holding in the aggregate Percentage Interests that are greater than fifty percent (50%) of the aggregate Percentage Interests of all Limited Partners (other than any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by the General Partner).

 

Net Income ” or “ Net Loss ” means for each fiscal year of the Partnership, an amount equal to the Partnership’s taxable income or loss for such fiscal year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

 

(a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be added to such taxable income or loss;

 

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(b) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be subtracted from such taxable income or loss;

 

(c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph (b) or subparagraph (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

 

(d) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year;

 

(f) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

 

(g) Notwithstanding any other provision of this definition of Net Income or Net Loss, any items which are specially allocated pursuant to Section 6.3 shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Partnership income, gain, loss, or deduction available to be specially allocated pursuant to Section 6.3 shall be determined by applying rules analogous to those set forth in this definition of Net Income or Net Loss.

 

Net Proceeds ” shall have the meaning set forth in Section 8.6.C(2) .

 

New Securities ” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase REIT Shares or other shares of capital stock of the General Partner, excluding in each case, grants under any Stock Plan, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).

 

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Nonrecourse Deductions ” shall have the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

 

Nonrecourse Liability ” shall have the meaning set forth in Regulations Section 1.752-1(a)(2).

 

Notice of Redemption ” means the Notice of Redemption substantially in the form of Exhibit B to this Agreement.

 

Offered Shares ” shall have the meaning set forth in Section 8.6.C(1) .

 

Option Agreement Effective Date ” means the date the Partnership acquires an Option Interest pursuant to the Option Agreement in exchange for Partnership Units.

 

Option Agreement ” means that certain option agreement by and between the Partnership and Global Innovation Partners, LLC, whereby such entity granted the Partnership an option to acquire the Option Interests.

 

Option Interests ” means that certain property or interest in entities which own certain real property.

 

Partner ” means a General Partner or a Limited Partner, and “ Partners ” means the General Partner and the Limited Partners.

 

Partner Minimum Gain ” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

 

Partner Nonrecourse Debt ” shall have the meaning set forth in Regulations Section 1.704-2(b)(4).

 

Partner Nonrecourse Deductions ” shall have the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

 

Partnership ” means the limited partnership formed under the Act and pursuant to this Agreement, and any successor thereto.

 

Partnership Interest ” means, an ownership interest in the Partnership of either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. There may be one or more classes or series of Partnership Interests as provided in Section 4.3 , 4.4 or 4.5 . A Partnership Interest may be expressed as a number of Partnership Units. Unless otherwise expressly provided for by the General Partner at the time of the original issuance of

 

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any Partnership Interests, all Partnership Interests (whether of a Limited Partner or a General Partner) shall be of the same class or series. The Partnership Interests represented by the Common Units and the Profits Interest Units are the only Partnership Interests as of the date hereof and, except as specifically provided in this Agreement, each such type of Unit shall be treated as the same class of Partnership Interest for purposes of this Agreement.

 

Partnership Minimum Gain ” shall have the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

 

Partnership Record Date ” means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 which record date shall be the same as the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.

 

Partnership Unit ” means, with respect to any class of Partnership Interest, a fractional, undivided share of such class of Partnership Interest issued pursuant to Sections 4.1 and 4.3 , 4.4 or 4.5 . The ownership of Partnership Units may be evidenced by a certificate for units substantially in the form of Exhibit D hereto or as the General Partner may determine with respect to any class of Partnership Units issued from time to time under Section 4.1 , 4.3 , 4.4 and 4.5 .

 

Partnership Year ” means the fiscal year of the Partnership, which shall be the calendar year.

 

Percentage Interest ” means, as to a Partner holding a class or series of Partnership Interests, its interest in such class or series as determined by dividing the Partnership Units of such class or series owned by such Partner by the total number of Partnership Units of such class then outstanding as specified in Exhibit A attached hereto, as such Exhibit may be amended from time to time. If the Partnership issues more than one class or series of Partnership Interests, the interest in the Partnership among the classes or series of Partnership Interests shall be determined as set forth in the amendment to the Partnership Agreement setting forth the rights and privileges of such additional classes or series of Partnership Interest, if any, as contemplated by Section 4.3.C .

 

Person ” means an individual or a corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity.

 

Plan ” means the Digital Realty Trust, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan.

 

Plan Asset Regulation ” means the regulations promulgated by the United States Department of Labor in Title 29, Code of Federal Regulations, Part 2510, Section 101.3, and any successor regulations thereto.

 

Pledge ” shall have the meaning set forth in Section 11.3.A .

 

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Pricing Agreements ” shall have the meaning set forth in Section 8.6.C(3)(b) .

 

Primary Offering Notice ” shall have the meaning set forth in Section 8.6.F(4) .

 

Profits Interest Units ” means long term incentive partnership units of the Partnership having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Plan. Profits Interest Units can be issued in one or more classes, or one or more series of any such classes bearing such relationship to one another as to allocations, distributions, and other rights as the general Partner shall determine in its sole and absolute discretion subject to Maryland law.

 

Profits Interest Unitholder ” means a Partner that holds Profits Interest Units.

 

Properties ” means such interests in real property and personal property including without limitation, fee interests, interests in ground leases, interests in joint ventures, interests in mortgages, and Debt instruments as the Partnership may hold from time to time.

 

Qualified REIT Subsidiary ” means any Subsidiary of the General Partner that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.

 

Qualified Transferee ” means an “Accredited Investor” as such term is defined in Rule 501 promulgated under the Securities Act.

 

Redemption ” shall have the meaning set forth in Section 8.6.A .

 

Regulations ” means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

Regulatory Allocations ” shall have the meaning set forth in Section 6.3.A(viii) .

 

REIT ” means a real estate investment trust, as defined under Sections 856 through 860 of the Code.

 

REIT Requirements ” shall have the meaning set forth in Section 5.1 .

 

REIT Share ” means a share of common stock of the General Partner.

 

REIT Shares Amount ” means, as of any date, an aggregate number of REIT Shares equal to the number of Tendered Units, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership.

 

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REIT Share Market Value ” means, with respect to a REIT Share, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the Specified Redemption Date. The market price for each such trading day shall be: (i) if the REIT Shares are listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system, (ii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Company, or (iii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the Company, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than (10) days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the REIT Share Market Value of the REIT Share shall be determined by the Board of Directors of the Company acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

 

ROFO Agreement Effective Date ” means the date the Partnership acquires the ROFO Interests pursuant to the respective ROFO Agreements in exchange for Partnership Units.

 

ROFO Agreement ” means those certain Right of First Offer Agreements by and between the Partnership and Global Innovation Partners, LLC, whereby such entities granted the Partnership the right to acquire the ROFO Interests.

 

ROFO Interests ” means those certain properties or interests in entities which own certain real property described in the respective ROFO Agreements.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.

 

Securities Exchange Act ” means the Securities Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.

 

Single Funding Notice ” shall have the meaning set forth in Section 8.6.C(1)(b) .

 

Specified Redemption Date ” means the day of receipt by the General Partner of a Notice of Redemption; provided that in the event the General Partner elects a Stock Offering Funding pursuant to Section 8.6.C , such Specified Redemption Date shall be deferred until the next Business Day following the date of the closing of the Stock Offering Funding.

 

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Stock Offered Funding Amount ” shall have the meaning set forth in Section 8.6.C(2) .

 

Stock Offering Funding ” shall have the meaning set forth in Section 8.6.C(1)(a) .

 

Stock Plan ” means any stock incentive, stock option, stock ownership or employee benefits plan of the General Partner.

 

Subsequent Redemption ” shall have the meaning set forth in Section 8.6.F(4) .

 

Subsidiary ” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

 

Subsidiary Partnership ” means any partnership or limited liability company that is a Subsidiary of the Partnership.

 

Substituted Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 .

 

Surviving Partnership ” shall have the meaning set forth in Section 11.2.B(2) .

 

Tax Items ” shall have the meaning set forth in Section 6.4.A .

 

Tenant ” means any tenant from which the General Partner derives rent either directly or indirectly through partnerships, including the Partnership.

 

Tendered Units ” shall have the meaning set forth in Section 8.6.A .

 

Tendering Partner ” shall have the meaning set forth in Section 8.6.A .

 

Termination Transaction ” shall have the meaning set forth in Section 11.2.B.

 

Transaction ” shall have the meaning set forth in Section 8.7.F .

 

Twelve-Month Period ” means a twelve-month period ending on the first anniversary of the Effective Date or on each subsequent anniversary thereof.

 

Unvested Profits Interest Units ” shall have the meaning set forth in Section 4.5.C .

 

Vested Profits Interest Units ” shall have the meaning set forth in Section 4.5.C .

 

Vesting Agreement ” means each or any, as the context implies, vesting agreement entered into by a Profits Interest Unitholder upon acceptance of an award of Unvested Profits Interest Units under the Plan (as such agreement may be amended, modified or supplemented from time to time).

 

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Withdrawing Partner ” shall have the meaning set forth in Section 8.6.C(3)(c) .

 

Section 1.2 Rules of Construction

 

Unless otherwise indicated, all references herein to “ REIT ,” “ REIT Requirements ,” “ REIT Shares ” and “ REIT Shares Amount ” with respect to the General Partner shall apply only with reference to the Company.

 

ARTICLE 2.

ORGANIZATIONAL MATTERS

 

Section 2.1 Organization

 

The Partnership is a limited partnership formed pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. Except as expressly provided herein, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.

 

Section 2.2 Name

 

The name of the Partnership is Digital Realty Trust, L.P. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

 

Section 2.3 Registered Office and Agent; Principal Office

 

The name and address of the registered office and registered agent of the Partnership in the State of Maryland is National Registered Agents, Inc. of MD, 11 East Chase Street, Baltimore, MD 21202. The address of the principal office of the Partnership in the State of Maryland is c/o National Registered Agents, Inc. of MD, 11 East Chase Street, Baltimore, MD 21202. The principal office of the Partnership is located at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Maryland as the General Partner deems advisable.

 

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Section 2.4 Power of Attorney

 

A. Each Limited Partner and each Assignee constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:

 

(1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Maryland and in all other jurisdictions in which the Partnership may conduct business or own property; (b) all instruments that the General Partner or any Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Articles 11 , 12 or 13 or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and

 

(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

 

Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article 14 or as may be otherwise expressly provided for in this Agreement.

 

B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or any Liquidator, within 15 days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

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Section 2.5 Term

 

The term of the Partnership commenced on July 21, 2004 and shall continue until December 31, 2104 unless it is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law.

 

ARTICLE 3.

PURPOSE

 

Section 3.1 Purpose and Business

 

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any business described in the foregoing clause (i) or to own interests in any entity engaged, directly or indirectly, in any such business and (iii) to do anything necessary or incidental to the foregoing, provided , however , that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to be classified as a REIT for federal income tax purposes, unless the General Partner ceases to qualify as a REIT for reasons other than the conduct of the business of the Partnership, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any business described in the foregoing clause (i) or to own interests in any entity engaged, directly or indirectly, in any such business and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole discretion to cease qualifying as a REIT, the Partners acknowledge that the General Partner’s current status as a REIT inures to the benefit of all the Partners and not solely the General Partner.

 

Section 3.2 Powers

 

The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided , however , notwithstanding anything to the contrary in this Agreement, the Partnership shall not, absent the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, take, or refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, could (i) adversely affect the ability of the General Partner to continue to qualify as a REIT, (ii) subject the General Partner to any taxes under Section 857 or Section 4981 of the Code, or (iii) violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner or its securities, unless any such action (or inaction) under (i), (ii) or (iii) shall have been specifically consented to by the General Partner in writing.

 

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Section 3.3 Partnership Only for Purposes Specified

 

The Partnership shall be a partnership only for the purposes specified in Section 3.1 , and this Agreement shall not be deemed to create a partnership among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1 . Except as otherwise provided in this Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.

 

Section 3.4 Representations and Warranties by the Parties

 

A. Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute, regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

 

B. Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), member(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its certificate of limited partnership, partnership agreement, trust agreement, limited liability company operating agreement, charter or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, members, beneficiaries, trustees or stockholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, members, trustees, beneficiaries or stockholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

 

C. Each Partner represents, warrants, and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Partner further represents and warrants

 

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that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment. Each Partner represents, warrants and agrees that such Partner is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act).

 

D. Each Partner acknowledges that (i) the Partnership Units (and any REIT Shares that might be exchanged therefor) have not been registered under the Securities Act and may not be transferred unless they are subsequently registered under the Securities Act or an exemption from such registration is available (it being understood that the Partnership has no intention of so registering the Partnership Units), (ii) a restrictive legend in the form set forth in Exhibit D shall be placed on the certificates representing the Partnership Units, and (iii) a notation shall be made in the appropriate records of the Partnership indicating that the Partnership Units are subject to restrictions on transfer.

 

E. Each Limited Partner further represents, warrants, covenants and agrees as follows:

 

(1) Except as provided in Exhibit E , at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not and will not, without the prior written consent of the General Partner, actually own or Constructively Own (a) with respect to any Tenant that is a corporation, any stock of such Tenant, and (b) with respect to any Tenant that is not a corporation, any interests in either the assets or net profits of such Tenant.

 

(2) Except as provided in Exhibit F , at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not, and agrees that it will not without the prior written consent of the General Partner, actually own or Constructively Own, any stock in the General Partner, other than any REIT Shares or other shares of capital stock of the General Partner such Partner may acquire (a) as a result of an exchange of Tendered Units pursuant to Section 8.6 or (b) upon the exercise of options granted or delivery of REIT Shares pursuant to any Stock Plan, in each case subject to the ownership limitations set forth in the General Partner’s Charter.

 

(3) Upon request of the General Partner, it will disclose to the General Partner the amount of REIT Shares or other shares of capital stock of the General Partner, or shares of capital stock or other interests in Tenants, that it actually owns or Constructively Owns.

 

(4) It understands that if, for any reason, (a) the representations, warranties or agreements set forth in E(1) or (2) above are violated, or (b) the Partnership’s actual or Constructive Ownership of REIT Shares or other shares of capital stock of the General Partner violates the limitations set forth in the Charter, then (x) some or all of the Redemption rights of the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary, as provided in the Charter.

 

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(5) Without the consent of the General Partner, which may be given or withheld in its sole discretion, no Partner shall take any action that would cause (i) the Partnership at any time to have more than 100 partners, including as partners (“ flow through partners ”) those persons indirectly owning an interest in the Partnership through a partnership, limited liability company, S corporation or grantor trust (such entity, a “ flow through entity ”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Partnership; or (ii) the Partnership Interest initially issued to such Partner or its predecessors to be held by more than seven (7) partners, including as partners any flow through partners.

 

F. The representations and warranties contained in this Section 3.4 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding up of the Partnership.

 

G. Each Partner hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, which may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.

 

Section 3.5 Certain ERISA Matters

 

Each Partner acknowledges that the Partnership is intended to qualify as a “real estate operating company” (as such term is defined in the Plan Asset Regulation). The General Partner may structure the investments in, relationships with and conduct with respect to Properties and any other assets of the Partnership so that the Partnership will be a “real estate operating company” (as such term is defined in the Plan Asset Regulation).

 

ARTICLE 4.

CAPITAL CONTRIBUTIONS

 

Section 4.1 Capital Contributions of the Partners

 

At the time of their respective execution of this Agreement, the Partners shall make or shall have made Capital Contributions as set forth in Exhibit A to this Agreement. The Partners shall own Partnership Units of the class or series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A , which Percentage Interest shall be adjusted in Exhibit A from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner’s Percentage Interest. Except as required by law, as otherwise provided in Sections 4.3 , 4.4 , 4. 5 and 10.5 , or as otherwise agreed to by a Partner and the Partnership, no Partner shall be required or permitted to make any additional Capital Contributions or loans to the Partnership. Unless otherwise specified by the General Partner at the time of the creation of any class of Partnership Interests, the corresponding class or series of capital stock for any Partnership Units issued shall be REIT Shares.

 

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Section 4.2 Loans by Third Parties

 

Subject to Section 4.3 , the Partnership may incur Debt, or enter into other similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any further acquisition of Properties) with any Person that is not the General Partner upon such terms as the General Partner determines appropriate; provided that , the Partnership shall not incur any Debt that is recourse to the General Partner, except to the extent otherwise agreed to by the General Partner in its sole discretion.

 

Section 4.3 Additional Funding and Capital Contributions

 

A. General . The General Partner may, at any time and from time to time determine that the Partnership requires additional funds (“ Additional Funds ”) for the acquisition of additional Properties or for such other Partnership purposes as the General Partner may determine. Additional Funds may be raised by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.3 . No Person shall have any preemptive, preferential or similar right or rights to subscribe for or acquire any Partnership Interest, except as set forth in this Section 4.3 .

 

B. Issuance of Additional Partnership Interests . The General Partner, in its sole and absolute discretion, may raise all or any portion of the Additional Funds by accepting additional Capital Contributions of cash. The General Partner may also accept additional Capital Contributions of real property or any other non-cash assets. In connection with any such additional Capital Contributions (of cash or property), the General Partner is hereby authorized to cause the Partnership from time to time to issue to Partners (including the General Partner) or other Persons (including, without limitation, in connection with the contribution of tangible or intangible property, services, or other consideration permitted by the Act to the Partnership) additional Partnership Units or other Partnership Interests, which may be Common Units or other Partnership Units issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional, conversion, exchange or other special rights, powers, and duties, including rights, powers, and duties senior to then existing Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Maryland law, including without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction, and credit to such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; and (iv) the right to vote, including, without limitation, the Limited Partner approval rights set forth in Section 11.2.A ; provided , that no such additional Partnership Units or other Partnership Interests shall be issued to the General Partner unless either (a) (1) the additional Partnership Interests are issued in connection with the grant, award, or issuance of shares of the General Partner pursuant to Section 4.3.C below, which shares have designations, preferences, and other rights (except voting rights) such that the economic interests attributable to such shares are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner

 

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in accordance with this Section 4.3.B , and (2) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to any net proceeds raised in connection with such issuance, or (b) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class or (c) the additional Partnership Interests are issued pursuant to a Stock Plan. The General Partner’s determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Partnership Interests are validly issued and paid. In the event that the Partnership issues additional Partnership Interests pursuant to this Section 4.3.B , the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.4 , Section 6.2.B , and Section 8.6 ) as it determines are necessary to reflect the issuance of such additional Partnership Interests.

 

C. Issuance of REIT Shares or Other Securities by the General Partner . Except as provided in the next following paragraph of this Section 4.3C , the General Partner shall not issue any additional REIT Shares, other shares of capital stock of the General Partner or New Securities (other than REIT Shares issued pursuant to Section 8.6 or such shares, stock or securities pursuant to a dividend or distribution (including any stock split) to all of its stockholders or all of its stockholders who hold a particular class of stock of the General Partner), unless (i) the General Partner shall cause the Partnership to issue to the General Partner, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests thereof are substantially similar to those of the REIT Shares, other shares of capital stock of the General Partner or New Securities issued by the General Partner and (ii) the General Partner shall make a Capital Contribution of any net proceeds from the issuance of such additional REIT Shares, other shares of capital stock or New Securities, as the case may be, and from any exercise of the rights contained in such additional New Securities, as the case may be. Without limiting the foregoing, the General Partner is expressly authorized to issue REIT Shares, other shares of capital stock of the General Partner or New Securities for no tangible value or for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the General Partner corresponding Partnership Interests, so long as (x) the General Partner concludes in good faith that such issuance of Partnership Interests is in the interests of the Partnership; and (y) the General Partner contributes all proceeds, if any, from such issuance and exercise to the Partnership.

 

In connection with the General Partner’s initial public offering of REIT Shares, any other issuance of REIT Shares, other capital stock of the General Partner or New Securities, the General Partner shall contribute to the Partnership, any net proceeds raised in connection with such issuance; provided , that the General Partner may use a portion of the net proceeds from any offering to acquire Partnership Units or other assets ( provided such other assets are contributed to the Partnership pursuant to the terms of this Agreement); and provided , further , that if the net proceeds actually received by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance then, except to the extent such net proceeds are used to acquire Partnership Units, the General Partner shall be deemed to have made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount and other expenses paid by the General Partner (which discount and expense shall be treated as an expense for the benefit of the Partnership for

 

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purposes of Section 7.4 ). In the case of issuance of REIT Shares by General Partner in any offering, whether registered under the Securities Act or exempt from such registration, underwritten, offered and sold directly to investors or through agents or other intermediaries, or otherwise distributed, for purposes of determining the number of additional Common Units issuable upon a Capital Contribution funded by the net proceeds thereof consistently with the immediately preceding sentence, any discount from the then current market price of REIT Shares shall be disregarded such that an equal number of Common Units can be issued to the General Partner as the number of REIT Shares sold by the General Partner in such offering, consistently with the determination of Partners’ Percentage Interests as provided in Section 4.3.D . In the case of issuances of REIT Shares, other capital stock of the General Partner or New Securities pursuant to any Stock Plan at a discount from fair market value or for no value, the amount of such discount representing compensation to the employee, as determined by the General Partner, shall be treated as an expense for the benefit of the Partnership for purposes of Section 7.4 and, as a result, the General Partner shall be deemed to have made a Capital Contribution to the Partnership in an amount equal to the sum of any net proceeds of such issuance plus the amount of such expense.

 

D. Percentage Interest Adjustments in the Case of Capital Contributions for Partnership Units . Upon the acceptance of additional Capital Contributions in exchange for any class or series of Partnership Units, the Percentage Interest of each Partner in such class or series of Partnership Units shall be equal to a fraction, the numerator of which is equal to the sum of (i) the Deemed Partnership Interest Value of the Partnership Interest of such Partner in respect of such class or series (computed as of the Business Day immediately preceding the Adjustment Date) and (ii) the Agreed Value of additional Capital Contributions, if any, made by such Partner to the Partnership in such class or series of Partnership Interests as of such Adjustment Date, and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of such class or series (computed as of the Business Day immediately preceding the Adjustment Date), plus (ii) the aggregate Agreed Value of additional Capital Contributions contributed by all Partners and/or third parties to the Partnership on such Adjustment Date in such class or series. Provided , however , solely for purposes of calculating a Partner’s Percentage Interest pursuant to this Section 4.3.D , (i) in the case of cash Capital Contributions by the General Partner funded by an offering of REIT Shares or other shares of capital stock of the General Partner and (ii) in the case of the contribution of properties by the General Partner which were acquired by the General Partner in exchange for REIT Shares or other shares of capital stock of the General Partner immediately prior to such contribution, the General Partner shall be issued a number of Partnership Units equal and corresponding to the number of such shares issued by the General Partner in exchange for such cash or Properties, the Partnership Units held by the other Partners shall not be adjusted, and the Partners’ Percentage Interests shall be adjusted accordingly. The General Partner shall promptly give each Partner written notice of its Percentage Interest, as adjusted. This Section 4.3.D shall not apply to the issuance of Profits Interest Units, which shall be governed by Section 4.5 , and the General Partner may adjust Percentage Interests in a manner that is different from the provisions of this Section 4.3.D to the extent it reasonably determines it is appropriate to do so to reflect the value of the respective Capital Contributions made to the Partnership and the number of Partnership Units issued with respect thereto.

 

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Section 4.4 Other Contribution Provisions . In the event that any Partner is admitted to the Partnership and is given (or is treated as having received) a Capital Account at the time of admission in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner as if the Partnership had compensated such Partner in cash, and the Partner had contributed such cash to the capital of the Partnership. In addition, with the consent of the General Partner, in its sole discretion, one or more Limited Partners may enter into agreements with the Partnership, in the form of a guarantee or contribution agreement, which have the effect of providing a guarantee of certain obligations of the Partnership.

 

Section 4.5 Profit Interest Units . The General Partner may from time to time issue Profits Interest Units to Persons who provide services to the Partnership, for such consideration or for no consideration as the General Partner may determine to be appropriate, and admit such Persons as Limited Partners. Subject to the following provisions of this Section 4.5 and the special provisions of Sections 4.3.D, 6.2.C, 8.7 and 8.8, Profits Interest Units shall be treated as Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Partners’ Percentage Interests, Profits Interest Units shall be treated as Common Units. In particular, the Partnership shall maintain at all times a one-to-one correspondence between Profits Interest Units and Common Units for conversion, distribution and other purposes, including without limitation complying with the following procedures:

 

A. If an Adjustment Event occurs, then the General Partner shall make a corresponding adjustment to the Profits Interest Units to maintain a one-for-one conversion and economic equivalence ratio between Common Units and Profits Interest Units. The following shall be “ Adjustment Events ”: (i) the Partnership makes a distribution on all outstanding Common Units in Partnership Units, (ii) the Partnership subdivides the outstanding Common Units into a greater number of units or combines the outstanding Common Units into a smaller number of units, or (iii) the Partnership issues any Partnership Units in exchange for its outstanding Common Units by way of a reclassification or recapitalization of its Common Units. If more than one Adjustment Event occurs, the adjustment to the Profits Interest Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Partnership Units to the Company in respect of a Capital Contribution to the Partnership of proceeds from the sale of securities by the Company. If the Partnership takes an action affecting the Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the General Partner such action would require an adjustment to the Profits Interest Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the Profits Interest Units, to the extent permitted by law and by any applicable Stock Plan or other compensatory arrangement or incentive program pursuant to which Profits Interest Units are issued, in such manner and at such time as the General Partner, in its sole discretion, may determine to be reasonably appropriate under the circumstances. If an adjustment is made to the Profits Interest Units as herein provided the Partnership shall promptly file in the books and records of the Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of

 

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such adjustment absent manifest error. Promptly after filing of such certificate, the Partnership shall mail a notice to each Profits Interest Unitholder setting forth the adjustment to his or her Profits Interest Units and the effective date of such adjustment.

 

B. Unless otherwise provided by the General Partner with respect to any particular class or series of Profits Interest Units, the Profits Interest Unitholders shall, in respect of each Distribution Payment Date, when, as and if authorized and declared by the General Partner out of assets legally available for that purpose, be entitled to receive distributions in an amount per Profits Interest Unit equal to the distributions per Common Unit, paid to holders of record on the same record date established by the General Partner with respect to such Distribution Payment Date. References to additional Partnership Interests in Section 5.4 shall be deemed to include Profits Interest Units issued during a Distribution Period and such Section 5.4 shall apply in full to Profits Interest Units. Unless otherwise provided by the General Partner with respect to any particular class or series of Profits Interest Units, (x) during any Distribution Period, so long as any Profits Interest Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the Profits Interest Units for such Distribution Period, (y), the Profits Interest Units shall rank pari passu with the Common Units as to the payment of regular and special periodic or other distributions and distribution of assets, and (z) any class or series of Partnership Units or Partnership Interests which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Common Units with respect to distributions shall also rank junior to, on a parity with, or senior to, as the case may be, the Profits Interest Units. Notwithstanding the foregoing provisions of this Section 4.5.B , proceeds from a Liquidating Event shall be distributed to Holders of Partnership Units as set forth in Sections 5.3 and 13.2 . Subject to the terms of any Vesting Agreement, a Profits Interest Unitholder shall be entitled to transfer his or her Profits Interest Units to the same extent, and subject to the same restrictions as holders of Common Units are entitled to transfer their Common Units pursuant to Article 11 .

 

C. Profits Interest Units shall be subject to the following special provisions:

 

(a) Vesting Agreements . Profits Interest Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Plan, if applicable. Profits Interest Units that were fully vested when issued or that have vested under the terms of a Vesting Agreement are referred to as “ Vested Profits Interest Units ”; all other Profits Interest Units shall be treated as “ Unvested Profits Interest Units .”

 

(b) Forfeiture . Unless otherwise specified in the Vesting Agreement or in any applicable Stock Plan or other compensatory arrangement or incentive program pursuant to which Profits Interest Units are issued, upon the occurrence of any event specified in such Vesting Agreement, Stock Plan, arrangement or program as resulting in either the right of the Partnership or the General Partner to repurchase Profits Interest Units at a specified purchase price or some other forfeiture of any Profits Interest Units, then if the Partnership or the General Partner exercises such right to repurchase or forfeiture or upon the occurrence of the event

 

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causing forfeiture in accordance with the applicable Vesting Agreement, Stock Plan, arrangement or program, then the relevant Profits Interest Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the applicable Vesting Agreement, Stock Plan, arrangement or program, no consideration or other payment shall be due with respect to any Profits Interest Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of Profits Interest Units, the balance of the portion of the Capital Account of the Profits Interest Unitholder that is attributable to all of his or her Profits Interest Units shall be reduced by the amount, if any, by which it exceeds the target balance contemplated by Section 6.2.C , calculated with respect to the Profits Interest Unitholder’s remaining Profits Interest Units, if any.

 

(c) Allocations . Profits Interest Unitholders shall be entitled to certain special allocations of gain under Section 6.2.C .

 

(d) Redemption . The Redemption Right provided to Limited Partners under Section 8.6 shall not apply with respect to Profits Interest Units unless and until they are converted to Partnership Units as provided in clause (vi) below and Section 8.7 .

 

(e) Legend . Any certificate evidencing an Profits Interest Unit shall bear an appropriate legend indicating that additional terms, conditions and restrictions on transfer, including without limitation any Vesting Agreement, apply to the Profits Interest Unit.

 

(f) Conversion to Partnership Units . Vested Profits Interest Units are eligible to be converted into Partnership Units under Section 8.7 .

 

(g) Voting . Profits Interest Units shall have the voting rights provided in Section 8.8 .

 

Section 4.6 No Preemptive Rights

 

Except to the extent expressly granted by the Partnership pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership or (ii) issuance or sale of any Partnership Units or other Partnership Interests.

 

ARTICLE 5.

DISTRIBUTIONS

 

Section 5.1 Requirement and Characterization of Distributions

 

The General Partner shall cause the Partnership to distribute quarterly all, or such portion as the General Partner may in its discretion determine, of Available Cash generated by the Partnership to the Partners who are Partners on the applicable Partnership Record Date with respect to such distribution, (1) first, with respect to any class or series of Partnership Interests that are entitled to any preference in distributions, in accordance with the rights of such class or series of Partnership Interests (and within such class or series, pro rata in proportion to the respective Percentage Interests on the applicable Partnership Record Date), and (2) second, with

 

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respect to any class or series of Partnership Interests that are not entitled to any preference in distributions, pro rata to each such class or series in accordance with the terms of such class or series to the Partners who are Partners of such class or series on the Partnership Record Date with respect to such distribution (and within each such class or series, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date). Unless otherwise expressly provided for herein or in an agreement, if any, entered into in connection with the creation of a new class or series of Partnership Interests created in accordance with Article 4 , no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest. The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with its qualification as a REIT, to cause the Partnership to distribute sufficient amounts to enable the General Partner, for so long as the General Partner has determined to qualify as a REIT, to pay stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (“ REIT Requirements ”), and (b) except to the extent otherwise determined by the General Partner, avoid the imposition of any federal income or excise tax liability on the General Partner.

 

Section 5.2 Distributions in Kind

 

No right is given to any Partner to demand and receive property other than cash. The General Partner may determine, in its sole and absolute discretion, to make a distribution in-kind to the Partners of Partnership assets, and such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5 , 6 and 10 .

 

Section 5.3 Distributions Upon Liquidation

 

Notwithstanding Section 5.1 , proceeds from a Liquidating Event shall be distributed to the Partners in accordance with Section 13.2 .

 

Section 5.4 Distributions to Reflect Issuance of Additional Partnership Interests

 

In the event that the Partnership issues additional Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Section 4.3.B , 4.3.C or 4.5 , the General Partner shall make such revisions to this Article 5 as it determines are necessary to reflect the issuance of such additional Partnership Interests. In the absence of any agreement to the contrary, an Additional Limited Partner shall be entitled to the distributions set forth in Section 5.1 (without regard to this Section 5.4 ) with respect to the period during which the closing of its contribution to the Partnership occurs, multiplied by a fraction the numerator of which is the number of days from and after the date of such closing through the end of the applicable period, and the denominator of which is the total number of days in such period.

 

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ARTICLE 6.

ALLOCATIONS

 

Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss

 

Net Income and Net Loss of the Partnership shall be determined and allocated with respect to each Partnership Year of the Partnership as of the end of each such year. Subject to the other provisions of this Article 6 , an allocation to a Partner of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss.

 

Section 6.2 General Allocations

 

A. Allocation of Net Income and Net Losses .

 

(1) Net Income . Except as otherwise provided in Section 6.3 , Net Income for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:

 

(a) First , to the General Partner in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to the General Partner pursuant to Section 6.2.A.2(c) for all prior Partnership Years minus the cumulative Net Income allocated to the General Partner pursuant to this Section 6.2.A(1)(a) for all prior Partnership Years;

 

(b) Second , to each Limited Partner in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to each such Limited Partner pursuant to Section 6.2.A.2(b) for all prior Partnership Years minus the cumulative Net Income allocated to such Limited Partner pursuant to this Section 6.2.A(1)(b) for all prior Partnership Years;

 

(c) Third , to the General Partner and the Limited Partners in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to each such Partner pursuant to Section 6.2.A.2(a) for all prior Partnership Years minus the cumulative Net Income allocated to each Partner pursuant to this Section 6.2.A(1)(c) for all prior Partnership Years;

 

(d) Fourth , to each of the Partners in accordance with their respective Percentage Interests.

 

To the extent the allocations of Net Income set forth above in any paragraph of this Section 6.2.A(1) are not sufficient to entirely satisfy the allocation set forth in such paragraph, such allocation shall be made in proportion to the total amount that would have been allocated pursuant to such paragraph without regard to such shortfall.

 

(2) Net Losses . Except as otherwise provided in Section 6.3 , Net Losses for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:

 

(a) First , to the General Partner and the Limited Partners in accordance with their respective Percentage Interests (to the extent consistent with this Section 6.2.A(2)(a) ) until the Adjusted Capital Account Balance (ignoring for this purpose any amounts a Partner is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of each such Partner is zero;

 

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(b) Second , to the Limited Partners to the extent of, and in proportion to, the positive balance (if any) in their Adjusted Capital Account Balance; and

 

(c) Third, to the General Partner.

 

B. Allocations to Reflect Issuance of Additional Partnership Interests . In the event that the Partnership issues additional Partnership Interests to the General Partner, a Limited Partner or any Additional Limited Partner pursuant to Section 4.3 , the General Partner shall make such revisions to this Section 6.2 as it determines are necessary to reflect the terms of the issuance of such additional Partnership Interests, including making preferential allocations to certain classes of Partnership Interests in accordance with any method selected by the General Partner.

 

C. Special Allocation of Gain to Profits Interest Unitholders . Notwithstanding the allocations set forth in Section 6.2.A(1) above, any net capital gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain treated as realized in connection with an adjustment to the Gross Asset Value of Partnership assets as set forth in the definition of such term, shall first be allocated to the Profits Interest Unitholders until the Economic Capital Account Balances of such Limited Partners, to the extent attributable to their ownership of Profits Interest Units, are equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of their Profits Interest Units. For this purpose, the “ Economic Capital Account Balances ” of the Profits Interest Unitholders will be equal to their Capital Account balances, plus the amount of their shares of any Partner Minimum Gain or Partnership Minimum Gain, in each case to the extent attributable to their ownership of Profits Interest Units. Similarly, the “ Common Unit Economic Balance ” shall mean (i) the Capital Account balance of the Company, plus the amount of the Company’s share of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the Company’s ownership of Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 6.2.C , divided by (ii) the number of the Company’s Common Units. Any such allocations shall be made among the Profits Interest Unitholders in proportion to the amounts required to be allocated to each under this Section 6.2.C . The parties agree that the intent of this Section 6.2.C is to make the Capital Account balances of the Profits Interest Unitholders with respect to their Profits Interest Units economically equivalent to the Capital Account balance of the Company with respect to its Common Units.

 

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Section 6.3 Additional Allocation Provisions

 

Notwithstanding the foregoing provisions of this Article 6 :

 

A. Regulatory Allocations .

 

(i) Minimum Gain Chargeback . Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 , or any other provision of this Article 6 , if there is a net decrease in Partnership Minimum Gain during any Partnership Year, each Holder shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holder’s share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Holder pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(i) is intended to qualify as a “minimum gain chargeback” within the meaning of Regulation Section 1.704-2(f) which shall be controlling in the event of a conflict between such Regulation and this Section 6.3.A(i) .

 

(ii) Partner Minimum Gain Chargeback . Except as otherwise provided in Regulations Section 1.704-2(i)(4), and notwithstanding the provisions of Section 6.2 , or any other provision of this Article 6 (except Section 6.3.A(i) ), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership Year, each Holder who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holder’s share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Holder pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(ii) is intended to qualify as a “chargeback of partner nonrecourse debt minimum gain” within the meaning of Regulation Section 1.704-2(i) which shall be controlling in the event of a conflict between such Regulation and this Section 6.3.A(ii) .

 

(iii) Nonrecourse Deductions and Partner Nonrecourse Deductions . Any Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Holders in accordance with their respective Percentage Interests. Any Partner Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Holder(s) who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable, in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).

 

(iv) Qualified Income Offset . If any Holder unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to the Holder in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of the Holder as quickly as possible provided that an allocation pursuant to this Section 6.3.A(iv) shall be made if and only to the extent that such Holder would have an

 

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Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.A(iv) were not in this Agreement. It is intended that this Section 6.3.A(iv) qualify and be construed as a “qualified income offset” within the meaning of Regulations 1.704-1(b)(2)(ii)(d), which shall be controlling in the event of a conflict between such Regulations and this Section 6.3.A(iv) .

 

(v) Gross Income Allocation . In the event any Holder has a deficit Capital Account at the end of any Partnership Year which is in excess of the sum of (1) the amount (if any) such Holder is obligated to restore to the Partnership, and (2) the amount such Holder is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Holder shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible, provided , that an allocation pursuant to this Section 6.3.A(v) shall be made if and only to the extent that such Holder would have a deficit Capital Account in excess of such sum after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.A(v) and Section 6.3.A(iv) were not in this Agreement.

 

(vi) Limitation on Allocation of Net Loss . To the extent any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Holder, such allocation of Net Loss shall be reallocated among the other Holders in accordance with their respective Percentage Interests, subject to the limitations of this Section 6.3.A(vi) .

 

(vii) Section 754 Adjustment . To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Holder in complete liquidation of his interest in the Partnership, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Holders in accordance with their interests in the Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(viii) Curative Allocation . The allocations set forth in Sections 6.3.A(i) , (ii) , (iii) , (iv) , (v) , (vi) , and (vii) (the “ Regulatory Allocations ”) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2 , the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Holders so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Holder shall be equal to the net amount that would have been allocated to each such Holder if the Regulatory Allocations had not occurred.

 

B. For purposes of determining a Holder’s proportional share of the “excess nonrecourse liabilities” of the Partnership within the meaning of Regulations Section 1.752-3(a)(3), each Holder’s interest in Partnership profits shall be such Holder’s Percentage Interest.

 

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Section 6.4 Tax Allocations

 

A. In General . Except as otherwise provided in this Section 6.4 , for income tax purposes each item of income, gain, loss and deduction (collectively, “ Tax Items ”) shall be allocated among the Holders in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 .

 

B. Allocations Respecting Section 704(c) Revaluations . Notwithstanding Section 6.4.A , Tax Items with respect to Partnership property that is contributed to the Partnership by a Partner shall be shared among the Holders for income tax purposes pursuant to Regulations promulgated under Section 704(c) of the Code, so as to take into account the variation, if any, between the basis of the property to the Partnership and its initial Gross Asset Value. With respect to Partnership property that is contributed to the Partnership in connection with the General Partner’s initial public offering or pursuant to the Partnership’s exercise of rights under any Option Agreement or ROFO Agreement, such variation between basis and initial Gross Asset Value shall be taken into account under the “traditional method” as described in Regulations Section 1.704-3(b). With respect to other properties contributed to the Partnership, the Partnership shall account for such variation under any method consistent with Section 704(c) of the Code and the applicable regulations as chosen by the General Partner. In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value (provided in Article 1 ), subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Section 704(c) of the Code and the applicable regulations consistent with the requirements of Regulations Section 1.704-1(b)(2)(iv)(g) using any method approved under Section 704(c) of the Code and the applicable regulations as chosen by the General Partner, provided , however , that the “traditional method” as described in Regulations Section 1.704-3(b) shall be used with respect to Partnership Property that is contributed to the Partnership in connection with the General Partner’s initial public offering or pursuant to the Partnership’s exercise of rights under any Option Agreement or ROFO Agreement.

 

ARTICLE 7.

MANAGEMENT AND OPERATIONS OF BUSINESS

 

Section 7.1 Management

 

A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the other provisions hereof including Sections 7.3 and 11.2 , shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its

 

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REIT status), to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1 , including, without limitation:

 

(1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the General Partner (so long as the General Partner has determined to qualify as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its stockholders sufficient to permit the General Partner to maintain REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership;

 

(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership, the registration of any class of securities of the Partnership under the Securities Exchange Act of 1934, as amended, and the listing of any debt securities of the Partnership on any exchange;

 

(3) subject to the provisions of Section 11.2 , the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or other combination of the Partnership with or into another entity;

 

(4) the acquisition, disposition, mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, and the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct or the operations of the General Partner or the Partnership, the lending of funds to other Persons (including, without limitation, the General Partner or any Subsidiaries of the Partnership) and the repayment of obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to its Subsidiaries;

 

(5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership;

 

(6) the negotiation, execution, and performance of any contracts, leases, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;

 

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(7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;

 

(8) the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership (including, without limitation, employees having titles such as “president,” “vice president,” “secretary” and “treasurer”), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, the determination of their compensation and other terms of employment or hiring, including waivers of conflicts of interest and the payment of their expenses and compensation out of the Partnership’s assets;

 

(9) the maintenance of such insurance for the benefit of the Partnership and the Partners and directors and officers of the Partnership or the General Partner as it deems necessary or appropriate;

 

(10) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, joint ventures, corporations or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to any Subsidiary and any other Person in which it has an equity investment from time to time); provided , that , as long as the General Partner has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that could cause the General Partner to fail to qualify as a REIT;

 

(11) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitration or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

 

(12) the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Person (including, without limitation, contributing or loaning Partnership funds to, incurring indebtedness on behalf of, or guarantying the obligations of any such Persons);

 

(13) subject to the other provisions in this Agreement, the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt, provided , that such methods are otherwise consistent with requirements of this Agreement;

 

(14) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;

 

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(15) holding, managing, investing and reinvesting cash and other assets of the Partnership;

 

(16) the collection and receipt of revenues and income of the Partnership;

 

(17) the exercise, directly or indirectly through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;

 

(18) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;

 

(19) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;

 

(20) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;

 

(21) the issuance of additional Partnership Interests as provided in Sections 4.3 , 4.4 or 4.5 ;

 

(22) the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6 hereof;

 

(23) the amendment and restatement of Exhibit A hereto to reflect accurately at all times the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment to this Agreement, as long as the matter or event being reflected in Exhibit A hereto otherwise is authorized by this Agreement;

 

(24) the taking of any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” taxable as a corporation under Section 7704 of the Code; and

 

(25) the delegation to another Person of any powers now or hereafter granted to the General Partner.

 

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B. Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provisions of this Agreement (except as provided in Section 7.3 or 11.2 ), the Act or any applicable law, rule or regulation to the fullest extent permitted under the Act or other applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.

 

C. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership and (ii) liability insurance for the benefit of any or all Indemnitees.

 

D. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.

 

E. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by the General Partner. The General Partner and the Partnership shall not have liability to a Partner under this Agreement as a result of an income tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement.

 

F. Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

 

Section 7.2 Certificate of Limited Partnership

 

To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Maryland and each other state, the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) , the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Maryland, any other state, or the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property.

 

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Section 7.3 Restrictions on General Partner’s Authority

 

A. The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of the Limited Partners and may not (i) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any liability not contemplated herein or under the Act; or (ii) enter into any contract, mortgage, loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to exercise its rights to a Redemption as provided in Section 8.6 , except in each case with the written consent of such Limited Partner.

 

B. The General Partner shall not, without the prior Consent of the Limited Partners, or except as provided in Section 7.3.C , amend, modify or terminate this Agreement.

 

C. Notwithstanding Section 7.3.B , the General Partner shall have the exclusive power to amend this Agreement as may be required to facilitate or implement any of the following purposes:

 

(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;

 

(2) to reflect the issuance of additional Partnership Interests pursuant to Sections 4.3 , 4.4 , 4.5 , 5.4 and 6.2.B or the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement;

 

(3) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;

 

(4) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;

 

(5) to reflect such changes as are reasonably necessary for the General Partner to maintain its status as a REIT, including changes which may be necessitated due to a change in applicable law (or an authoritative interpretation thereof) or a ruling of the IRS; and

 

(6) to modify, as set forth in the definition of “ Capital Account ,” the manner in which Capital Accounts are computed.

 

The General Partner will provide notice to the Limited Partners when any action under this Section 7.3.C is taken.

 

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D. Notwithstanding Sections 7.3.B and 7.3.C , this Agreement shall not be amended with respect to any Partner adversely affected, and no action may be taken by the General Partner, without the Consent of such Partner adversely affected if such amendment or action would (i) convert a Limited Partner’s interest in the Partnership into a general partner’s interest (except as the result of the General Partner acquiring such interest), (ii) modify the limited liability of a Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant to Article 5 or Section 13.2.A(4) , or the allocations specified in Article 6 (except as permitted pursuant to Sections 4.3 , 4.4 , 4.5 , 5.4 , 6.2.B and Section 7.3.C(3) ), (iv) adversely alter or modify the rights to a Redemption or the REIT Shares Amount as set forth in Section 8.6 , and related definitions hereof, (v) alter the protections of the Limited Partners as set forth in Section 11.2.B or (vi) amend this Section 7.3.D . Further, no amendment may alter the restrictions on the General Partner’s authority set forth elsewhere in this Section 7.3 without the Consent specified in such section. This Section 7.3D does not require unanimous consent of all Partners adversely affected unless the amendment is to be effective against all partners adversely affected.

 

Section 7.4 Reimbursement of the General Partner

 

A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

 

B. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s and the General Partner’s organization, the ownership of its assets and its operations. The General Partner is hereby authorized to cause the Partnership to pay compensation for accounting, administrative, legal, technical, management and other services rendered to the Partnership. Except to the extent provided in this Agreement, the General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses that the General Partner and its Affiliates incur relating to the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, administrative expenses); provided , that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership. The Partners acknowledge that all such expenses of the General Partner are deemed to be for the benefit of the Partnership. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.7 hereof. In the event that certain expenses are incurred for the benefit of the Partnership and other entities (including the General Partner), such expenses will be allocated to the Partnership and such other entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner.

 

C. If the General Partner shall elect to purchase from its stockholders REIT Shares for the purpose of delivering such REIT Shares to satisfy an obligation under any dividend reinvestment program adopted by the General Partner, any employee stock purchase plan adopted by the General Partner, or any similar obligation or arrangement undertaken by the

 

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General Partner in the future or for the purpose of retiring such REIT Shares, the purchase price paid by the General Partner for such REIT Shares and any other expenses incurred by the General Partner in connection with such purchase shall be considered expenses of the Partnership and shall be advanced by the Partnership to the General Partner or reimbursed by the Partnership to the General Partner, subject to the condition that: (i) if such REIT Shares subsequently are sold by the General Partner, the General Partner shall pay to the Partnership any proceeds received by the General Partner for such REIT Shares (which sales proceeds shall include the amount of dividends reinvested under any dividend reinvestment or similar program; provided , that a transfer of REIT Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such REIT Shares are not retransferred by the General Partner within thirty (30) days after the purchase thereof, or the General Partner otherwise determines not to retransfer such REIT Shares, the General Partner, shall cause the Partnership to redeem a number of Partnership Units held by the General Partner equal to the number of such REIT Shares, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership (in which case such advancement or reimbursement of expenses shall be treated as having been made as a distribution in redemption of such number of Partnership Units held by the General Partner).

 

D. As set forth in Section 4.3 , the General Partner shall be treated as having made a Capital Contribution in the amount of all expenses that it incurs relating to the General Partner’s offering of REIT Shares, other shares of capital stock of the General Partner or New Securities.

 

E. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.4 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.

 

Section 7.5 Outside Activities of the General Partner

 

A. Except in connection with a transaction authorized in Section 11.2 , without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business, other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner and the management of the business of the Partnership, its operation as a public reporting company with a class (or classes) of securities registered under the Exchange Act, its operation as a REIT and such activities as are incidental to the same. Except as otherwise expressly provided in this Section 7.5 , without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, participate in or otherwise acquire any interest in any real or personal property, except its General Partner Interest, its minority interest in any Subsidiary Partnership(s) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and such bank accounts, similar instruments or other short-term investments as it deems necessary to carry out its responsibilities contemplated

 

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under this Agreement and the Charter. In the event the General Partner desires to contribute cash to any Subsidiary Partnership to acquire or maintain an interest of 1% or less in the capital of such partnership, the General Partner may acquire or maintain an interest of 1% or less in the capital of such partnership, and the General Partner may acquire such cash from the Partnership as a loan or in exchange for a reduction in the General Partner’s Partnership Units, in an amount equal to the amount of such cash divided by the Fair Market Value of a REIT Share on the day such cash is received by the General Partner. Notwithstanding the foregoing, the General Partner may acquire Properties or other assets in exchange for REIT Shares or cash, to the extent such Properties or other assets are immediately contributed by the General Partner to the Partnership, pursuant to the terms described in Section 4.3.D . Any Limited Partner Interests acquired by the General Partner, whether pursuant to exercise by a Limited Partner of its right of Redemption, or otherwise, shall be automatically converted into a General Partner Interest comprised of an identical number of Partnership Units with the same rights, priorities and preferences as the class or series so acquired. The General Partner may also own one-hundred percent (100%) of the stock or interests of one or more Qualified REIT Subsidiaries or limited liability companies, respectively, provided that any such entity shall be subject to the limitations of this Section 7.5.A . If, at any time, the General Partner acquires material assets (other than Partnership Interests or other assets on behalf of the Partnership), the definition of “ REIT Shares Amount ” and the definition of “Deemed Value of Partnership Interests” shall be adjusted, as reasonably determined by the General Partner, to reflect the relative Fair Market Value of a share of capital stock of the General Partner relative to the Deemed Partnership Interest Value of the related Partnership Unit. The General Partner’s General Partner Interest in the Partnership, its minority interest in any Subsidiary Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and interests in such short-term liquid investments, bank accounts or similar instruments as the General Partner deems necessary to carry out its responsibilities contemplated under this Agreement and the Charter are interests which the General Partner is permitted to acquire and hold for purposes of this Section 7.5.A .

 

B. In the event the General Partner exercises its rights under the Charter to purchase REIT Shares, other capital stock of the General Partner or New Securities, as the case may be, then the General Partner shall cause the Partnership to purchase from it a number of Partnership Units equal to the number of REIT Shares, other capital stock of the General Partner or New Securities, as the case may be, so purchased on the same terms that the General Partner purchased such REIT Shares, other capital stock of the General Partner or New Securities, as the case may be.

 

Section 7.6 Contracts with Affiliates

 

A. The Partnership may lend or contribute to, and borrow funds from, Persons in which it has an equity investment, and such Persons may borrow funds from, and lend or contribute funds to, the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Person.

 

B. Except as provided in Section 7.5.A , the Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner in its sole discretion deems advisable.

 

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C. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans (including without limitation plans that contemplate the issuance of Profits Interests Units) funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed or to be performed, directly or indirectly, for the benefit of such entities. The General Partner also is expressly authorized to cause the Partnership to issue to it Partnership Units corresponding to REIT Shares issued by the General Partner pursuant to any Stock Plan or any similar or successor plan and to repurchase such Partnership Units from the General Partner to the extent necessary to permit the General Partner to repurchase such REIT Shares in accordance with such plan.

 

D. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.

 

E. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

 

Section 7.7 Indemnification

 

A. To the fullest extent permitted by law, the Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, subpoenas, requests for information, formal or informal investigations, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership or the General Partner as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith, constituted fraud or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption

 

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that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A . The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or any entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A . Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from liability policies covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7 , except to the extent otherwise expressly agreed to by such Partner and the Partnership.

 

B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding or the recipient of a subpoena or request for information with respect to a proceeding to which such Indemnitee is not a party may be paid or reimbursed by the Partnership in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

 

C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified.

 

D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

 

E. For purposes of this Section 7.7 , the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of Section 7.7 ; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

 

F. In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

 

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G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

 

H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnership’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

 

I. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.7 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership) such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.

 

J. Any indemnification hereunder is subject to, and limited by, the provisions of Section 10-107 of the Act.

 

K. In the event the Partnership is made a party to any litigation or otherwise incurs any loss or expense as a result of or in connection with any Partner’s personal obligations or liabilities unrelated to Partnership business, such Partner shall indemnify and reimburse the Partnership for all such loss and expense incurred, including legal fees, and the Partnership interest of such Partner may be charged therefor. The liability of a Partner under this Section 7.7.K shall not be limited to such Partner’s Partnership Interest, but shall be enforceable against such Partner personally.

 

Section 7.8 Liability of the General Partner

 

A. Notwithstanding anything to the contrary set forth in this Agreement, none of the General Partner nor any of its officers, directors, agents or employees shall be liable or accountable in damages or otherwise to the Partnership, any Partners or any Assignees, or their successors or assigns, for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission if the General Partner acted in good faith.

 

B. The Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partner’s stockholders collectively. Neither the General Partner generally nor the board of directors of the General Partner specifically is under any obligation to give priority to the separate interests of the Limited Partners or the General Partner’s stockholders (including, without limitation, the tax consequences to Limited Partners or Assignees or to stockholders) in deciding whether to cause

 

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the Partnership to take (or decline to take) any actions. If there is a conflict between the interests of the stockholders of the General Partner on one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of the General Partner or the Limited Partners; provided , however , that for so long as the General Partner owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders of the General Partner or the Limited Partners shall be resolved in favor of the stockholders of the General Partner. The General Partner shall not be liable under this Agreement to the Partnership or to any Partner for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions; provided , that the General Partner has acted in good faith.

 

C. Subject to its obligations and duties as General Partner set forth in Section 7.1.A , the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

 

D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the General Partner and any of its officers, directors, agents and employee’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

 

Section 7.9 Other Matters Concerning the General Partner

 

A. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

 

C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder.

 

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D. Notwithstanding any other provisions of this Agreement or any non-mandatory provision of the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order to protect the ability of the General Partner, for so long as the General Partner has determined to qualify as a REIT, to (i) continue to qualify as a REIT or (ii) avoid the General Partner incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

 

Section 7.10 Title to Partnership Assets

 

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided , however , that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

 

Section 7.11 Reliance by Third Parties

 

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

 

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ARTICLE 8.

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

 

Section 8.1 Limitation of Liability

 

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or under the Act.

 

Section 8.2 Management of Business

 

No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Partnership’s business transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.

 

Section 8.3 Outside Activities of Limited Partners

 

Subject to any agreements entered into by a Limited Partner or its Affiliates with the General Partner, Partnership or a Subsidiary, any Limited Partner and any officer, director, employee, agent, trustee, Affiliate or stockholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person, other than the Limited Partners benefiting from the business conducted by the General Partner, and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.

 

Section 8.4 Return of Capital

 

Except pursuant to the rights of Redemption set forth in Section 8.6 , no Limited Partner shall be entitled to the withdrawal or return of his or her Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except as expressly set forth herein, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses, distributions or credits.

 

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Section 8.5 Rights of Limited Partners Relating to the Partnership

 

A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C , each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s expense:

 

(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by the General Partner pursuant to the Securities Exchange Act, and each communication sent to the stockholders of the General Partner;

 

(2) to obtain a copy of the Partnership’s federal, state and local income tax returns for each Partnership Year;

 

(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;

 

(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and

 

(5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.

 

B. The Partnership shall notify each Limited Partner in writing of any adjustment made in the calculation of the REIT Shares Amount within a reasonable time after the date such change becomes effective.

 

C. Notwithstanding any other provision of this Section 8.5 , the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or (ii) the Partnership or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential.

 

Section 8.6 Redemption Rights

 

A. On or after the date fourteen (14) months after (i) the Effective Date, with respect to the Partnership Units acquired prior to, on or contemporaneously with the Effective Date, (ii) the Option Agreement Effective Date, with respect to the Partnership Units received pursuant to the Option Agreement, (iii) the ROFO Agreement Effective Date, with respect to the Partnership Units received pursuant to the ROFO Agreement, and (iv) the date of issuance of any other Partnership Units, in each case, other than Profits Interest Units and except to the extent a different date is expressly provided in an agreement entered into between the Partnership and any Limited Partner, each Limited Partner shall have the right (subject to the terms and conditions set

 

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forth herein and in any other such agreement, as applicable) to require the Partnership to redeem all or a portion of the Partnership Units held by such Limited Partner (such Partnership Units being hereafter referred to as “ Tendered Units ”) in exchange for the Cash Amount (a “ Redemption ”); provided that the terms of such Partnership Units do not provide that such Partnership Units are not entitled to a right of Redemption. Unless otherwise expressly provided in this Agreement or in a separate agreement entered into between the Partnership and the holders of such Partnership Units, all Common Units shall be entitled to a right of Redemption hereunder. The Tendering Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Limited Partner who is exercising the right (the “ Tendering Partner ”). The Cash Amount shall be payable to the Tendering Partner within ten (10) days of the Specified Redemption Date, except as provided below.

 

B. REIT Share Election

 

(1) Notwithstanding Section 8.6.A above, if a Limited Partner has delivered to the General Partner a Notice of Redemption then the General Partner may, in its sole and absolute discretion, (subject to the limitations on ownership and transfer of REIT Shares set forth in the Charter) elect to acquire some or all of the Tendered Units from the Tendering Partner in exchange for the REIT Shares Amount (as of the Specified Redemption Date) and, if the General Partner so elects, the Tendering Partner shall sell the Tendered Units to the General Partner in exchange for the REIT Shares Amount. In such event, the Tendering Partner shall have no right to cause the Partnership to redeem such Tendered Units. The General Partner shall promptly give such Tendering Partner written notice of its election, and subject to Section 8.6.C below, the Tendering Partner may elect to withdraw its redemption request at any time prior to the receipt of the cash pursuant to Section 8.6.A or REIT Shares Amount pursuant to this Section 8.6.B by such Tendering Partner.

 

(2) The REIT Shares Amount, if applicable, shall be delivered as duly authorized, validly issued, fully paid and nonassessable REIT Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the Charter, the Bylaws of the General Partner, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such REIT Shares entered into by the Tendering Partner. Notwithstanding any delay in such delivery (but subject to Section 8.6.E ), the Tendering Partner shall be deemed the owner of such REIT Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date. In addition, the REIT Shares for which the Partnership Units might be exchanged shall also bear a legend which generally provides the following:

 

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE CORPORATION’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (“REIT”) UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION’S ARTICLES OF AMENDMENT AND

 

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RESTATEMENT, (i) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK OF THE CORPORATION IN EXCESS OF 9.8% OF THE VALUE OF THE TOTAL OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION AND NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION’S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE CORPORATION; (ii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iii) NO PERSON MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP SET FORTH IN (i) OR (ii) IS VIOLATED, THE SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES, AND ANY TRANSFER THAT WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS SHALL BE VOID AB INITIO . IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE CHARTER OF THE CORPORATION SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE CHARTER OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

 

C. Stock Offering Funding Option

 

(1) (a) Notwithstanding Section 8.6.A or Section 8.6.B above, if a Limited Partner has delivered to the General Partner a Notice of Redemption with respect to Excess Units, and (i) the number of Excess Units plus the number of Tendered Units such Limited Partner agrees to treat as Excess Units (the “ Offering Units ”) exceeds (A) 9.8% of the REIT Shares, calculated in accordance with the methodology for calculating the percentage of ownership of a Person for purposes of the ownership limit pursuant to Article VI of the Charter (subject to adjustment in connection with any Adjustment Event), and (B) $50,000,000 gross value based on a Partnership Unit price equal to the REIT Share Market Value, and (ii) the

 

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General Partner is eligible to file a registration statement under Form S-3 (or any successor form similar thereto), then the General Partner may, at its election, either (x) cause the Partnership to redeem the Offering Units with the proceeds of an offering, whether registered under the Securities Act or exempt from such registration, underwritten, offered and sold directly to investors or through agents or other intermediaries, or otherwise distributed (a “ Stock Offering Funding ”) of a number of REIT Shares (“ Offered Shares ”) equal to the REIT Shares Amount with respect to the Offering Units pursuant to the terms of this Section 8.6.C ; or (y) cause the Partnership to pay the Cash Amount with respect to the Excess Units pursuant to the terms of Section 8.6.A ; or (z) acquire the Excess Units in exchange for the REIT Shares Amount pursuant to the terms of Section 8.6.B , but only if the Tendering Partner provides the General Partner with any representations or undertakings which the General Partner has determined, in its sole and absolute discretion, are sufficient to prevent a violation of the Charter. In the event that the General Partner fails to give notice of its exercise of the election described in clause (i) above within the period of time specified in Section 8.6.B for an election to deliver the REIT Share Amount, it will be deemed to have elected not to purchase the Tendered Units through a Stock Offering Funding.

 

(b) In the event that the General Partner elects a Stock Offering Funding with respect to a Notice of Redemption, it may at such time, give notice (a “ Single Funding Notice ”) of such election to all Limited Partners and require that all Limited Partners elect whether or not to effect a Redemption to be funded through such Stock Offering Funding. In the event a Limited Partner elects to effect such a Redemption, it shall give notice thereof and of the number of Partnership Units to be made subject thereto in writing to the General Partner within 10 Business Days after receipt of the Single Funding Notice, and such Limited Partner shall be treated as a Tendering Partner for all purposes of this Section 8.6.C . In the event that a Limited Partner does not so elect, it shall be deemed to have waived its right to effect a Redemption for the current Twelve-Month Period, except that it may effect a Redemption for no more than 1.0% of the REIT Shares, calculated in accordance with the methodology for calculating the percentage of ownership of a Person for purposes of the ownership limit pursuant to Article VI of the Charter (subject to adjustment in connection with any Adjustment Event) during such Twelve-Month Period.

 

(2) In the event that the General Partner elects a Stock Offering Funding, on the Specified Redemption Date determined pursuant to the proviso in the definition thereon it shall purchase each Offering Unit that is still a Tendered Unit on such date for cash in immediately available funds in the amount (the “ Stock Offering Funding Amount ”) equal to the lesser of (i) the Cash Amount per Partnership Unit, calculated pursuant to Section 8.6.A as of the original Specified Redemption Date assuming the General Partner did not elect to conduct a Stock Offering Funding pursuant to Section 8.6.C (the “ Base Amount ”) or (ii) the net proceeds per Offered Share received by the General Partner from the Stock Offering Funding, determined after deduction of reasonable expenses related thereto, including underwriting discounts and commissions, legal and accounting fees and expenses, Securities and Exchange Commission registration fees, state blue sky and securities laws fees and expenses, printing expenses, NASD filing fees and listing fees (the “ Net Proceeds ”).

 

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(3) If the General Partner elects a Stock Offering Funding, the following additional terms and conditions shall apply:

 

(a) As soon as practicable after the General Partner gives the Tendering Partner notice of its election pursuant to Section 8.6.C(1)(a)(i) , the General Partner shall use its reasonable efforts to effect as promptly as possible a registration, qualification or compliance (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as would permit or facilitate the sale and distribution of the Offered Shares; provided , that , the General Partner shall not by reason hereof, be required to submit to jurisdiction or taxation, or qualify to do business in any jurisdiction in which such submission or qualification would not be otherwise required; provided , further , that if the General Partner shall deliver a certificate to the Tendering Partner stating that the General Partner has determined in the good faith judgment of the Board of Directors of the General Partner that such filing, registration or qualification would require disclosure of material non-public information, the disclosure of which would have a material adverse effect on the General Partner, then the General Partner may delay making any filing or delay the effectiveness of any registration or qualification for the shorter of (a) the period ending on the date upon which such information is disclosed to the public or ceases to be material or (b) an aggregate period of ninety (90) days in connection with any Stock Offering Funding.

 

(b) The General Partner shall advise each Tendering Partner, regularly and promptly upon any request, of the status of the Stock Offering Funding process, including the timing of all filings, the selection of and understandings with underwriters, agents, dealers and brokers, the nature and contents of all communications with the Securities and Exchange Commission and other governmental bodies, the expenses related to the Stock Offering Funding as they are being incurred, the nature of marketing activities, and any other matters reasonably related to the timing, price and expenses relating to the Stock Offering Funding and the compliance by the General Partner with its obligations with respect thereto. In addition, the General Partner and each Tendering Partner may, but shall be under no obligation to, enter into understandings in writing (“ Pricing Agreements ”) whereby the Tendering Partner will agree in advance as to the acceptability of a Net Proceeds amount at or below the Base Amount. Furthermore, the General Partner shall establish pricing notification procedures with each such Tendering Partner, such that the Tendering Partner will have the maximum opportunity practicable to determine whether to become a Withdrawing Partner pursuant to Section 8.6.C(3)(c) below.

 

(c) The General Partner, upon notification of the price per REIT Share in the Stock Offering Funding from the managing underwriter(s), in the case of a registered public offering, or lead placement agent(s), in the event of an unregistered offering, engaged by the General Partner in order to sell the Offered Shares, shall immediately use its reasonable efforts to notify each Tendering Partner of the price per REIT Share in the Stock Offering Funding and resulting Net Proceeds. Each Tendering Partner shall have one hour (as such time may be extended by the General Partner) to elect to withdraw its Redemption (a Tendering Partner making such an election being a “ Withdrawing Partner ”), and Partnership Units with a REIT Shares Amount equal to such excluded Offered Shares shall be considered to be withdrawn

 

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from the related Redemption; provided , however , that if Tendering Partners withdraw in excess of 20% of the Offered Shares, all Offered Shares will, at the General Partner’s option, be deemed to have been withdrawn by all Tendering Partners. If a Tendering Partner, within such time period, does not notify the General Partner of such Tendering Partner’s election not to become a Withdrawing Partner, then such Tendering Partner shall, except as otherwise provided in a Pricing Agreement, be deemed not to have withdrawn from the Redemption, without liability to the General Partner. To the extent that the General Partner is unable to notify any Tendering Partner, such unnotified Tendering Partner shall, except as otherwise provided in any Pricing Agreement, be deemed not to have elected to become a Withdrawing Partner. Each Tendering Partner whose Redemption is being funded through the Stock Offering Funding who does not become a Withdrawing Partner shall have the right, subject to the approval of the managing underwriter(s) or placement agent(s) and restrictions of any applicable securities laws, to submit for Redemption additional Partnership Units in a number no greater than the number of Partnership Units withdrawn. If more than one Tendering Partner so elects to redeem additional Partnership Units, then such Partnership Units shall be redeemed on a pro rata basis, based on the number of additional Partnership Units sought to be so redeemed. To the extent that the Net Proceeds would be below the Base Amount, and to the extent that other Partners have not elected to redeem additional Partnership Units, then the Withdrawing Partners shall bear their pro rata shares of the expenses described in Section 8.6.C(2) (such shares calculated as if such Limited Partners had not been Withdrawing Partners) as reasonably determined by the General Partner.

 

(d) The General Partner shall take all reasonable action in order to effectuate the sale of the Offered Shares including, but not limited to, the entering into of an underwriting or placement agreement in customary form with the managing underwriter(s) or placement agent(s) selected for such underwriting by the General Partner. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) or placement agent(s) advises the General Partner in writing that marketing factors require a limitation of the number of shares to be offered, then the General Partner shall so advise all Tendering Partners and the number of Partnership Units to be sold to the General Partner pursuant to the Redemption shall be allocated among all Tendering Partners in proportion, as nearly as practicable, to the respective number of Partnership Units as to which each Tendering Partner elected to effect a Redemption. No Offered Shares excluded from the underwriting by reason of the managing underwriter’s or placement agent’s marketing limitation shall be included in such offering.

 

(e) The General Partner may include securities for its own account in any offering made pursuant to Section 8.6.C.1 hereof and, if the managing underwriter or placement agent has not limited the number of Registrable Shares to be offered, the General Partner may include securities for the account of others in such offering, in each case only if and to the extent that the managing underwriter or placement agent, the General Partner and Tendering Partners owning Partnership Units representing at least seventy-five percent (75%) of the Partnership Units with respect to which the Stock Offering Funding is being effected so agree in writing.

 

D. Each Limited Partner covenants and agrees with the General Partner that all Tendered Units shall be delivered to the General Partner free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Tendered Units, the General Partner shall be under no obligation to acquire

 

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the same. Each Limited Partner further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Tendered Units to the General Partner (or its designee), such Limited Partner shall assume and pay such transfer tax.

 

E. Notwithstanding the provisions of Section 8.6.A , 8.6.B , 8.6.C or any other provision of this Agreement, a Limited Partner (i) shall not be entitled to effect a Redemption for cash pursuant to Section 8.6.A or an exchange for REIT Shares pursuant to Section 8.6.B to the extent the ownership or right to acquire REIT Shares pursuant to such exchange by such Partner on the Specified Redemption Date could cause such Partner or any other Person to violate the restrictions on ownership and transfer of REIT Shares set forth in the Charter and (ii) shall have no rights under this Agreement to acquire REIT Shares which would otherwise be prohibited under the Charter. The limitation set forth in Section 8.6.E(i) above shall not limit the ability of a Limited Partner to require a Stock Offering Funding pursuant to the terms of Section 8.6.C if (A) the Offering Units exceed (a) 9.8% of the REIT Shares, calculated in accordance with the methodology for calculating the percentage of ownership of a Person for purposes of the ownership limit pursuant to Article VI of the Charter (subject to adjustment in connection with any Adjustment Event) and (b) $50,000,000 gross value based on a Partnership Unit price equal to the REIT Share Market Value, and (B) the General Partner is eligible to file a registration statement under Form S-3 (or any successor form similar thereto). To the extent any attempted Redemption or exchange for REIT Shares would be in violation of this Section 8.6.E , it shall be null and void ab initio and such Limited Partner shall not acquire any rights or economic interest in the cash otherwise payable upon such Redemption or the REIT Shares otherwise issuable upon such exchange.

 

F. Notwithstanding anything herein to the contrary (but subject to Section 8.6.E , with respect to any Redemption or exchange for REIT Shares pursuant to this Section 8.6 ):

 

(1) All Partnership Units acquired by the General Partner pursuant thereto shall automatically, and without further action required, be converted into and deemed to be General Partner Interests comprised of the same number and class of Partnership Units.

 

(2) Without the consent of the General Partner, each Limited Partner may not effect a Redemption for less than 1,000 Partnership Units or, if the Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Limited Partner.

 

(3) Without the consent of the General Partner, each Limited Partner may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.

 

(4) Notwithstanding anything herein to the contrary, in the event the General Partner gives notice to all Limited Partners (a “ Primary Offering Notice ”) that it desires to effect a primary offering of its equity securities for cash (other than an offering in connection with a merger, consolidation or similar transaction, or employee benefit or similar plans) then, unless the General Partner otherwise consents, the actions described in Section 8.6.C as to a Stock Offering Funding with respect to any Notice of Redemption with respect to Excess Units thereafter received may be delayed until the earlier of (a) the completion of the primary offering

 

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or (b) 120 days following the giving of the Primary Offering Notice; provided that , to the extent that the managing underwriter(s) of such primary offering advise that the inclusion of such additional REIT Shares will not adversely affect the offering, additional REIT Shares the proceeds of which are to be used to satisfy a Redemption with respect to such Excess Units (a “ Subsequent Redemption ”) (without regard to the limitations of subparagraph (2) of this paragraph F) shall be included in such offering, and the procedures of this Section 8.6 shall otherwise be followed as closely as practicable; provided , further that a Primary Offering Notice may be given no more than twice in any Twelve-Month Period without the Consent of the Limited Partners.

 

(5) The General Partner may delay a Stock Offering Funding, such that it will not occur (1) during the same Twelve-Month Period as the General Partner has effected a “Demand Registration” pursuant to the Registration Rights Agreements dated as of October 27, 2004, among the General Partner and certain Limited Partners (it being understood that in the event a Notice of Redemption is received prior to the receipt of requisite requests for a Demand Registration, such Notice of Redemption shall control, and vice versa) or (b) within 120 days following the closing of any prior public offering of similar securities by the General Partner.

 

(6) The consummation of any Redemption or exchange for REIT Shares shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

(7) Each Tendering Partner shall continue to own all Partnership Units subject to any Redemption or exchange for REIT Shares, and be treated as a Limited Partner with respect to such Partnership Units for all purposes of this Agreement, until such Partnership Units are transferred to the General Partner and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, and provided the General Partner has issued REIT shares pursuant to Section 8.6.B , the Tendering Partner shall have no rights as a stockholder of the General Partner with respect to such Tendering Partner’s Partnership Units.

 

G. Notwithstanding the provisions of this Section 8.6 permitting the General Partner to delay a Public Offering Funding by virtue of an event described in Section 8.6.C , the giving of a Primary Offering Notice, or a delay referred to in Section 8.6.F(5), the General Partner shall use its reasonable efforts to take all such actions, as are consistent with the purposes of such delay provisions, to effect a Stock Offering Funding at the earliest time practicable. It is understood that such periods of delay shall run, to the extent practicable, concurrently, and shall not limit the right of a Limited Partner to deliver a Notice of Redemption.

 

H. In the event that the Partnership issues additional Partnership Interests to any Additional Limited Partner pursuant to Section 4.3.B , the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such additional Partnership Interests.

 

Section 8.7 Conversion of Profits Interest Units .

 

A. A Profits Interest Unitholder shall have the right (the “ Conversion Right ”), at his or her option, at any time to convert all or a portion of his or her Vested Profits Interest Units

 

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into Common Units; provided , however , that a holder may not exercise the Conversion Right for less than one thousand (1,000) Vested Profits Interest Units or, if such holder holds less than one thousand Vested Profits Interest Units, all of the Vested Profits Interest Units held by such holder. Profits Interest Unitholders shall not have the right to convert Unvested Profits Interest Units into Common Units until they become Vested Profits Interest Units; provided , however , that when a Profits Interest Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested Profits Interest Units to become Vested Profits Interest Units, such Profits Interest Unitholder may give the Partnership a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the Profits Interest Unitholder, shall be accepted by the Partnership subject to such condition. In all cases, the conversion of any Profits Interest Units into Common Units shall be subject to the conditions and procedures set forth in this Section 8.7 .

 

B. A holder of Vested Profits Interest Units may convert such Units into an equal number of fully paid and non-assessable Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.5 . Notwithstanding the foregoing, in no event may a holder of Vested Profits Interest Units convert a number of Vested Profits Interest Units that exceeds (x) the Economic Capital Account Balance of such Limited Partner, to the extent attributable to its ownership of Profits Interest Units, divided by (y) the Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “ Capital Account Limitation ”). In order to exercise his or her Conversion Right, a Profits Interest Unitholder shall deliver a notice (a “ Conversion Notice ”) in the form attached as Exhibit G to the Partnership (with a copy to the General Partner) not less than 10 nor more than 60 days prior to a date (the “ Conversion Date ”) specified in such Conversion Notice; provided , however , that if the General Partner has not given to the Profits Interest Unitholders notice of a proposed or upcoming Transaction (as defined below) at least thirty (30) days prior to the effective date of such Transaction, then Profits Interest Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth (10th) day after such notice from the General Partner of a Transaction or (y) the third business day immediately preceding the effective date of such Transaction. A Conversion Notice shall be provided in the manner provided in Section 15.1 . Each Profits Interest Unitholder covenants and agrees with the Partnership that all Vested Profits Interest Units to be converted pursuant to this Section 8.7.A shall be free and clear of all liens. Notwithstanding anything herein to the contrary, a holder of Profits Interest Units may deliver a Redemption Notice pursuant to Section 8.6.A relating to those Common Units that will be issued to such holder upon conversion of such Profits Interest Units into Common Units in advance of the Conversion Date; provided , however , that the redemption of such Common Units by the Partnership shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put a Profits Interest Unitholder in a position where, if he or she so wishes, the Common Units into which his or her Vested Profits Interest Units will be converted can be redeemed by the Partnership pursuant to Section 8.6.A simultaneously with such conversion, with the further consequence that, if the Company elects to assume the Partnership’s redemption obligation with respect to such Common Units under Section 8.6.B by delivering to such holder REIT Shares rather than cash, then such holder can have such REIT Shares issued to him or her simultaneously with the conversion of his or her Vested Profits Interest Units into Common Units. The General Partner shall cooperate with a Profits Interest Unitholder to coordinate the timing of the different events described in the foregoing sentence.

 

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C. The Partnership, at any time at the election of the General Partner, may cause any number of Vested Profits Interest Units held by a Profits Interest Unitholder to be converted (a “ Forced Conversion ”) into an equal number of Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.5 ; provided , however , that the Partnership may not cause Forced Conversion of any Profits Interest Units that would not at the time be eligible for conversion at the option of such Profits Interest Unitholder pursuant to Section 8.7.B . In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a “ Forced Conversion Notice ”) in the form attached as Exhibit H to the applicable Profits Interest Unitholder not less than 10 nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 15.1 .

 

D. A conversion of Vested Profits Interest Units for which the holder thereof has given a Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such Profits Interest Unitholder, as of which time such Profits Interest Unitholder shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of Common Units issuable upon such conversion. After the conversion of Profits Interest Units as aforesaid, the Partnership shall deliver to such Profits Interest Unitholder, upon his or her written request, a certificate of the General Partner certifying the number of Common Units and remaining Profits Interest Units, if any, held by such person immediately after such conversion. The Assignee of any Limited Partner pursuant to Article 11 hereof may exercise the rights of such Limited Partner pursuant to this Section 8.7 and such Limited Partner shall be bound by the exercise of such rights by the Assignee.

 

E. For purposes of making future allocations under Section 6.2.C and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable Profits Interest Unitholder that is treated as attributable to his or her Profits Interest Units shall be reduced, as of the date of conversion, by the product of the number of Profits Interest Units converted and the Common Unit Economic Balance.

 

F. If the Partnership or the General Partner shall be a party to any transaction (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Common Units or other business combination or reorganization, or sale of all or substantially all of the Partnership’s assets, but excluding any transaction which constitutes an Adjustment Event) in each case as a result of which Common Units shall be exchanged for or converted into the right, or the Holders shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a “ Transaction ”), then the General Partner shall, immediately prior to the Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of Profits Interest Units then eligible for conversion, taking into account any allocations that occur in connection with the Transaction or that would occur in connection with the Transaction if the assets of the Partnership were sold at the Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Common Units in the context of the Transaction (in which case the Conversion Date shall be the effective date of the Transaction). In anticipation of such Forced Conversion and the consummation of the Transaction, the Partnership shall use commercially reasonable efforts to cause each Profits

 

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Interest Unitholder to be afforded the right to receive in connection with such Transaction in consideration for the Common Units into which his or her Profits Interest Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Transaction by a Holder of the same number of Common Units, assuming such Holder is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a “ Constituent Person ”), or an affiliate of a Constituent Person. In the event that Holders have the opportunity to elect the form or type of consideration to be received upon consummation of the Transaction, prior to such Transaction the General Partner shall give prompt written notice to each Profits Interest Unitholder of such election, and shall use commercially reasonable efforts to afford the Profits Interest Unitholders the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each Profits Interest Unit held by such holder into Common Units in connection with such Transaction. If a Profits Interest Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each Profits Interest Unit held him or her (or by any of his or her transferees) the same kind and amount of consideration that a Holder would receive if such Holder failed to make such an election. Subject to the rights of the Partnership and the Company under any Vesting Agreement and the relevant terms of any applicable Stock Plan, the Partnership shall use commercially reasonable effort to cause the terms of any Transaction to be consistent with the provisions of this Section 8.7.F and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any Profits Interest Unitholders whose Profits Interest Units will not be converted into Common Units in connection with the Transaction that will (i) contain provisions enabling the holders of Profits Interest Units that remain outstanding after such Transaction to convert their Profits Interest Units into securities as comparable as reasonably possible under the circumstances to the Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in the Agreement for the benefit of the Profits Interest Unitholders.

 

Section 8.8 Voting Rights of Profits Interest Units

 

Profits Interest Unitholders shall (a) have those voting rights required from time to time by applicable law, if any, (b) have the same voting rights as a Holder, with the Profits Interest Units voting as a single class with the Common Units and having one vote per Profits Interest Unit; and (c) have the additional voting rights that are expressly set forth below. So long as any Profits Interest Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of at least a majority of the Profits Interest Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of the Agreement applicable to Profits Interest Units so as to materially and adversely affect any right, privilege or voting power of the Profits Interest Units or the Profits Interest Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the holders of Common Units; but subject, in any event, to the following provisions: (i) with respect to any Transaction, so long as the Profits Interest Units are treated in accordance with Section 8.7.F hereof, the consummation of such Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Profits Interest Units or the Profits Interest Unitholders as such; and (ii) any

 

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creation or issuance of any Partnership Units or of any class or series of Partnership Interest including without limitation additional Partnership Units or Profits Interest Units, whether ranking senior to, junior to, or on a parity with the Profits Interest Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Profits Interest Units or the Profits Interest Unitholders as such. The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding Profits Interest Units shall have been converted into Common Units.

 

ARTICLE 9.

BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

Section 9.1 Records and Accounting

 

The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3 . Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of any information storage device, provided , that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.

 

Section 9.2 Fiscal Year

 

The fiscal year of the Partnership shall be the calendar year.

 

Section 9.3 Reports

 

A. As soon as practicable, but in no event later than 105 days after the close of each Partnership Year, or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be mailed to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such Partnership Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner.

 

B. As soon as practicable, but in no event later than 45 days after the close of each calendar quarter (except the last calendar quarter of each year), or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be mailed to each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the General Partner, if such statements are prepared solely on a consolidated basis with the applicable law or regulation, or as the General Partner determines to be appropriate.

 

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Section 9.4 Nondisclosure of Certain Information

 

Notwithstanding the provisions of Sections 9.1 and 9.3 , the General Partner may keep confidential from the Limited Partners any information that the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interest of the Partnership or which the Partnership is required by law or by agreements with unaffiliated third parties to keep confidential.

 

ARTICLE 10.

TAX MATTERS

 

Section 10.1 Preparation of Tax Returns

 

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within 120 days of the close of each taxable year, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes. Each Limited Partner shall promptly provide the General Partner with any information reasonably requested by the General Partner relating to any Contributed Property contributed (directly or indirectly) by such Limited Partner to the Partnership.

 

Section 10.2 Tax Elections

 

Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code, including the election under Section 754 of the Code. The General Partner shall have the right to seek to revoke any such election (including without limitation, any election under Section 754 of the Code) upon the General Partner’s determination in its sole and absolute discretion that such revocation is the best interests of the Partners.

 

Section 10.3 Tax Matters Partner

 

A. The General Partner shall be the “ tax matters partner ” of the Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address and profit interest of each of the Limited Partners and Assignees; provided , however , that such information is provided to the Partnership by the Limited Partners and Assignees.

 

B. The tax matters partner is authorized, but not required:

 

(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “ tax audit ” and such judicial proceedings being referred to as “ judicial review ”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time

 

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prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a “ notice partner ” (as defined in Section 6231 of the Code) or a member of a “ notice group ” (as defined in Section 6223(b)(2) of the Code);

 

(2) in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “ final adjustment ”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Partnership’s principal place of business is located;

 

(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;

 

(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

 

(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and

 

(6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.

 

The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such.

 

C. The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm or law firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.

 

Section 10.4 Organizational Expenses

 

The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a 60-month period as provided in Section 709 of the Code.

 

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Section 10.5 Withholding

 

Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a receivable of the Partnership from such Limited Partner, which receivable shall be paid by such Limited Partner within 15 days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner’s Partnership Interest to secure such Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5 . Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal , plus two percentage points (but not higher than the maximum lawful rate) from the date such amount is due ( i.e. , 15 days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder.

 

ARTICLE 11.

TRANSFERS AND WITHDRAWALS

 

Section 11.1 Transfer

 

A. The term “ transfer ,” when used in this Article 11 with respect to a Partnership Interest, shall be deemed to refer to a transaction by which the General Partner purports to assign its General Partner Interest to another Person or by which a Limited Partner purports to assign its Limited Partner Interest to another Person, and includes a sale, assignment, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term “transfer” when used in this Article 11 does not include any Redemption or exchange for REIT Shares pursuant to Section 8.6 except as otherwise provided herein. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement or consented to by the General Partner.

 

B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11 . Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void ab initio unless otherwise consented to by the General Partner in its sole and absolute discretion.

 

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Section 11.2 Transfer of General Partner’s Partnership Interest

 

A. Except in connection with a Termination Transaction permitted under Section 11.2.B , the General Partner shall not withdraw from the Partnership and shall not transfer all or any portion of its interest in the Partnership (whether by sale, statutory merger or consolidation, liquidation or otherwise), other than an Affiliate, without the Consent of the Limited Partners, which may be given or withheld by each Limited Partner in its sole and absolute discretion, and only upon the admission of a successor General Partner pursuant to Section 12.1 . Upon any transfer of a Partnership Interest in accordance with the provisions of this Section 11.2 , the transferee shall become a Substitute General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a condition to any transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest, and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor General Partner are assumed by a successor corporation by operation of law) shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners, in their reasonable discretion. In the event the General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the Incapacity of the General Partner, all of the remaining Partners may elect to continue the Partnership business by selecting a Substitute General Partner in accordance with the Act.

 

B. The General Partner shall not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of its assets or any reclassification, recapitalization or change of its outstanding equity interests (“ Termination Transaction ”) unless (1) the Termination Transaction has been approved by a Consent of the Partners and (2) either clause (a) or (b) below is satisfied:

 

(a) in connection with such Termination Transaction all Limited Partners either will receive, or will have the right to elect to receive, for each Partnership Unit an amount of cash, securities, or other property equal to the product of the REIT Shares Amount and the greatest amount of cash, securities or other property paid to a holder of one REIT Share in consideration of one REIT Share in connection with the Termination Transaction; provided , that , if, in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding REIT Shares, each holder of Partnership Units shall receive, or shall have the right to elect to receive, the greatest amount of cash, securities, or other property which such holder would have received had it exercised its right to Redemption (as set forth in Section 8.6 ) and received REIT Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer and then such Termination Transaction shall have been consummated; or

 

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(b) the following conditions are met: (i) substantially all of the assets directly or indirectly owned by the surviving entity are held directly or indirectly by the Partnership or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with the Partnership (in each case, the “ Surviving Partnership ”); (ii) the holders of Partnership Units own a percentage interest of the Surviving Partnership based on the relative fair market value of the net assets of the Partnership and the other net assets of the Surviving Partnership immediately prior to the consummation of such transaction; (iii) the rights, preferences and privileges of such holders in the Surviving Partnership are at least as favorable as those in effect immediately prior to the consummation of such transaction and as those applicable to any other limited partners or non-managing members of the Surviving Partnership; and (iv) such rights of the Limited Partners include at least one of the following: (a) the right to redeem their interests in the Surviving Partnership for the consideration available to such persons pursuant to Section 11.2.B(2)(a) ; or (b) the right to redeem their Partnership Units for cash on terms equivalent to those in effect with respect to their Partnership Units immediately prior to the consummation of such transaction, or, if the ultimate controlling person of the Surviving Partnership has publicly traded common equity securities, such common equity securities, with an exchange ratio based on the determination of relative fair market value of such securities and the REIT Shares.

 

Section 11.3 Limited Partners’ Rights to Transfer

 

A. Prior to the twelve (12) months after the Effective Date, no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the consent of the General Partner, which consent may be withheld in its sole and absolute discretion or exercise its right of Redemption set forth in Section 8.6 ; provided , however , that any Limited Partner may, at any time (whether prior to or after such twelve (12) month period), without the consent of the General Partner other than by way of exercise of the right of Redemption set forth in Section 8.6 , (i) transfer all or any portion of its Partnership Interest to the General Partner, (ii) transfer all or any portion of its Partnership Interest to an Immediate Family Member, subject to the provisions of Section 11.6 , (iii) transfer all or any portion of its Partnership Interest to a trust for the benefit of a charitable beneficiary or to a charitable foundation, subject to the provisions of Section 11.6 , and (iv) subject to the provisions of Section 11.6 , pledge (a “ Pledge ”) all or any portion of its Partnership Interest to a lending institution, which is not an Affiliate of such Limited Partner, as collateral or security for a bona fide loan or other extension of credit with a scheduled maturity date not sooner than the twelve (12) month anniversary of the Effective Date, and transfer such pledged Partnership Interest to such lending institution in connection with the exercise of remedies under such loan or extension or credit, and the transfer of such pledged Partnership Interest by the lender to any transferee. After such twelve (12) month anniversary, each Limited Partner or Assignee (resulting from a transfer made pursuant to clauses (i)-(iv) of the proviso of the preceding sentence) shall have the right to transfer all or any portion of its Partnership Interest, subject to the provisions of Section 11.6 and the satisfaction of each of the following conditions (in addition to the right of each such Limited Partner or Assignee (A) to continue to make any such transfer permitted by clauses (i)-(iv) of such proviso or (B) to make any transfer to its Affiliates or members, in each case, without satisfying condition (1) below):

 

(1) General Partner Right of First Refusal . The transferring Partner shall give written notice of the proposed transfer to the General Partner, which notice shall state (i) the identity of the proposed transferee, and (ii) the amount and type of consideration proposed to be received for the transferred Partnership Units. The General Partner shall have ten (10) days upon which to give the transferring Partner notice of its election to acquire the Partnership Units on the proposed terms. If it so elects, it shall purchase the Partnership Units on such terms within ten (10) days after giving notice of such election. If it does not so elect, the transferring Partner may transfer such Partnership Units to a third party, on economic terms no more favorable to the transferee than the proposed terms, subject to the other conditions of this Section 11.3 .

 

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(2) Qualified Transferee . Any transfer of a Partnership Interest shall be made only to Qualified Transferees.

 

It is a condition to any transfer otherwise permitted hereunder that the transferee assumes by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such transferred Partnership Interest and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its reasonable discretion. Notwithstanding the foregoing, any transferee of any transferred Partnership Interest shall be subject to any and all ownership limitations contained in the Charter, which may limit or restrict such transferee’s ability to exercise its Redemption rights, and to the representations in Section 3.4 . Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substitute Limited Partner in accordance with Section 11.4.B , no transferee, whether by a voluntary transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in and in compliance with Section 11.5 .

 

B. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator, or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.

 

C. The General Partner may prohibit any transfer otherwise permitted under Section 11.3 by a Limited Partner of his or her Partnership Units if, in the opinion of legal counsel to the Partnership, such transfer would require the filing of a registration statement under the Securities Act by the Partnership or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Unit.

 

Section 11.4 Substituted Limited Partners

 

A. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or her place (including any transferee permitted by Section 11.3 ). The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of

 

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a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or any Partner.

 

B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be subject to the transferee executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement (including without limitation, the provisions of Section 2.4 and such other documents or instruments as may be required to effect the admission), each in form and substance satisfactory to the General Partner) and the acknowledgment by such transferee that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such transferee as of the date of the transfer of the Partnership Interest to such transferee and will continue to be true to the extent required by such representations and warranties.

 

C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of Partnership Units, and Percentage Interest of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner.

 

Section 11.5 Assignees

 

If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4 , such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses, gain and loss attributable to the Partnership Units assigned to such transferee, the rights to transfer the Partnership Units provided in this Article 11 and the right of Redemption provided in Section 8.6 , but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to effect a Consent with respect to such Partnership Units on any matter presented to the Limited Partners for approval (such Consent remaining with the transferor Limited Partner). In the event any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units. Notwithstanding anything contained in this Agreement to the contrary, as a condition to becoming an Assignee, any prospective Assignee must first execute and deliver to the Partnership an acknowledgment that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such prospective Assignee as of the date of the prospective assignment of the Partnership Interest to such prospective Assignee and will continue to be true to the extent required by such representations or warranties.

 

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Section 11.6 General Provisions

 

A. No Limited Partner may withdraw from the Partnership other than as a result of (i) a permitted transfer of all of such Limited Partner’s Partnership Units in accordance with this Article 11 and the transferee(s) of such Partnership Units being admitted to the Partnership as a Substituted Limited Partner or (ii) pursuant to the exercise of its right of Redemption of all of such Limited Partner’s Partnership Units under Section 8.6 ; provided that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.

 

B. Any Limited Partner who shall transfer all of such Limited Partner’s Partnership Units in a transfer permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Limited Partner or pursuant to the exercise of its rights of Redemption of all of such Limited Partner’s Partnership Units under Section 8.6 shall cease to be a Limited Partner; provided that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.

 

C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees.

 

D. If any Partnership Interest is transferred, assigned or redeemed during any quarterly segment of the Partnership’s Partnership Year in compliance with the provisions of this Article 11 or transferred or redeemed pursuant to Section 8.6 , on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items attributable to such Partnership Interest for such Partnership Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with the Code. Except as otherwise agreed by the General Partner, all distributions of Available Cash with respect to which the Partnership Record Date is before the date of such transfer, assignment, exchange or redemption shall be made to the transferor Partner, and all distributions of Available Cash thereafter, in the case of a transfer or assignment other than a redemption, shall be made to the transferee Partner.

 

E. In addition to any other restrictions on transfer herein contained, including without limitation the provisions of this Article 11 and Section 2.6 , in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to a Redemption or exchange for REIT Shares pursuant to Section 8.6 ) be made (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, if in the opinion of legal counsel to the Partnership such transfer could cause a termination of the Partnership for federal or state income tax purposes (except as a result of the Redemption or exchange for REIT Shares of all Partnership Interests held by all Limited Partners or pursuant to a transaction expressly permitted under Section 11.2 ); (v) if in the opinion of counsel to the Partnership such transfer could cause the Partnership to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption

 

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or exchange for REIT Shares of all Partnership Interests held by all Limited Partners); (vi) if such transfer could, in the opinion of counsel to the Partnership, cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(e) of the Code); (vii) if such transfer could, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (viii) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (ix) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, if such transfer (1) could be treated as effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code, (2) could cause the Partnership to become a “Publicly Traded Partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code, (3) could be in violation of Section 3.4.E(5) , or (4) could cause the Partnership to fail one or more of the Safe Harbors (as defined below); (x) if such transfer subjects the Partnership to be regulated under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (xi) except with the consent of the General Partner, which may be given or withheld in its sole discretion, if the transferee or assignee of such Partnership Interest is unable to make the representations set forth in Section 3.4.C ; (xii) if such transfer is made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion; and provided , that , as a condition to granting such consent the lender may be required to enter into an arrangement with the Partnership and the General Partner to redeem or exchange for the REIT Shares Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code; or (xiii) if in the opinion of legal counsel for the Partnership such transfer could adversely affect the ability of the General Partner to continue to qualify as a REIT or, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code.

 

F. The General Partner shall monitor the transfers of interests in the Partnership (including any acquisition of Common Units by the Partnership or the General Partner) to determine (i) if such interests could be treated as being traded on an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether such transfers of interests could result in the Partnership being unable to qualify for the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “ Safe Harbors ”). The General Partner shall have the authority (but shall not be required) to take any steps it determines are necessary or appropriate in its sole and absolute discretion to prevent any trading of interests which could cause the Partnership to become a “publicly traded partnership,” within the meaning of Code Section 7704, or any recognition by the Partnership of such transfers, or to insure that one or more of the Safe Harbors is met.

 

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ARTICLE 12.

ADMISSION OF PARTNERS

 

Section 12.1 Admission of Successor General Partner

 

A successor to all of the General Partner’s General Partner Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Article 11 .

 

Section 12.2 Admission of Additional Limited Partners

 

A. After the admission to the Partnership of the initial Limited Partners on the date hereof, a Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.

 

B. Notwithstanding anything to the contrary in this Section 12.2 , no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the receipt of the Capital Contribution in respect of such Limited Partner and the consent of the General Partner to such admission. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with the Code. Except as otherwise agreed to by the Additional Limited Partners and the General Partner, all distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner (other than in its capacity as an Assignee) and all distributions of Available Cash thereafter shall be made to all Partners and Assignees including such Additional Limited Partner.

 

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Section 12.3 Amendment of Agreement and Certificate of Limited Partnership

 

For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A ) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 .

 

ARTICLE 13.

DISSOLUTION AND LIQUIDATION

 

Section 13.1 Dissolution

 

The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner (selected as described in Section 13.1.B below) shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “ Liquidating Event ”):

 

A. the expiration of its term as provided in Section 2.5 ;

 

B. an event of withdrawal of the General Partner, as defined in the Act, unless, within 90 days after the withdrawal, all of the remaining Partners agree in writing, in their sole and absolute discretion, to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner;

 

C. subject to compliance with Section 11.2 an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;

 

D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;

 

E. any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership;

 

F. the Incapacity of the General Partner, unless all of the remaining Partners in their sole and absolute discretion agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such Incapacity, of a substitute General Partner;

 

G. the Redemption or exchange for REIT Shares of all Partnership Interests (other than those of the General Partner) pursuant to this Agreement; or

 

H. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable

 

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order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to the entry of such order or judgment all of the remaining Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.

 

Section 13.2 Winding Up

 

A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner (or, in the event there is no remaining General Partner, any Person elected by a Majority in Interest of the Limited Partners (the “ Liquidator ”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order:

 

(1) First, to the payment and discharge of all of the Partnership’s debts and liabilities to creditors other than the Partners;

 

(2) Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;

 

(3) Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the other Partners; and

 

(4) The balance, if any, to the General Partner and Limited Partners in accordance with their positive Capital Account balances, determined after taking into account all Capital Account adjustments for all prior periods and the Partnership taxable year during which the liquidation occurs (other than those made as a result of the liquidating distribution set forth in this Section 13.2.A(4) ).

 

The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13 other than reimbursement of its expenses as provided in Section 7.4 .

 

B. Notwithstanding the provisions of Section 13.2.A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A , undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in-kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in-kind are in

 

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the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

 

Section 13.3 Capital Contribution Obligation

 

If any Partner has a deficit balance in his or her Capital Account (after giving effect to all contributions, distributions and allocations for the taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit at any time shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever, except to the extent otherwise expressly agreed to by such Partner and the Partnership.

 

Section 13.4 Compliance with Timing Requirements of Regulations

 

In the discretion of the Liquidator or the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article 13 may be:

 

(1) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator or the General Partner, in the same proportions and the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or

 

(2) withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided , that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and priority set forth in Section 13.2.A as soon as practicable.

 

Section 13.5 Deemed Distribution and Recontribution

 

Notwithstanding any other provision of this Article 13 , in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership’s property shall not be liquidated, the Partnership’s liabilities shall not be paid or discharged, and the Partnership’s affairs shall not be wound up. Instead, the Partnership shall be deemed to have contributed all of its assets and liabilities to a new partnership in exchange a for an interest in the new partnership. Immediately thereafter, the Partnership shall be deemed to distribute interests in the new partnership to the General Partner and Limited Partners in proportion to their respective interests in the Partnership in liquidation of the Partnership.

 

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Section 13.6 Rights of Limited Partners

 

Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of his Capital Contribution and shall have no right or power to demand or receive property from the General Partner.

 

Section 13.7 Notice of Dissolution

 

In the event a Liquidating Event occurs or an event occurs that would, but for provisions of Section 13.1 , result in a dissolution of the Partnership, the General Partner shall, within 30 days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner) and shall publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conducts business (as determined in the discretion of the General Partner).

 

Section 13.8 Cancellation of Certificate of Limited Partnership

 

Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 , the Partnership shall be terminated and the Certificate and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Maryland shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.

 

Section 13.9 Reasonable Time for Winding-Up

 

A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 , in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.

 

Section 13.10 Waiver of Partition

 

Each Partner hereby waives any right to partition of the Partnership property.

 

ARTICLE 14.

AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS

 

Section 14.1 Amendments

 

A. The actions requiring consent or approval of the Partners or of the Limited Partners pursuant to this Agreement, including Section 7.3 , or otherwise pursuant to applicable law, are subject to the procedures in this Article 14 .

 

B. Amendments to this Agreement requiring the consent or approval of Limited Partners may be proposed by the General Partner or by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. The General Partner shall seek the written consent of the Limited Partners on the proposed amendment or

 

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shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written consent, the General Partner may require a response within a reasonable specified time, but not less than 15 days, and failure to respond in such time period shall constitute a consent which is consistent with the General Partner’s recommendation (if so recommended) with respect to the proposal; provided , that , an action shall become effective at such time as requisite consents are received even if prior to such specified time.

 

Section 14.2 Action by the Partners

 

A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. The notice shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of the Limited Partners or of the Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1 .

 

B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by the percentage as is expressly required by this Agreement for the action in question. Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of the Percentage Interests of the Partners (expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.

 

C. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or his attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it.

 

D. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.

 

E. On matters on which Limited Partners are entitled to vote, each Limited Partner shall have a vote equal to the number of Partnership Units held.

 

76


ARTICLE 15.

GENERAL PROVISIONS

 

Section 15.1 Addresses and Notice

 

Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address set forth in Exhibit A or such other address as the Partners shall notify the General Partner in writing.

 

Section 15.2 Titles and Captions

 

All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.

 

Section 15.3 Pronouns and Plurals

 

Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

Section 15.4 Further Action

 

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 15.5 Binding Effect

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

Section 15.6 Creditors

 

Other than as expressly set forth herein with respect to Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

 

Section 15.7 Waiver

 

No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

 

77


Section 15.8 Counterparts

 

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

 

Section 15.9 Applicable Law

 

This Agreement shall be construed in accordance with and governed by the laws of the State of Maryland, without regard to the principles of conflicts of law.

 

Section 15.10 Invalidity of Provisions

 

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

Section 15.11 Entire Agreement

 

This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any other prior written or oral understandings or agreements among them with respect thereto.

 

Section 15.12 No Rights as Stockholders

 

Nothing contained in this Agreement shall be construed as conferring upon the holders of Partnership Units any rights whatsoever as stockholders of the General Partner, including without limitation any right to receive dividends or other distributions made to stockholders of the General Partner or to vote or to consent or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the General Partner or any other matter.

 

78


IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Agreement of Limited Partnership as of the date first written above.

 

DIGITAL REALTY TRUST, L.P.

By:

 

Digital Realty Trust, Inc.,

   

a Maryland corporation

   

Its General Partner

   

By:

 

/s/ Michael F. Foust


       

Michael F. Foust

       

Chief Executive Officer

LIMITED PARTNERS:

Global Innovation Partners, LLC,

        a Delaware limited liability company

By:

 

Global Innovation Manager, LLC,

   

its Manager

   

By:

 

/s/ Richard A. Magnuson


       

Richard A. Magnuson

       

Executive Managing Director

 

S-1

Signature Page to Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.


IN WITNESS WHEREOF, pursuant to Section 12.2.A of this Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P. (this “Agreement”), each of the undersigned hereby agrees to be bound by all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, as of the 27th day of October, 2004.

 

ADDITIONAL LIMITED PARTNERS

San Francisco Wave eXchange, LLC,

        a Delaware limited liability company

By:

 

200 Paul Wave Exchange LLC

   

a Delaware limited liability company

Its:

 

Member

   

By:

 

Cambay Tele.com, LLC

       

a Delaware limited liability company

   

Its:

 

Member

       

By:

 

The Cambay Group, Inc.

           

a California corporation

       

Its:

 

Member

           

By:

 

/s/ John O. Wilson


           

Name:

 

John O. Wilson

           

Title:

 

Vice President and Secretary

Santa Clara Wave eXchange, LLC,.

        a Delaware limited liability company

By:

 

Wave Exchange LLC

   

a Delaware limited liability company

Its:

 

Member

   

By:

 

Wave Exchange, Inc.

       

a California corporation

   

Its:

 

Member

       

By:

 

/s/ William C. Scott, Jr.


       

Name:

 

William C. Scott, Jr.

       

Title:

 

Chief Financial Officer

 

Signature Page to Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.


IN WITNESS WHEREOF, pursuant to Section 12.2.A of this Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P. (this “Agreement”), the undersigned hereby agrees to be bound by all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, as of the 27th day of October, 2004.

 

ADDITIONAL LIMITED PARTNER

Pacific Bryan Partners, L.P.,

        a Texas limited partnership

By:

 

Bryan Partners, LLC

   

a Texas limited liability company

Its:

 

General Partner

   

By:

 

/s/ A. Ghassemieh


   

Name:

 

A. Ghassemieh

   

Title:

 

Manager

 

Signature Page to Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.


IN WITNESS WHEREOF, pursuant to Section 12.2.A of this Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P. (this “Agreement”), each of the undersigned hereby agrees to be bound by all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, as of the 27th day of October, 2004.

 

ADDITIONAL LIMITED PARTNERS

Cambay Tele.com, LLC

        a Delaware limited liability company

   

By:

 

The Cambay Group, Inc.

       

a California corporation

   

Its:

 

Member

       

By:

 

/s/ John O. Wilson


       

Name:

 

John O. Wilson

       

Title:

 

Vice President and Secretary

Wave Exchange LLC

        a Delaware limited liability company

   

By:

 

Wave Exchange, Inc.

       

a California corporation

   

Its:

 

Member

       

By:

 

/s/ William C. Scott, Jr.


       

Name:

 

William C. Scott, Jr.

       

Title:

 

Chief Financial Officer

 

Signature Page to Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 27, 2004, is entered into by and among Digital Realty Trust, Inc., a Maryland corporation (the “Company”), Digital Realty Trust, L.P., a Maryland limited partnership (the “Operating Partnership”), and the unit holders whose names are set forth on the signature pages hereto (each a “Unit Holder” and collectively, the “Unit Holders”).

 

RECITALS

 

WHEREAS, in connection with the initial public offering of shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), the Company, the Operating Partnership and the Unit Holders as the parties which hold ownership interests in certain properties (the “Properties”) will engage in certain formation transactions (the “Formation Transactions”) whereby the Unit Holders will contribute to the Operating Partnership their interests in the Properties or the Properties themselves;

 

WHEREAS, the Unit Holders will receive units of limited partnership interests (“OP Units”) in the Operating Partnership in exchange for their respective interests in the Properties or the Properties themselves and the Company will be the general partner of the Operating Partnership;

 

WHEREAS, pursuant to the Partnership Agreement (as defined below) OP Units owned by the DLR Persons (as defined below) will be redeemable for cash or exchangeable for shares of Common Stock of the Company upon the terms and subject to the conditions contained therein; and

 

WHEREAS, the Unit Holders are willing to contribute their respective interests in the Properties or the Properties themselves in consideration of receiving, among other things, the registration rights set forth in Article II hereof.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1. Definitions . In addition to the definitions set forth above, the following terms, as used herein, have the following meanings:

 

“Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.


“Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.

 

“Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company as filed with the Secretary of State of the State of Maryland on October 26, 2004, as the same may be amended, modified or restated from time to time.

 

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized by law to close.

 

“Cambay Holder” means (i) San Francisco Wave eXchange, LLC, a Delaware limited liability company; (ii) Santa Clara Wave eXchange, LLC, a Delaware limited liability company, (iii) any partner, member or stockholder of entities identified in (i) and (ii); (iv) any Affiliates of any such partner, member or stockholder, and (v) the Immediate Family of any of the foregoing.

 

“Commission” means the Securities and Exchange Commission.

 

“Default Demand Registration” means a Default Demand Registration as defined in Section 2.2.

 

“Demand Registration” means a Demand Registration as defined in Section 2.2.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exchangeable OP Units” means OP Units which may be redeemable for cash or exchangeable for Common Stock pursuant to Section 8.6 of the Partnership Agreement (without regard to any limitations on the exercise of such exchange right as a result of the Ownership Limit Provisions).

 

“DLR Persons” means (i) any Unit Holder, (ii) any partner, member or stockholder of the Unit Holders, (iii) any Affiliates of any such partner, member or stockholder, and (iv) the Immediate Family of any of the foregoing.

 

“General Partner” means the Company or its successors as general partner of the Operating Partnership.

 

“GIP Holder” means (i) Global Innovation Partners, LLC, (ii) any partner, member or stockholder of Global Innovation Partners, LLC, (iii) any Affiliates of any such partner, member or stockholder, and (iv) the Immediate Family of any of the foregoing.

 

“Holder” means any DLR Person who is the record or beneficial owner of any Registrable Security or any assignee or transferee of such Registrable Security (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) to the extent (x) permitted under the Partnership Agreement and (y) such assignee or transferee agrees in writing to be bound by all the provisions hereof, unless such Registrable Security is acquired in a public

 

2


distribution pursuant to a registration statement under the Securities Act or pursuant to transactions exempt from registration under the Securities Act where securities sold in such transaction may be resold without subsequent registration under the Securities Act.

 

“Immediate Family” of any individual means such individual’s estate and heirs or current spouse, or former spouse, parents, parents-in-law, children (whether natural or adoptive or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such individual or any of the foregoing.

 

“Initial Public Offering” means the offering of the Company’s Common Stock pursuant to the Form S-11 Registration Statement (No. 333-117865) filed by the Company with the Commission under the Securities Act.

 

“Major Holder Demand Registration” means a Major Holder Demand Registration as defined in Section 2.2.

 

“Market Value” means, with respect to the Common Stock, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date of a written request for registration pursuant to Section 2.2(a). The market price for each such trading day shall be: (i) if the Common Stock is listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system, (ii) if the Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Company, or (iii) if the Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the Company, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than (10) days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the Common Stock shall be determined by the Board of Directors of the Company acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

 

“Ownership Limit Provisions” mean the various provisions of the Company’s Articles of Incorporation set forth in ARTICLE VI thereof restricting the ownership of Common Stock by Persons to specified percentages of the outstanding Common Stock.

 

“Partnership Agreement” means the amended and restated agreement of limited partnership of the Operating Partnership dated as of October 27, 2004, as the same may be amended, modified or restated from time to time.

 

3


“Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Piggy-Back Registration” means a Piggy-Back Registration as defined in Section 2.3.

 

“Registrable Securities” means shares of Common Stock of the Company at any time owned, either of record or beneficially, by any DLR Person and issued upon exchange of Exchangeable OP Units received in the Formation Transactions (including, without limitation, shares of Common Stock issuable upon exchange of Exchangeable OP Units) and any additional Common Stock issued as a dividend, distribution or exchange for, or in respect of such shares until (i) a registration statement covering such shares has been declared effective by the Commission and such shares have been disposed of pursuant to such effective registration statement, (ii) such shares are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or under which such shares may be sold pursuant to Rule 144(k), (iii) such shares held by such Person may be sold pursuant to Rule 144 under the Securities Act and could be sold in one transaction in accordance with the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act, or (iv) such shares have been otherwise transferred in a transaction that would constitute a sale thereof under the Securities Act, the Company has delivered a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares may be resold without subsequent registration under the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act.

 

“Shelf Registration Statement” means a Shelf Registration statement as defined in Section 2.1.

 

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities.

 

ARTICLE II

REGISTRATION RIGHTS

 

SECTION 2.1. Shelf Registration . Not later than the date which is fourteen (14) months after the consummation date of the Initial Public Offering, the Company shall prepare and file a “shelf” registration statement with respect to shares of Common Stock issuable upon the exchange of Exchangeable OP Units on an appropriate form for the offering and subsequent resale thereof, to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”) and shall use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective on or as soon as practicable thereafter, and to keep such Shelf Registration Statement continuously effective for a period ending when all shares of Common Stock covered by the Shelf Registration Statement are no longer Registrable Securities.

 

4


SECTION 2.2. Demand Registration .

 

(a) Request for Registration . Commencing on or after the date which is sixteen (16) months after the consummation date of the Initial Public Offering, the Cambay Holders and the GIP Holders may each make one written request (to be executed by Holders owning a majority of the Registrable Securities of the Cambay Holders or GIP Holders, as the case may be) for registration under the Securities Act of all or part of its or their Registrable Securities (a “Major Holder Demand Registration”); provided , however , that the right to request a Major Holder Demand Registration shall lapse as to such group of Holders if the Cambay Holders or the GIP Holders, as the case may be, cease to own Registrable Securities in an amount in excess of 7.5% of the Common Stock of the Company, calculated in accordance with the methodology for calculating the percentage ownership of a Person for purposes of the Ownership Limit pursuant to Article VI of the Company’s Articles of Incorporation. In addition, in the event that the Company fails to file, or if filed fails to maintain the effectiveness of, a Shelf Registration Statement, Holders of Registrable Securities may make a written request for registration under the Securities Act of all or part of its or their Registrable Securities (a “Default Demand Registration,” and together with a Major Holder Demand Registration, a “Demand Registration”); provided, that if and so long as a Shelf Registration Statement is on file and effective, then the Company shall have no obligation to effect a Default Demand Registration; and provided, further , that the number of shares of Registrable Securities proposed to be sold by the Holders making such written request for a Default Demand Registration shall have a Market Value of at least $10 million on the date of such demand. The Company shall not be obligated to effect more than one Demand Registration in any twelve-month period. Subject to the foregoing, the number of Default Demand Registrations which may be made pursuant to this Section 2.2 shall be unlimited. Any request for a Demand Registration will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within ten (10) days after receipt of such request, the Company will give written notice of such registration request to all other Holders of the Registrable Securities and include in such registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) Business Days after the receipt by the applicable Holder of the Company’s notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof. Unless the Holder or Holders of a majority of the Registrable Securities to be registered in such Demand Registration shall consent in writing, no other party, including the Company (but excluding another Holder of a Registrable Security), shall be permitted to offer securities under any such Demand Registration.

 

(b) Effective Registration . A registration will not count as a Demand Registration until it has become effective.

 

(c) Selling Holders Become Party to Agreement . Each Holder acknowledges that by asserting or participating in its registration rights pursuant to this Article II, he, she or it may become a Selling Holder and thereby will be deemed a party to this Agreement and will be bound by each of its terms.

 

5


(d) Underwritten Demand Registrations . If the Holders of a majority of shares of the Registrable Securities to be registered in a Demand Registration so elect by written notice to the Company, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Company shall select the book-running managing Underwriter in connection with any such Demand Registration; provided that such managing Underwriter must be reasonably satisfactory to the Holders of a majority of the shares of the Registrable Securities participating in the Demand Registration. The Company may select any additional investment banks and managers to be used in connection with the offering; provided that such additional investment bankers and managers must be reasonably satisfactory to a majority of the Holders making such Demand Registration. In the case of a Default Demand Registration, to the extent 10% or more of the Registrable Securities so requested to be registered are excluded from the offering in accordance with Section 2.4, the Holders of such Registrable Securities shall have the right to one additional Demand Registration under this Section in such twelve-month period with respect to such Registrable Securities.

 

SECTION 2.3. Piggy-Back Registration . If the Company proposes to file a registration statement under the Securities Act with respect to an underwritten equity offering of Common Stock by the Company for its own account or for the account of any of its respective securityholders (other than (i) any registration statement filed by the Company under the Securities Act relating to an offering of Common Stock for its own account as a result of the exercise of the exchange rights set forth in Section 8.6 of the Partnership Agreement, (ii) any registration statement filed in connection with a demand registration other than a Demand Registration under this Agreement or (iii) a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or filed in connection with an exchange offer or offering of securities solely to the Company’s existing securityholders), then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than ten (10) days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (a “Piggy-Back Registration”); provided , that if and so long as a Shelf Registration Statement is on file and effective, then (other than with respect to Registrable Securities held by Global Innovation Partners, LLC) the Company shall have no obligation to effect a Piggy-Back Registration. The Company shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company included therein.

 

SECTION 2.4. Reduction of Offering . Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.2 or 2.3 advise the Company and the Holders of the Registrable Securities included in such offering that (i) the size of the offering that the Holders, the Company and such other persons intend to make or (ii) in the case of a Piggy-Back Registration only, the kind of securities that the Holders, the Company and/or any other persons or entities intend to include in such offering are such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then (A) if the size of the offering is the basis of such Underwriter’s determination, (x) in the case of a Major Holder Demand Registration, the

 

6


amount of securities to be offered for the accounts of Holders (other than the Cambay Holders, if the Cambay Holders have requested such Major Demand Registration, or the GIP Holders, if the GIP Holders have requested such Major Demand Registration) shall be reduced pro rata (according to the Registrable Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters, and (y) in the event of a Default Demand Registration or a Piggy-Back Registration, the amount of securities to be offered for the accounts of Holders shall be reduced pro rata (according to the Registrable Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters; provided that, in the case of a Piggy-Back Registration, if securities of a different class are being offered for the account of other persons or entities as well as the Company, then with respect to the Registrable Securities intended to be offered by Holders, the proportion by which the amount of-such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other persons or entities is reduced; and (B) if the combination of securities to be offered is the basis of such Underwriter’s determination, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)) or, (y) if the actions described in clause (x) would, in the judgment of the managing Underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering.

 

SECTION 2.5. Registration Procedures; Filings; Information . In connection with any Shelf Registration Statement under Section 2.1 or whenever Holders request that any Registrable Securities be registered pursuant to Section 2.2 hereof, the Company will use its commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request:

 

(a) The Company will as expeditiously as possible prepare and file with the Commission a registration statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its commercially reasonable efforts to cause such filed registration statement to become and remain effective (i) in the case of a Shelf Registration, for the period described in Section 2.1 and (ii) in the case of a Demand Registration, for a period of not less than 270 days; provided that if the Company shall furnish to the Holders making a request pursuant to Section 2.2 a certificate signed by either its Chairman or Chief Executive Officer stating that in his or her good faith judgment it would be significantly disadvantageous to the Company or its shareholders for such a registration statement to be filed as expeditiously as possible, the Company shall have a period of not more than 120 days within which to file such registration statement measured from the date of receipt of the request in accordance with Section 2.2.

 

(b) The Company will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder

 

7


and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder and Underwriter, if any, such number of conformed copies of such registration statement, each amendment and supplement thereto (and upon request, all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

 

(c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(d) The Company will use its commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder or managing Underwriter or Underwriters, if any, reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

 

(e) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and promptly make available to each Selling Holder any such supplement or amendment.

 

(f) The Company will enter into customary agreements (including an underwriting agreement, if any, in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.

 

(g) The Company will make available for inspection by any Selling Holder of such Registrable Securities, if such Selling Stockholder has a due diligence defense under the Securities Act, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as

 

8


shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the company or its Affiliates unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

(h) The Company will furnish to each Selling Holder, if it has a due diligence defense under the Securities Act, and to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) if eligible under SAS 72, a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Securities included in such offering or the managing Underwriter or Underwriters therefor reasonably requests.

 

(i) The Company will otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder (or any successor rule or regulation hereafter adopted by the Commission).

 

(j) The Company will use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed.

 

The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding such selling Holder, the Registrable Securities held by it and the intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.

 

Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.5(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of

 

9


the copies of the supplemented or amended prospectus contemplated by Section 2.5(e) hereof, and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 2.5(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 2.5(e) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 2.5(e) hereof.

 

SECTION 2.6. Registration Expenses . In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 2.5(h) hereof), (vii) the reasonable fees and disbursement of one counsel for all the Holders and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities or any transfer taxes relating to the registration or sale of the Registrable Securities.

 

SECTION 2.7. Indemnification by the Company . The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such

 

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untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 2.7, provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter of the Registrable Securities from whom the person asserting any such losses, claims, damages or liabilities purchased the Registrable Securities which are the subject thereof if such person did not receive a copy of the prospectus (or the prospectus as supplemented) at or prior to the confirmation of the sale of such Registrable Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as supplemented).

 

SECTION 2.8. Indemnification by Holders of Registrable Securities . Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information relating to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.7. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 2.8. Notwithstanding the foregoing, in no event will the liability of a GIP Holder under this Section 2.8 or Section 2.10 or otherwise hereunder exceed the net proceeds received by such Selling Holder.

 

SECTION 2.9. Conduct of Indemnification Proceedings . In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 2.7 or 2.8, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying

 

11


Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.7 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in the case of Persons indemnified pursuant to Section 2.8, the Company. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 Business Days after receipt by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of with any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

SECTION 2.10. Contribution . If the indemnification provided for in Section 2.7 or 2.8 hereof is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total

 

12


underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Selling Holder’s obligations to contribute pursuant to this Section 2.10 are several in proportion to the proceeds of the offering received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint. For the avoidance of doubt, this Section 2.10 applies in the case of a shelf registration and an underwritten offering.

 

SECTION 2.11. Participation in Underwritten Registrations . No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights provided for in this Article II.

 

SECTION 2.12. Rule 144 . The Company covenants that it will timely file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will

 

13


take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

 

SECTION 2.13. Holdback Agreements .

 

(a) Restrictions on Public Sale by Holder of Registrable Securities . To the extent not inconsistent with applicable law, each Holder whose securities are included in a registration statement agrees not to effect any sale or distribution of the issue being registered or a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing Underwriter or Underwriters).

 

(b) Restrictions on Public Sale by the Company and Others . The Company agrees that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.2 or Section 2.3 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90-day period beginning on, the effective date of any registration statement (except as part of such registration statement where the Holders of a majority of the Registrable Securities to be included in such registration statement consent or as part of registration statements filed as set forth in Section 2.3(i) or (iii)), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing Underwriter or Underwriters), in each case including a sale pursuant to Rule 144 under the Securities Act (except as part of any such registration, if permitted); provided , however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities.

 

(c) If the Company determines in its good faith judgment that the filing of the Shelf Registration Statement under Section 2.1 or a Demand Registration under Section 2.2 hereof or the use of any related prospectus would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or

 

14


the disclosure of which would impede the Company’s ability to consummate a significant transaction, and that the Company is not otherwise required by applicable securities laws or regulations to disclose, upon written notice of such determination by the Company, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the earlier of (i) the date upon which the Company notifies the Holders in writing that suspension of such rights for the grounds set forth in this Section 2.13(c) is no longer necessary and (ii) 40 days. The Company agrees to give such notice as promptly as practicable following the date that such suspension of rights is no longer necessary. The Company may not utilize this suspension right more than three times in any twelve (12) month period.

 

(d) If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by the Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X under the Act, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the earlier of (i) the date on which the Company has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in the Shelf Registration Statement, and (ii) 30 days, and the Company shall notify the Holders as promptly as practicable when such suspension is no longer required. The Company may not utilize this suspension right more than three times in any twelve (12)-month period.

 

ARTICLE III

MISCELLANEOUS

 

SECTION 3.1. New York Stock Exchange Listing . In the event that the Company shall issue any Common Stock in exchange for OP Units pursuant to Section 8.6 of the Partnership Agreement, then in any such case the Company agrees to cause any such shares of Common Stock to be listed on the New York Stock Exchange prior to or concurrently with the issuance thereof by the Company.

 

SECTION 3.2. Remedies . In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the DLR Persons shall be entitled to specific performance of the rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. Notwithstanding the foregoing, specific performance shall not be available with respect to the rights and obligations of the parties pursuant to Section 2.13(a) and (b).

 

15


SECTION 3.3. Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, in each case without the written consent of the Company and the Holders of a majority of the Registrable Securities. No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

 

SECTION 3.4. Notices . All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery:

 

(1) if to any DLR Person, initially c/o the Operating Partnership initially at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (Attention: Chief Executive Officer), or to such other address and to such other Persons as any DLR Person may hereafter specify in writing; and

 

(2) if to the Company, initially at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (Attention: Chief Executive Officer), or to such other address as the Company may hereafter specify in writing.

 

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery.

 

SECTION 3.5. Successors and Assigns . Except as expressly provided in this Agreement the rights and obligations of the DLR Persons under this Agreement shall not be assignable by any DLR Person to any Person that is not a DLR Person. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

 

SECTION 3.6. Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

 

SECTION 3.7. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to the choice of law provisions thereof.

 

SECTION 3.8. Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

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SECTION 3.9. Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

SECTION 3.10. Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

SECTION 3.11. No Third Party Beneficiaries . Nothing express or implied herein is intended or shall be construed to confer upon any person or entity, other than the parties hereto and their respective successors and assigns and all Indemnified Parties, any rights, remedies or other benefits under or by reason of this Agreement.

 

[Signature Pages Follow]

 

17


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

COMPANY
DIGITAL REALTY TRUST, INC.
a Maryland corporation
By:  

/s/ Michael F. Foust


Name:   Michael F. Foust
Title:   Chief Executive Officer
OPERATING PARTNERSHIP
DIGITAL REALTY TRUST, L.P.,
a Maryland limited partnership
By:   Digital Realty Trust, Inc.
    General Partner
    By:  

/s/ Michael F. Foust


    Name:   Michael F. Foust
    Title:   Chief Executive Officer
UNIT HOLDERS
Global Innovation Partners, LLC,
a Delaware limited liability company
By:   Global Innovation Manager, LLC,
    its Manager
    By:  

A. William Stein


    Name:   A. William Stein
    Title:   Authorized Signatory

 

S-1

Signature Page to Registration Rights Agreement


UNIT HOLDERS
San Francisco Wave eXchange, LLC,
a Delaware limited liability company
By:    200 Paul Wave Exchange, LLC
     a Delaware limited liability company
Its:    Member
     By:    Cambay Tele.com, LLC,
          a Delaware limited liability company
     Its:    Member
          By:   The Cambay Group, Inc.,
              a California corporation
          Its:   Member
          By:  

/s/ John O. Wilson


          Name:   John O. Wilson
          Title:   Vice President and Secretary
Santa Clara Wave eXchange, LLC,
a Delaware limited liability company
By:    Wave Exchange, LLC,
     a Delaware limited liability company
Its:    Member
     By:    Wave Exchange, Inc.,
          a California corporation
     Its:    Member
          By:  

/s/ William C. Scott, Jr.


          Name:   William C. Scott, Jr.
          Title:   Chief Financial Officer

 

S-2

Signature Page to Registration Rights Agreement


UNIT HOLDERS
Pacific Bryan Partners, L.P.,
a Texas limited partnership
By:   Bryan Partners, LLC
    a Texas limited liability company
Its:   General Partner
    By:  

/s/ A. Ghassemieh


    Name:   A. Ghassemieh
    Title:   Manager

 

S-3

Signature Page to Registration Rights Agreement

Exhibit 10.3

 

DIGITAL REALTY TRUST, INC.,

DIGITAL SERVICES, INC. AND

DIGITAL REALTY TRUST, L.P.

2004 INCENTIVE AWARD PLAN

 

ARTICLE 1

 

PURPOSE

 

The purpose of the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (the “ Plan ”) is to promote the success and enhance the value of Digital Realty Trust, Inc., a Maryland corporation (the “ Company ”), Digital Services, Inc., a Maryland corporation (the “ Services Company ”), and Digital Realty Trust, L.P. (the “ Partnership ”) by linking the personal interests of Employees, Consultants, members of the Board, and Services Company Directors to those of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company, the Services Company, the Partnership and their subsidiaries in their ability to motivate, attract, and retain the services of those individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s, the Service Company’s and the Partnership’s operation is largely dependent.

 

ARTICLE 2

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

 

2.1 “ Award ” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Profits Interest Unit award, an Other Incentive Award, a Performance Bonus Award, or a Performance-Based Award granted to a Participant pursuant to the Plan.

 

2.2 “ Award Agreement ” means any written agreement, contract, or other instrument or document evidencing an Award.

 

2.3 “ Board ” means the Board of Directors of the Company.

 

2.4 “ Change in Control ” means the occurrence of any of the following events:

 

(a) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent 35% or more of the combined voting power of the Company’s then outstanding voting securities, other than

 

(i) an acquisition of securities by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or


(ii) an acquisition of securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

 

(iii) an acquisition of securities pursuant to a transaction described in Section 2.4(c) below that would not be a Change in Control under Section 2.4(c), or

 

(iv) any direct or indirect acquisition of securities by Global Innovation Partners, LLC or California Public Employees’ Retirement System (CALPERS), or any affiliate thereof;

 

Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this Section 2.4(a): an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 35% or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of 35% or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change in Control;

 

(b) individuals who, as of the date of the closing of the initial public offering of the Stock, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election by the Company’s stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(c) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction

 

(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or

 

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by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

 

(ii) after which no person or group, other than Global Innovation Partners, LLC or California Public Employees’ Retirement System (CALPERS), or any affiliate thereof, beneficially owns voting securities representing 35% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 35% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

 

(d) approval by the Company’s stockholders of a liquidation or dissolution of the Company.

 

For purposes of Section 2.4(a) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of the Company’s stockholders, and for purposes of Section 2.4(c) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of the Company’s stockholders. The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.

 

2.5 “ Code ” means the Internal Revenue Code of 1986, as amended.

 

2.6 “ Committee ” means the committee of the Board described in Article 12.

 

2.7 “ Company Consultant ” means any consultant or adviser if:

 

(a) The consultant or adviser renders bona fide services to the Company or Company Subsidiary;

 

(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly with the Company or Company Subsidiary to render such services.

 

2.8 “ Company Employee ” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or of any Company Subsidiary.

 

2.9 “ Company Subsidiary ” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is

 

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owned, directly or indirectly, by the Company or by one or more Company Subsidiaries or by the Company and one or more Company Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Company or by one or more Company Subsidiaries or by the Company and one or more Company Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Company or by one or more other Company Subsidiaries or by the Company and one or more Company Subsidiaries; provided, however , that “Company Subsidiary” shall not include the Services Company, any Services Company Subsidiary, the Partnership or any Partnership Subsidiary.

 

2.10 “ Consultant ” means any Company Consultant, Services Company Consultant or Partnership Consultant.

 

2.11 “ Covered Employee ” means a Company Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.

 

2.12 “ Deferred Stock ” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8.

 

2.13 “ Disability ” means that the Participant qualifies to receive long-term disability payments under the Company’s or the Partnership’s long-term disability insurance program, as it may be amended from time to time.

 

2.14 “ Dividend Equivalents ” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

 

2.15 “ Effective Date ” shall have the meaning set forth in Section 13.1.

 

2.16 “ Eligible Individual ” means any person who is an Employee, a Consultant, a member of the Board or a Services Company Director, as determined by the Committee.

 

2.17 “ Employee ” means any Company Employee, Services Company Employee or Partnership Employee.

 

2.18 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

2.19 “ Fair Market Value ” means, as of any given date, the fair market value of a share of Stock on the immediately preceding date determined by such methods or procedures as may be established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a share of Stock as of any date shall be the average of the high and low trading prices for a share of Stock as reported on the New York Stock Exchange (or on any national securities exchange on which the Stock is then listed) for the immediately preceding date or, if no such prices are reported for that date, the average of the high and low trading prices on the next preceding date for which such prices were reported; provided, however , that the Fair Market Value of a share of Stock granted on the Public Trading Date shall equal the initial public offering price per share of Stock.

 

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2.20 “ Incentive Stock Option ” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

 

2.21 “ Independent Director ” means a member of the Board who is not an Employee.

 

2.22 “ Non-Employee Director ” means a member of the Board who qualifies as a “non-employee director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor definition adopted by the Board.

 

2.23 “ Non-Qualified Stock Option ” means an Option that is not intended to be an Incentive Stock Option or which is designated as an Incentive Stock Option but does not conform to the applicable provisions of Section 422 of the Code.

 

2.24 “ Option ” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

 

2.25 “ Other Incentive Award ” means an Award granted, based upon or denominated in Stock or units of Stock pursuant to Section 8.8 of the Plan.

 

2.26 “ Participant ” means a person who, as an Employee, Consultant, member of the Board, or Services Company Director, has been granted an Award pursuant to the Plan.

 

2.27 “ Partnership Agreement ” means the Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as the same may be amended, modified or restated from time to time.

 

2.28 “ Partnership Consultant ” means any consultant or advisor if:

 

(a) The consultant or adviser renders bona fide services to the Partnership or Partnership Subsidiary;

 

(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Partnership’s securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly with the Partnership or Partnership Subsidiary to render such services.

 

2.29 “ Partnership Employee ” means any employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership or any entity which is then a Partnership Subsidiary.

 

2.30 “ Partnership Participant Purchased Shares ” has the meaning set forth in Section 5.6.

 

2.31 “ Partnership Purchase Price ” has the meaning set forth in Section 5.6.

 

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2.32 “ Partnership Purchased Shares ” has the meaning set forth in Section 5.6.

 

2.33 “ Partnership Subsidiary ” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Partnership or by one or more Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Partnership or by one or more Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Partnership or by one or more other Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries; provided, however, that “Partnership Subsidiary” shall not include the Services Company or any Services Company Subsidiary.

 

2.34 “ Performance-Based Award ” means an Award granted to selected Covered Employees pursuant to Articles 6 and 8, but which is subject to the terms and conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as Qualified Performance-Based Compensation.

 

2.35 “ Performance Bonus Award ” has the meaning set forth in Section 8.9.

 

2.36 “ Performance Criteria ” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), funds from operations, adjusted funds from operations, cash available for distribution, economic value-added (as determined by the Committee), sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.

 

2.37 “ Performance Goals ” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall performance of the Company, the Services Company, the Partnership, any Subsidiary, any division or business unit thereof, or an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (i) in the event of, or

 

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in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, the Services Company, the Partnership or any Subsidiary, or the financial statements of the Company, the Services Company, the Partnership or any Subsidiary, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.

 

2.38 “ Performance Period ” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award.

 

2.39 “ Performance Share ” means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.

 

2.40 “ Performance Stock Unit ” means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon achieving certain performance goals established by the Committee.

 

2.41 “ Plan ” means this Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan, as it may be amended from time to time.

 

2.42 “ Pricing Date ” has the meaning set forth in Section 8.10(a).

 

2.43 “ Profits Interest Unit ” means a “Profits Interest Unit” of the Partnership, as defined in the Partnership Agreement.

 

2.44 “ Public Trading Date ” means the first date upon which Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.

 

2.45 “ Qualified Performance-Based Compensation ” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

 

2.46 “ REIT ” means a real estate investment trust within the meaning of Sections 856 through 860 of the Code.

 

2.47 “ Restricted Stock ” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture.

 

2.48 “ Restricted Stock Unit ” means an Award granted pursuant to Section 8.6.

 

2.49 “ Services Company ” means Digital Services, Inc., a Maryland corporation.

 

2.50 “ Services Company Consultant ” means any consultant or advisor if:

 

(a) The consultant or adviser renders bona fide services to the Services Company or Services Company Subsidiary;

 

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(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly with the Services Company or Services Company Subsidiary to render such services.

 

2.51 “ Services Company Director ” means a member of the Board of Directors of the Services Company.

 

2.52 “ Services Company Employee ” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Services Company or of any corporation, partnership or limited liability company which is then a Services Company Subsidiary.

 

2.53 “ Services Company Participant Purchased Shares ” has the meaning set forth in Section 5.7.

 

2.54 “ Services Company Purchase Price ” has the meaning set forth in Section 5.7.

 

2.55 “ Services Company Purchased Shares ” has the meaning set forth in Section 5.7.

 

2.56 “ Services Company Subsidiary ” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Services Company or by one or more Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Services Company or by one or more Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Services Company or by one or more other Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries.

 

2.57 “ Stock ” means the common stock of the Company, par value $0.01 per share, and such other securities of the Company that may be substituted for Stock pursuant to Article 11.

 

2.58 “ Stock Appreciation Right ” or “ SAR ” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.

 

2.59 “ Stock Payment ” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

 

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2.60 “ Subsidiary ” means any Company Subsidiary, Services Company Subsidiary or Partnership Subsidiary.

 

ARTICLE 3

 

SHARES SUBJECT TO THE PLAN

 

3.1 Number of Shares .

 

(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards (including, without limitation, Incentive Stock Options) under the Plan shall be 4,474,102. Each Profits Interest Unit issued pursuant to an Award shall count as one share of Stock for purposes of calculating the aggregate number of shares of Stock available for issuance under the Plan as set forth in this Section 3.1(a) and for purposes of calculating the share limitation set forth in Section 3.3.

 

(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards), and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. Notwithstanding the foregoing, no shares shall become available pursuant to this Section 3.1(b) to the extent that (x) the transaction resulting in the return of shares occurs more than ten years after the date of the most recent shareholder approval of the Plan, or (y) such return of shares would constitute a “material revision” of the Plan subject to stockholder approval under then applicable rules of the New York Stock Exchange (or any other applicable exchange or quotation system).

 

3.2 Stock Distributed . Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

 

3.3 Limitation on Number of Shares Subject to Awards . Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during a rolling three-year period (measured from the date of any grant) shall be 1,118,526 ; provided,

 

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however, that the foregoing limitation shall not apply prior to the Public Trading Date and, following the Public Trading Date, the foregoing limitation shall not apply until the earliest of: (a) the first material modification of the Plan (including any increase in the number of shares reserved for issuance under the Plan in accordance with Section 3.1); (b) the issuance of all of the shares of Stock reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting of stockholders at which members of the Board are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security of the Company under Section 12 of the Exchange Act; or (e) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.

 

ARTICLE 4

 

ELIGIBILITY AND PARTICIPATION

 

4.1 Eligibility . Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.

 

4.2 Participation . Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to this Plan.

 

4.3 Foreign Participants . In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however , that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan.

 

ARTICLE 5

 

STOCK OPTIONS

 

5.1 General . The Committee is authorized to grant Options to Participants on the following terms and conditions:

 

(a) Exercise Price . The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided that the exercise price for any Option shall not be less than 85% of the Fair Market Value of a share of Stock on the date of grant.

 

(b) Time and Conditions of Exercise . The Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.

 

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(c) Payment . The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, (i) cash, (ii) shares of Stock held for such period of time as may be required by the Committee in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k) of the Exchange Act.

 

(d) Evidence of Grant . All Options shall be evidenced by a written Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.

 

5.2 Incentive Stock Options . The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the conditions and limitations contained in Section 13.2 and this Section 5.2:

 

(a) Eligibility . Incentive Stock Options may be granted only to Company Employees or to Employees of a Subsidiary which constitutes a “subsidiary corporation” within the meaning of Section 424(f) of the Code.

 

(b) Exercise Price . The exercise price per share of Stock subject to an Incentive Stock Option shall be set by the Committee but shall not be less than 100% of the Fair Market Value on the date of grant.

 

(c) Individual Dollar Limitation . The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.

 

(d) Ten Percent Owners . An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant.

 

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(e) Notice of Disposition . The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option if such disposition occurs within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant.

 

(f) Right to Exercise . During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.

 

5.3 Substitution of Stock Appreciation Rights . The Committee may provide in the Award Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have to right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option, subject to the provisions of Section 7.2 hereof; provided that such Stock Appreciation Right shall be exercisable for the same number of shares of Stock as such substituted Option would have been exercisable for.

 

5.4 Granting of Options to Independent Directors . The Board may from time to time, in its sole discretion, and subject to the limitations of the Plan:

 

(a) Select from among the Independent Directors (including Independent Directors who have previously been granted Options under the Plan) such of them as in its opinion should be granted Options;

 

(b) Subject to Section 3.3, determine the number of shares of Stock that may be purchased upon exercise of the Options granted to such selected Independent Directors; and

 

(c) Subject to the provisions of this Article 5, determine the terms and conditions of such Options, consistent with the Plan

 

5.5 Transfer of Shares to a Company Employee, Consultant or Independent Director . As soon as practicable after receipt by the Company of payment for the shares with respect to which an Option (which in the case of a Company Employee, Company Consultant or Independent Director was issued to and is held by such Participant in such capacity), or portion thereof, is exercised by a Participant who is a Company Employee, Company Consultant or Independent Director, then, with respect to each such exercise, the Company shall transfer to the Participant the number of shares equal to:

 

(a) The amount of the payment made by the Participant to the Company pursuant to Section 5.1(c), divided by

 

(b) The price per share of the shares subject to the Option as determined pursuant to Section 5.1(a) or 5.2(a), as applicable.

 

5.6 Transfer of Shares to a Partnership Employee or Consultant . As soon as practicable after receipt by the Company, pursuant to Section 5.1(c), of payment for the shares with respect to which an Option (which was issued to and is held by a Partnership Employee or Partnership Consultant in such capacity), or portion thereof, is exercised by a Participant who is a Partnership Employee or Partnership Consultant, then, with respect to each such exercise:

 

(a) the Company shall transfer to the Participant the number of shares equal to (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock at the time of exercise (the “ Partnership Participant Purchased Shares ”);

 

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(b) the Company shall sell to the Partnership the number of shares (the “ Partnership Purchased Shares ”) equal to the excess of (i) the amount obtained by dividing (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) by (B) the price per share of the shares subject to the Option as determined pursuant to Section 5.1(a), over (ii) the Partnership Participant Purchased Shares. The price to be paid by the Partnership to the Company for the Partnership Purchased Shares (the “ Partnership Purchase Price ”) shall be an amount equal to the product of (x) the number of Partnership Purchased Shares multiplied by (y) the Fair Market Value of a share of Common Stock at the time of the exercise; and

 

(c) as soon as practicable after receipt of the Partnership Purchased Shares by the Partnership, the Partnership shall transfer such shares to the Participant at no additional cost, as additional compensation.

 

5.7 Transfer of Shares to a Services Company Employee, Consultant or Director . As soon as practicable after receipt by the Company, pursuant to Section 5.1(c), of payment for the shares with respect to which an Option (which was issued to and is held by a Services Company Employee, Services Company Director or Services Company Consultant in such capacity), or portion thereof, is exercised by a Participant who is a Services Company Employee, Services Company Director or Services Company Consultant, then, with respect to each such exercise:

 

(a) the Company shall transfer to the Participant the number of shares equal to (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock at the time of exercise (the “ Services Company Participant Purchased Shares ”);

 

(b) the Company shall sell to the Services Company the number of shares (the “ Services Company Purchased Shares ”) equal to the excess of (i) the amount obtained by dividing (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) by (B) the price per share of the shares subject to the Option as determined pursuant to Section 5.1(a), over (ii) the Services Company Participant Purchased Shares. The price to be paid by the Services Company to the Company for the Services Company Purchased Shares (the “ Services Company Purchase Price ”) shall be an amount equal to the product of (x) the number of Services Company Purchased Shares multiplied by (y) the Fair Market Value of a share of Common Stock at the time of the exercise; and

 

(c) as soon as practicable after receipt of the Services Company Purchased Shares by the Services Company, the Services Company shall transfer such shares to the Participant at no additional cost, as additional compensation.

 

5.8 Transfer of Payment to the Partnership . As soon as practicable after receipt by the Company of the amounts described in Sections 5.1(c), 5.6(b) and 5.7(b), the Company shall contribute to the Partnership an amount of cash equal to such payments and the Partnership shall issue an additional interest in the Partnership on the terms set forth in the Partnership Agreement.

 

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ARTICLE 6

 

RESTRICTED STOCK AWARDS

 

6.1 Grant of Restricted Stock . The Committee is authorized to make Awards of Restricted Stock to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a written Restricted Stock Award Agreement.

 

6.2 Issuance and Restrictions . Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

 

6.3 Forfeiture . Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however , that the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

 

6.4 Certificates for Restricted Stock . Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company, the Services Company or the Partnership, as applicable, may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

 

ARTICLE 7

 

STOCK APPRECIATION RIGHTS

 

7.1 Grant of Stock Appreciation Rights . A Stock Appreciation Right may be granted to any Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

 

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7.2 Coupled Stock Appreciation Rights .

 

(a) A Coupled Stock Appreciation Right (“ CSAR ”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable.

 

(b) A CSAR may be granted to a Participant for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled.

 

(c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company the unexercised portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company, the Partnership or the Services Company, as applicable, in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose.

 

7.3 Independent Stock Appreciation Rights .

 

(a) An Independent Stock Appreciation Right (“ ISAR ”) shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may determine. The exercise price per share of Stock subject to each ISAR shall be set by the Committee; provided that the exercise price for any ISAR shall not be less than 100% of the Fair Market Value on the date of grant; and provided, further , that, the Committee in its sole and absolute discretion may provide that the ISAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or Disability, or otherwise.

 

(b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company, the Partnership or the Services Company, as applicable, an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of shares of Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose.

 

7.4 Payment and Limitations on Exercise .

 

(a) Payment of the amounts determined under Sections 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.

 

(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.

 

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ARTICLE 8

 

OTHER TYPES OF AWARDS

 

8.1 Performance Share Awards . Any Participant selected by the Committee may be granted one or more Performance Share awards which shall be denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee.

 

8.2 Performance Stock Units . Any Participant selected by the Committee may be granted one or more Performance Stock Unit awards which shall be denominated in units of value including dollar value of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee.

 

8.3 Dividend Equivalents .

 

(a) Any Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.

 

(b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.

 

8.4 Stock Payments . Any Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

 

8.5 Deferred Stock . Any Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.

 

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8.6 Restricted Stock Units . Any Participant selected by the Committee may be granted an award of Restricted Stock Units in such amount and subject to such terms and conditions as may be determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company, the Services Company or the Partnership, as applicable, shall transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company, the Services Company or the Partnership, as applicable, for such shares of Stock.

 

8.7 Profits Interest Units . Any Participant selected by the Committee may be granted an award of Profits Interest Units in such amount and subject to such terms and conditions as may be determined by the Committee; provided, however, that Profits Interest Units may only be issued to a Participant for the performance of services to or for the benefit of the Partnership in the Participant’s capacity as a partner of the Partnership. At the time of grant, the Committee shall specify the date or dates on which the Profits Interest Units shall vest and become nonforfeitable, and may specify such conditions to vesting as it deems appropriate. Profits Interest Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Partnership for the Profits Interest Units.

 

8.8 Other Incentive Awards . Any Participant selected by the Committee may be granted one or more Awards that provide Participants with shares of Stock or the right to purchase shares of Stock or that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise based on or payable in shares of Stock (including, without limitation, convertible or exchangeable securities), in each case on a specified date or dates or over any period or periods determined by the Committee. Other Incentive Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee.

 

8.9 Performance Bonus Awards . Any Participant selected by the Committee may be granted one or more Performance-Based Awards in the form of a cash bonus (a “ Performance Bonus Award ”) payable upon the attainment of Performance Goals that are established by the Committee and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Any such Performance Bonus Award paid to a Covered Employee shall be based upon objectively determinable bonus formulas established in accordance with Article 9. The maximum amount of any Performance Bonus Award payable to a Covered Employee with respect to any fiscal year of the Company shall not exceed $2,000,000.

 

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8.10 Granting of Profits Interest Units to Independent Directors .

 

(a) During the term of the Plan, each person who is an Independent Director as of the effective date of the Registration Statement on Form S-11 with respect to the initial public offering of shares of Stock (the “ Pricing Date ”) automatically shall be granted (i) 6,448 Profits Interest Units on the Pricing Date, and (ii) 1,612 Profits Interest Units on the date of each annual meeting of stockholders after the Public Trading Date at which the Independent Director is reelected to the Board, commencing with the third annual meeting after the Public Trading Date. During the term of the Plan, each person who is initially elected to the Board after the Pricing Date and who is an Independent Director at the time of such initial election automatically shall be granted (I) 6,448 Profits Interest Units on the date of such initial election, and (II) 1,612 Profits Interest Units on the date of each annual meeting of stockholders after such initial election at which the Independent Director is reelected to the Board, commencing with the third annual meeting after such initial election. Members of the Board who are employees of the Company, the Partnership, the Services Company, or any Subsidiary who subsequently retire from employment with such entities and remain on the Board will not receive an initial Award of Profits Interest Units pursuant to clause (I) of the preceding sentence, but to the extent they are otherwise eligible, will receive, after retirement from such employment, an Award of Profits Interest Units as described in clause (ii) above or clause (II) of the preceding sentence, as applicable. Notwithstanding the foregoing, in the event that an Independent Director does not qualify as an “accredited investor” within the meaning of Regulation D of the Securities Act of 1933, as amended, on the date of any grant of Profits Interest Units to such Independent Director pursuant to this Section 8.10, then such Independent Director shall not receive such grant of Profits Interest Units, and in lieu thereof shall automatically be granted an equivalent number of fully vested shares of Restricted Stock at a per share purchase price equal to the par value of the Stock.

 

(b) The Profits Interest Units awarded pursuant to subsection (a) above shall be vested in full as of the date of grant. Consistent with the foregoing, the terms and conditions of the Profits Interest Units (including, without limitation, transfer restrictions with respect thereto) shall be set forth in an Award Agreement to be entered into by the Company and each Independent Director which shall evidence the grant of the Profits Interest Units.

 

8.11 Term . Except as otherwise provided herein, the term of any Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units, Profits Interest Units or Other Incentive Award shall be set by the Committee in its discretion.

 

8.12 Exercise or Purchase Price . The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments, Restricted Stock Units or Other Incentive Award; provided, however , that such price shall not be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law.

 

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8.13 Exercise Upon Termination of Employment or Service . An Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments, Restricted Stock Units, Profits Interest Units and Other Incentive Award shall only be exercisable or payable while the Participant is an Employee, Consultant, a member of the Board or a Services Company Director, as applicable; provided, however , that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units, Profits Interest Units or Other Incentive Award may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or Disability, or otherwise; provided further, that any such provision with respect to Performance Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation.

 

8.14 Form of Payment . Payments with respect to any Award granted under this Article 8, other than Profits Interest Units, shall be made in cash, in Stock or a combination of both, as determined by the Committee.

 

8.15 Award Agreement . All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by a written Award Agreement.

 

ARTICLE 9

 

PERFORMANCE-BASED AWARDS

 

9.1 Purpose . The purpose of this Article 9 is to provide the Committee the ability to qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8; provided, however , that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.

 

9.2 Applicability . This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.

 

9.3 Procedures with Respect to Performance-Based Awards . To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and 8 which may

 

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be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.

 

9.4 Payment of Performance-Based Awards . Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a Company Subsidiary, the Partnership or a Partnership Subsidiary, or the Services Company or a Services Company Subsidiary, on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved.

 

9.5 Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements.

 

ARTICLE 10

 

PROVISIONS APPLICABLE TO AWARDS

 

10.1 Stand-Alone and Tandem Awards . Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

 

10.2 Award Agreement . Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

 

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10.3 Limits on Transfer . No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company, the Services Company, the Partnership or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company, the Services Company, the Partnership or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution. The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including but not limited to members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company, the Services Company, the Partnership or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.

 

10.4 Beneficiaries . Notwithstanding Section 10.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

 

10.5 Certificates; Book Entry Procedures .

 

(a) Notwithstanding anything herein to the contrary, neither the Company, the Services Company, nor the Partnership shall be required to issue or deliver any certificates evidencing shares of Stock or other securities pursuant to the grant or exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock or other securities are listed or traded. All certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the

 

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such securities are listed, quoted, or traded. The Committee may place legends on any certificate to reference restrictions applicable to the Stock or other securities. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

 

(b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, neither the Company, the Services Company, nor the Partnership shall deliver to any Participant certificates evidencing shares of Stock or other securities issued in connection with any Award and instead such shares of Stock or other securities shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

 

ARTICLE 11

 

CHANGES IN CAPITAL STRUCTURE

 

11.1 Adjustments .

 

(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (i) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable Performance Goals or Performance Criteria with respect thereto); and (iii) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code.

 

(b) In the event of any transaction or event described in Section 11.1(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole discretion and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested (and, for the avoidance of doubt, if the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction or event described in this Section 11.1(b), then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

 

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(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock or securities of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

 

(iii) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of shares subject to outstanding Restricted Stock or Deferred Stock Awards and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future

 

(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares or other securities covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

 

(v) To provide that the Award cannot vest, be exercised or become payable after such event.

 

11.2 Acceleration Upon Certain Changes in Control . Notwithstanding Section 11.1, if a Change in Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company, the Services Company, the Partnership or any Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 11.2, this Section 11.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.

 

11.3 Outstanding Awards – Other Changes . In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 11, the Committee may, in its absolute discretion, make such adjustments in the number

 

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and kind of shares or other securities subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

 

11.4 No Other Rights . Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock or other securities subject to an Award or the grant or exercise price of any Award.

 

ARTICLE 12

 

ADMINISTRATION

 

12.1 Committee . Unless and until the Board delegates administration of the Plan to a Committee as set forth below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, shall delegate administration of the Plan to a Committee. The Committee shall consist solely of two or more members of the Board each of whom is both an “outside director,” within the meaning of Section 162(m) of the Code, and a Non-Employee Director. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 12.5. Appointment of Committee members shall be effective upon acceptance of appointment. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board.

 

12.2 Action by the Committee . A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company, the Services Company, the Partnership or any Subsidiary, the independent certified public accountants of the Company, the Services Company or the Partnership, or any executive compensation consultant or other professional retained by the Company, the Services Company or the Partnership to assist in the administration of the Plan.

 

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12.3 Authority of Committee . Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

 

(a) Designate Participants to receive Awards;

 

(b) Determine the type or types of Awards to be granted to each Participant;

 

(c) Determine the number of Awards to be granted and the number of shares of Stock or other securities to which an Award will relate;

 

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines; provided, however , that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;

 

(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

 

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

 

(g) Decide all other matters that must be determined in connection with an Award;

 

(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement;

 

(j) In the case of Awards to Service Company Employees, Service Company Consultants, Partnership Employees or Partnership Consultants, determine the mechanics for the transfer of rights under such Awards; and

 

(k) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

 

12.4 Decisions Binding . The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

 

12.5 Delegation of Authority . To the extent permitted by applicable law, the Committee may from time to time delegate to a committee of one or more members of the Board

 

25


or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Committee.

 

ARTICLE 13

 

EFFECTIVE AND EXPIRATION DATE

 

13.1 Effective Date . The Plan is effective as of the date the Plan is approved by the Company’s stockholders (the “ Effective Date ”). The Plan will be deemed to be approved by the stockholders if it receives the affirmative vote of the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Bylaws.

 

13.2 Expiration Date . The Plan will expire on, and no Incentive Stock Option or other Award may be granted pursuant to the Plan after, the earlier of the tenth anniversary of (i) the Effective Date or (ii) the date this Plan is approved by the Board. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.

 

ARTICLE 14

 

AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1 Amendment, Modification, And Termination . With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however , that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 11), (ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant, or (iii) permits the Committee to extend the exercise period for an Option beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option may be amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Option is granted and, except as permitted by Article 11, no Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having a higher per share exercise price.

 

14.2 Awards Previously Granted . No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

 

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ARTICLE 15

 

GENERAL PROVISIONS

 

15.1 No Rights to Awards . No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and none of the Company, the Services Company, the Partnership or the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.

 

15.2 No Stockholders Rights . Except as otherwise provided herein, no Participant shall have any of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock.

 

15.3 Withholding . The Company, the Services Company, the Partnership or any Subsidiary, as applicable, shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, the Services Company, the Partnership or any Subsidiary, as applicable, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company, the Services Company, the Partnership or any Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

 

15.4 No Right to Employment or Services . Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company, the Services Company, the Partnership or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company, the Services Company, the Partnership or any Subsidiary.

 

15.5 Unfunded Status of Awards . The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company, the Services Company, the Partnership or any Subsidiary.

 

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15.6 Indemnification . To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company, the Services Company and/or the Partnership from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company, the Services Company and the Partnership an opportunity, at their own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company, the Services Company and/or the Partnership may have to indemnify them or hold them harmless.

 

15.7 Relationship to other Benefits . No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company, the Services Company, the Partnership or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

15.8 Expenses . The expenses of administering the Plan shall be borne by the Company, the Services Company, the Partnership and their Subsidiaries.

 

15.9 Titles and Headings . The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

15.10 Fractional Shares . No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

 

15.11 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

15.12 Government and Other Regulations . The obligation of the Company, the Services Company and the Partnership to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock or other securities paid pursuant

 

28


to the Plan. If the shares or other securities paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, as amended, the Company, the Services Company and the Partnership may restrict the transfer of such shares or other securities in such manner as it deems advisable to ensure the availability of any such exemption.

 

15.13 Section 83(b) Election Prohibited . No Participant may make an election under Section 83(b) of the Code with respect to any Award under the Plan without the consent of the Company, which the Company may grant or withhold in its sole discretion.

 

15.14 Grant of Awards to Certain Employees or Consultants . The Company, the Services Company, the Partnership or any Subsidiary may provide through the establishment of a formal written policy or otherwise for the method by which shares of Stock or other securities and/or payment therefor may be exchanged or contributed between the Company and such other party, or may be returned to the Company upon any forfeiture of Stock or other securities by the Participant, for the purpose of ensuring that the relationship between the Company and the Services Company, the Partnership or such Subsidiary remains at arm’s-length.

 

15.15 Restrictions on Awards . This Plan shall be interpreted and construed in a manner consistent with the Company’s status as a REIT. No Award shall be granted or awarded, and with respect to an Award already granted under the Plan, such Award shall not be exercisable:

 

(a) to the extent that the grant or exercise of such Award could cause the Participant to be in violation of the Common Stock Ownership Limit or the Aggregate Stock Ownership Limit (each as defined in the Company’s Articles of Incorporation, as amended from time to time); or

 

(b) if, in the discretion of the Committee, the grant or exercise of such Award could impair the Company’s status as a REIT.

 

15.16 Governing Law . The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of California.

 

29


* * * * *

 

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Digital Realty Trust, Inc. on October 24, 2004.

 

* * * * *

 

I hereby certify that the foregoing Plan was approved by the stockholders of Digital Realty Trust, Inc. on October 24, 2004.

 

Executed on this 24th day of October, 2004.

 

/s/ A. William Stein


                Corporate Secretary

 

30

Exhibit 10.10

 

NON-COMPETITION AGREEMENT

 

THIS NON-COMPETITION AGREEMENT (this “ Agreement ”) is dated as of October 28, 2004, by and between Digital Realty, Inc., a Maryland corporation (the “ Company ”), and Global Innovation Partners, LLC, a Delaware limited liability company (the “ Fund ”).

 

WHEREAS, the Fund entered into a Contribution Agreement, dated as of July 31, 2004 (the “ Contribution Agreement ”), pursuant to which the Fund agreed, subject to certain conditions and upon the closing of related transactions (the “Closing”), to contribute to the Operating Partnership, all of its right, title and interest, as a partner or member, in each of the partnerships and limited liability companies which hold an interest in certain commercial properties (the “ Contributed Properties ”), in exchange for a limited partnership interest in Digital Realty Trust, L.P., a Maryland limited partnership (the “ Operating Partnership ”), the general partner of which is the Company; and

 

WHEREAS , the Company and the Fund agree that, in connection with the consummation of the contribution of the Contributed Properties to the Operating Partnership, the Fund will agree to the restrictions upon competition with the Company following the Closing set forth herein.

 

NOW, THEREFORE , in furtherance of the foregoing and in exchange for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Noncompetition .

 

(a) During the remainder of the “ Investment Period ” of the Fund (through February 28, 2006), the Fund shall not, unless agreed to in writing by the Company, engage in Competition, as defined below.

 

(b) The term “ Competition ” for purposes of this Agreement shall mean acquiring or owning interests in, directly or indirectly, including as principal, partner, stockholder or manager of any partnership, corporation or any other entity, Technology Real Estate located in the United States or Europe; provided that it is not the intent of the parties to limit the members of the Fund, so long as they do not act with or through the Fund or entities controlled by the Fund. For purposes of this Agreement, “ Technology Real Estate ” shall mean commercial real estate buildings that are used principally (i) to provide infrastructure required by companies in the data, voice and wireless communications industry; (ii) to provide the physical environment required for businesses in the disaster recovery, IT outsourcing and collocation industries, (iii) to provide highly specialized manufacturing environments for manufacturing of technology products or (iv) as headquarter office facilities for technology companies (or any combination of the foregoing). The term “ Competition ” shall not include (x) the provision of management or other services in respect of real estate (provided such real estate is not owned or acquired by the Fund in violation of this Agreement); (y) the Fund’s ownership of the Option Properties described in Exhibit A hereto; or (z) the Fund’s acquisition of any entity of which the ownership of Technology Real Estate does not comprise the primary business, provided such business accounts for less than 35% of the total enterprise value of such entity, as determined on the date of its acquisition by the Fund.


2. Remedies . The parties acknowledges that in the event of breach by the Fund of the terms of Section 1 hereof, the damages to the Company may be difficult to calculate and accordingly, the sole remedy for such breach shall be to require the Fund to transfer any asset it acquires in violation of this Agreement to the Operating Partnership or the Company for a purchase price equal to the price paid by the Fund; provided that such remedy must be exercised by the Company (or it will be forever waived) with respect to any real estate investment by the Fund within 90 days of receipt of notice from the Fund that it has made any such real estate investment; provided further that the closing of such transfer to the Company shall be consummated not less than 30 days nor more than more than 90 days from the date of exercise of this remedy by the Company. In connection with any such notice, the Fund agrees to disclose to the Company, subject to reasonable confidentiality provisions, sufficient information about the real estate investment to enable the Company to determine whether a breach of this Agreement has occurred.

 

3. Attorneys’ Fees . If any legal action, arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, including any appeal of such action or proceeding, in addition to any other relief to which that party may be entitled.

 

4. Severability . Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that any other provisions of this Agreement invalid, illegal or unenforceable in any other jurisdiction. Notwithstanding the foregoing, if any provision of this Agreement should be deemed invalid, illegal or unenforceable because its scope or duration is considered excessive, such provision shall be modified so that the scope of the provision is reduced only to the minimum extent necessary to render the modified provision valid, legal and enforceable.

 

5. Governing Law . This Agreement shall be governed, construed, interpreted and enforced in accordance with the laws of the State of California, without regard to the conflict of laws principles thereof.

 

6. Entire Agreement . This Agreement contains the entire agreement and understanding between the Company, the Operating Partnership and the Fund with respect to the subject matter hereof, and no representations, promises, agreements or understandings, written or oral, not herein contained shall be of any force or effect. This Agreement shall not be changed unless in writing and signed by both the Fund and the Company.

 

7. Assignment . This Agreement may not be assigned by the Fund, but may be assigned by the Company and the Operating Partnership to any entity that succeeds to its business substantially in its entirety and will inure to the benefit of and be binding upon any such successor.

 

2


8. Notice . For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when personally delivered, (ii) when transmitted by telecopy, electronic or digital transmission with receipt confirmed, (iii) one day after delivery to a nationally recognized overnight air courier guaranteeing next day delivery, or (iv) upon receipt if sent by certified or registered mail. In each case, notice shall be sent to:

 

If to the Fund:

   Global Innovation Partners, LLC
     2730 Sand Hill Road, Suite 280
     Menlo Park, California 94025
     Phone: (650) 233-3600
     Facsimile: (650) 233-3601
     Attn: Richard A. Magnuson

If to the Company

    

and to the Operating Partnership:

   Digital Realty Trust, Inc.
     2730 Sand Hill Road, Suite 280
     Menlo Park, California 94025
     Phone: (650) 233-3600
     Facsimile: (650) 233-3601
     Attn: Michael F. Foust

 

9. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

[Signature Page Follows]

 

3


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

THE COMPANY

Digital Realty Trust, Inc.,

a Maryland corporation

By:

 

/s/ Michael F. Foust


   

Michael F. Foust

   

Chief Executive Officer and Director

Digital Realty Trust, L.P.,

a Maryland limited partnership

By:

 

Digital Realty, Inc.,

   

a Maryland corporation,

   

Its: General Partner

   

By:

 

/s/ Michael F. Foust


       

Michael F. Foust

       

Chief Executive Officer and Director

THE FUND

Global Innovation Partners, LLC,

a Delaware limited liability company

By:

 

/s/ Richard A. Magnuson


   

Richard A. Magnuson

 

4

Exhibit 10.23

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 27, 2004, is entered into by and among Digital Realty Trust, Inc., a Maryland corporation (the “Company”) and Digital Realty Trust, L.P., a Maryland limited partnership (the “Operating Partnership”), and the Option Entity (as defined below) and each ROFO Entity (as defined below) whose names are set forth on the signature pages hereto.

 

RECITALS

 

WHEREAS, in connection with the initial public offering of shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), the Company, the Operating Partnership and certain persons and entities engaged in certain formation transactions (the “Formation Transactions”), whereby each such person or entity contributed to the Operating Partnership their interests in certain properties and other assets (the “Properties”) in exchange for limited partnership interests (“OP Units”) in the Operating Partnership and entered into a registration rights agreement (the “Formation Transactions Registration Rights Agreement”);

 

WHEREAS, in connection with the Formation Transactions, the Operating Partnership entered into an option agreement (the “Option Agreement”) with the entity (the “Option Entity”) which owns interests in the entity that owns certain real property pursuant to which the Option Entity granted the Operating Partnership the right to acquire such interests (the “Option Interest”) in exchange for OP Units in the Operating Partnership;

 

WHEREAS, in connection with the Formation Transactions, the Operating Partnership entered into Right of First Offer Agreements (each, a “ROFO Agreement”) with each of the entities (each, a “ROFO Entity”) who own interests in certain real property or interests in entities that own real property pursuant to which each ROFO Entity granted the Operating Partnership the right of first offer with respect to the properties described therein (each, a “ROFO Interest”) in exchange for OP Units in the Operating Partnership;

 

WHEREAS, at such time as the Operating Partnership acquires the Option Interest or any ROFO Interest, the Option Entity or such ROFO Entity, as applicable, without further action by the Option Entity or ROFO Entity, as applicable, will become a Unit Holder (as defined below) for purposes hereof and will have all of the rights and obligations of the Unit Holders under this Agreement;

 

WHEREAS, pursuant to the Partnership Agreement (as defined below) OP Units owned by the DLR Persons (as defined below) will be redeemable for cash or exchangeable for shares of Common Stock of the Company upon the terms and subject to the conditions contained therein; and

 

WHEREAS, the Option Entity is willing to grant options to the Operating Partnership to acquire its Option Interest and the ROFO Entities are willing to grant the Operating Partnership a right of first offer to acquire their ROFO Interests in consideration of receiving, among other things, the registration rights set forth in Article II hereof.


NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1. Definitions . In addition to the definitions set forth above, the following terms, as used herein, have the following meanings:

 

“Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.

 

“Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company as filed with the Secretary of State of the State of Maryland on October 26, 2004, as the same may be amended, modified or restated from time to time.

 

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized by law to close.

 

“Commission” means the Securities and Exchange Commission.

 

“Demand Registration” means a Demand Registration as defined in Section 2.2.

 

“DLR Persons” means (i) any Unit Holder, (ii) any partner, member or stockholder of the Unit Holders, (iii) any Affiliates of any such partner, member or stockholder, and (iv) the Immediate Family of any of the foregoing.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

“Exchangeable OP Units” means OP Units which may be redeemable for cash or exchangeable for Common Stock pursuant to Section 8.6 of the Partnership Agreement (without regard to any limitations on the exercise of such exchange right as a result of the Ownership Limit Provisions).

 

“General Partner” means the Company or its successors as general partner of the Operating Partnership.

 

“Holder” means any DLR Person who is the record or beneficial owner of any Registrable Security or any assignee or transferee of such Registrable Security (including

 

2


assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) to the extent (x) permitted under the Partnership Agreement and (y) such assignee or transferee agrees in writing to be bound by all the provisions hereof, unless such Registrable Security is acquired in a public distribution pursuant to a registration statement under the Securities Act or pursuant to transactions exempt from registration under the Securities Act where securities sold in such transaction may be resold without subsequent registration under the Securities Act.

 

“Immediate Family” of any individual means such individual’s estate and heirs or current spouse, or former spouse, parents, parents-in-law, children (whether natural or adoptive or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such individual or any of the foregoing.

 

“Initial Public Offering” means the offering of the Company’s Common Stock pursuant to the Form S-11 Registration Statement (No. 333-117865) filed by the Company with the Commission under the Securities Act.

 

“Market Value” means, with respect to the Common Stock, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date of a written request for registration pursuant to Section 2.2(a). The market price for each such trading day shall be: (i) if the Common Stock is listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system, (ii) if the Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Company, or (iii) if the Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ-National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the Company, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than (10) days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Market Value of the Common Stock shall be determined by the Board of Directors of the Company acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

 

“Ownership Limit Provisions” mean the various provisions of the Company’s Articles of Incorporation set forth in ARTICLE VI thereof restricting the ownership of Common Stock by Persons to specified percentages of the outstanding Common Stock.

 

“Partnership Agreement” means the amended and restated agreement of limited partnership of the Operating Partnership dated as of October 27, 2004, as the same may be amended, modified or restated from time to time.

 

3


“Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Piggy-Back Registration” means a Piggy-Back Registration as defined in Section 2.3.

 

“Registrable Securities” means shares of Common Stock of the Company at any time owned, either of record or beneficially, by any DLR Person and issued upon exchange of Exchangeable OP Units received pursuant to the Option Agreement or a ROFO Agreement, as applicable, (including, without limitation, shares of Common Stock issuable upon exchange of Exchangeable OP Units) and any additional Common Stock issued as a dividend, distribution or exchange for, or in respect of such shares until (i) a registration statement covering such shares has been declared effective by the Commission and such shares have been disposed of pursuant to such effective registration statement, (ii) such shares are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or under which such shares may be sold pursuant to Rule 144(k), (iii) such shares held by such Person may be sold pursuant to Rule 144 under the Securities Act and could be sold in one transaction in accordance with the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act, or (iv) such shares have been otherwise transferred in a transaction that would constitute a sale thereof under the Securities Act, the Company has delivered a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares may be resold without subsequent registration under the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

 

“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act.

 

“Shelf Registration Statement” means a Shelf Registration statement as defined in Section 2.1.

 

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities.

 

“Unit Holder” means the Option Entity or any ROFO Entity whose Option Interest or ROFO Interest, as applicable, has been acquired by the Operating Partnership in exchange for OP Units.

 

ARTICLE II

REGISTRATION RIGHTS

 

SECTION 2.1. Shelf Registration . Not later than the date which is fourteen (14) months after the Operating Partnership’s acquisition of the Option Interest or any ROFO Interest, as applicable, the Company shall prepare and file a “shelf” registration statement with respect to shares of Common Stock issuable upon the exchange of Exchangeable OP Units acquired

 

4


pursuant to the terms of such Option Agreement or ROFO Agreement, as applicable, on an appropriate form for the offering and subsequent resale thereof, to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”) and shall use commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective on or as soon as practicable thereafter, and to keep the Shelf Registration Statement continuously effective for a period ending when all shares of Common Stock covered by such Shelf Registration Statement are no longer Registrable Securities. In the event that the Company fails to file, or if filed fails to maintain the effectiveness of, such Shelf Registration Statement, Holders of shares of Common Stock issuable upon the exchange of Exchangable OP Units acquired pursuant to the Option Agreement or the ROFO Agreements, as applicable, may make a written request for a Demand Registration (as defined below) pursuant to Section 2.2 herein or Piggy Back Registration (as defined below) pursuant to Section 2.3 herein; provided , that if and so long as a Shelf Registration Statement is on file and effective, then the Company shall have no obligation to effect a Demand Registration or Piggy Back Registration; provided, further , that Holders of shares of Common Stock issuable upon the exchange of Exchangable OP Units acquired pursuant to the Option Agreement or the ROFO Agreements, as applicable, may also request that Registrable Securities under this agreement be included in any Major Holder Demand Registration (as defined in the Formation Transactions Registration Rights Agreement) exercised by such Holders pursuant to the Formation Transactions Registration Rights Agreement.

 

SECTION 2.2. Demand Registration .

 

(a) Request for Registration . Subject to Section 2.1 hereof, commencing on or after the date which is fourteen months after the Operating Partnership’s acquisition of the Option Interest or each ROFO Interest, as applicable, Holders of Registrable Securities may make a written request for registration under the Securities Act of all or part of its or their Registrable Securities (a “Demand Registration”); provided , that the Company shall not be obligated to effect more than one Demand Registration in any twelve month period; and provided, further , that the number of shares of Registrable Securities proposed to be sold by the Holders making such written request shall have a Market Value of at least $5,000,000. Subject to the foregoing, the number of Demand Registrations which may be made pursuant to this Section 2.2 shall be unlimited. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within ten (10) days after receipt of such request, the Company will give written notice of such registration request to all other Holders of the Registrable Securities and include in such registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) Business Days after the receipt by the applicable Holder of the Company’s notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof. Unless the Holder or Holders of a majority of the Registrable Securities to be registered in such Demand Registration shall consent in writing, no other party, including the Company (but excluding another Holder of a Registrable Security), shall be permitted to offer securities under any such Demand Registration.

 

(b) Effective Registration . A registration will not count as a Demand Registration until it has become effective.

 

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(c) Selling Holders Become Party to Agreement . Each Holder acknowledges that by asserting or participating in its registration rights pursuant to this Article II, he, she or it may become a Selling Holder and thereby will be deemed a party to this Agreement and will be bound by each of its terms.

 

(d) Underwritten Demand Registrations . If the Holders of a majority of shares of the Registrable Securities to be registered in a Demand Registration so elect by written notice to the Company, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Company shall select the book-running managing Underwriter in connection with any such Demand Registration; provided that such managing Underwriter must be reasonably satisfactory to the Holders of a majority of the shares of the Registrable Securities. The Company may select any additional investment banks and managers to be used in connection with the offering; provided that such additional investment bankers and managers must be reasonably satisfactory to a majority of the Holders making such Demand Registration. To the extent 10% or more of the Registrable Securities so requested to be registered are excluded from the offering in accordance with Section 2.4, the Holders of such Registrable Securities shall have the right to one additional Demand Registration under this Section in such twelve-month period with respect to such Registrable Securities.

 

SECTION 2.3. Piggy-Back Registration . Subject to Section 2.1 hereof, if the Company proposes to file a registration statement under the Securities Act with respect to an underwritten equity offering by the Company for its own account or for the account of any of its respective securityholders of any class of security (other than (i) any registration statement filed by the Company under the Securities Act relating to an offering of Common Stock for its own account as a result of the exercise of the exchange rights set forth in Section 8.6 of the Partnership Agreement, (ii) any registration statement filed in connection with a demand registration other than a Demand Registration under this Agreement or (iii) a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or filed in connection with an exchange offer or offering of securities solely to the Company’s existing securityholders), then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than ten (10) days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (a “Piggy-Back Registration”). The Company shall use commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company included therein.

 

SECTION 2.4. Reduction of Offering . Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.2 or 2.3 advise the Company and the Holders of the Registrable Securities included in such offering that (i) the size of the offering that the Holders, the Company and such other persons intend to make or (ii) the kind of securities that the Holders, the Company and/or any other persons or entities intend to include in such offering are such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then (A) if the size of the offering is the basis of such Underwriter’s opinion, the

 

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amount of securities to be offered for the accounts of Holders shall be reduced pro rata (according to the Registrable Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters; provided that, in the case of a Piggy-Back Registration, if securities are being offered for the account of other persons or entities as well as the Company, then with respect to the Registrable Securities intended to be offered by Holders, the proportion by which the amount of such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other persons or entities is reduced; and (B) if the combination of securities to be offered is the basis of such Underwriter’s determination, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)) or, (y) if the actions described in clause (x) would, in the judgment of the managing Underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering.

 

SECTION 2.5. Registration Procedures; Filings; Information . In connection with any Shelf Registration Statement under Section 2.1 or whenever Holders request that any Registrable Securities be registered pursuant to Section 2.2 hereof, the Company will use commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request:

 

(a) The Company will as expeditiously as possible prepare and file with the Commission a registration statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use commercially reasonable efforts to cause such filed registration statement to become and remain effective for a period of not less than 270 days; provided that if the Company shall furnish to the Holders making a request pursuant to Section 2.2 a certificate signed by either its Chairman or Chief Executive Officer stating that in his or her good faith judgment it would be significantly disadvantageous to the Company or its shareholders for such a registration statement to be filed as expeditiously as possible, the Company shall have a period of not more than 120 days within which to file such registration statement measured from the date of receipt of the request in accordance with Section 2.2.

 

(b) The Company will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder and Underwriter, if any, such number of conformed copies of such registration statement, each amendment and supplement thereto (and upon request, all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

 

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(c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(d) The Company will use commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder or managing Underwriter or Underwriters, if any, reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

 

(e) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and promptly make available to each Selling Holder any such supplement or amendment.

 

(f) The Company will enter into customary agreements (including an underwriting agreement, if any, in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.

 

(g) The Company will make available for inspection by any Selling Holder of such Registrable Securities, if such Selling Stockholder has a due diligence defense under the Securities Act, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall

 

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not be used by it as the basis for any market transactions in the securities of the company or its Affiliates unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

(h) The Company will furnish to each Selling Holder, if it has a due diligence defense under the Securities Act, and to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) if eligible under SAS 72, a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Securities included in such offering or the managing Underwriter or Underwriters therefor reasonably requests.

 

(i) The Company will otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder (or any successor rule or regulation hereafter adopted by the Commission).

 

(j) The Company will use commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed.

 

The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding such selling Holder, the Registrable Securities held by it and the intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.

 

Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.5(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.5(e) hereof, and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material

 

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fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 2.5(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 2.5(e) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 2.5(e) hereof.

 

SECTION 2.6. Registration Expenses . In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 2.5(h) hereof), (vii) the reasonable fees and disbursement of one counsel for all the Holders and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities or any transfer taxes relating to the registration or sale of the Registrable Securities.

 

SECTION 2.7. Indemnification by the Company . The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 2.7, provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter of the Registrable Securities from whom the person asserting any such losses, claims, damages or liabilities

 

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purchased the Registrable Securities which are the subject thereof if such person did not receive a copy of the prospectus (or the prospectus as supplemented) at or prior to the confirmation of the sale of such Registrable Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as supplemented).

 

SECTION 2.8. Indemnification by Holders of Registrable Securities . Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information relating to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.7. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 2.8. Notwithstanding the foregoing, in no event will the liability of any Selling Holder under this Section 2.8 or Section 2.10 or otherwise hereunder exceed the net proceeds received by such Selling Holder.

 

SECTION 2.9. Conduct of Indemnification Proceedings . In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 2.7 or 2.8, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.7 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in

 

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the case of Persons indemnified pursuant to Section 2.8, the Company. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 Business Days after receipt by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of with any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

SECTION 2.10. Contribution . If the indemnification provided for in Section 2.7 or 2.8 hereof is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

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The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Selling Holder’s obligations to contribute pursuant to this Section 2.10 are several in proportion to the proceeds of the offering received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint. For the avoidance of doubt, this Section 2.10 applies in the case of a shelf registration and an underwritten offering.

 

SECTION 2.11. Participation in Underwritten Registrations . No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights provided for in this Article II.

 

SECTION 2.12. Rule 144 . The Company covenants that it will timely file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

 

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SECTION 2.13. Holdback Agreements .

 

(a) Restrictions on Public Sale by Holder of Registrable Securities . To the extent not inconsistent with applicable law, each Holder whose securities are included in a registration statement agrees not to effect any sale or distribution of the issue being registered or a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing Underwriting or Underwriters).

 

(b) Restrictions on Public Sale by the Company and Others . The Company agrees that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.2 or Section 2.3 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90-day period beginning on, the effective date of any registration statement (except as part of such registration statement where the Holders of a majority of the Registrable Securities to be included in such registration statement consent or as part of registration statements filed as set forth in Section 2.3(i) or (iii)), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing Underwriter or Underwriters), in each case including a sale pursuant to Rule 144 under the Securities Act (except as part of any such registration, if permitted); provided , however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities.

 

(c) If the Company determines in its good faith judgment that the filing of the Shelf Registration Statement under Section 2.1 or a Demand Registration under Section 2.2 hereof or the use of any related prospectus would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or the disclosure of which would impede the Company’s ability to consummate a significant transaction, and that the Company is not otherwise required by applicable securities laws or regulations to disclose, upon written notice of such determination by the Company, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the earlier of (i) the date upon which the Company notifies the Holders in writing that suspension of such rights for the grounds

 

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set forth in this Section 2.13(c) is no longer necessary and (ii) 40 days. The Company agrees to give such notice as promptly as practicable following the date that such suspension of rights is no longer necessary. The Company may not utilize this suspension right more than three times in any twelve (12) month period.

 

(d) If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by the Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X under the Act, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration or to require the Company to take action with respect to the registration or sale of any Registrable Securities pursuant to the Shelf Registration Statement or a Demand Registration shall be suspended until the earlier of (i) the date on which the Company has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in the Shelf Registration Statement, and (ii) 30 days, and the Company shall notify the Holders as promptly as practicable when such suspension is no longer required. The Company may not utilize this suspension right more than three times in any twelve (12) month period.

 

ARTICLE III

MISCELLANEOUS

 

SECTION 3.1. New York Stock Exchange Listing . In the event that the Company shall issue any Common Stock in exchange for OP Units pursuant to Section 8.6 of the Partnership Agreement, then in any such case the Company agrees to cause any such shares of Common Stock to be listed on the New York Stock Exchange prior to or concurrently with the issuance thereof by the Company.

 

SECTION 3.2. Remedies . In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the DLR Persons shall be entitled to specific performance of the rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. Notwithstanding the foregoing, specific performance shall not be available with respect to the rights and obligations of the parties pursuant to Section 2.13(a) and (b).

 

SECTION 3.3. Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, in each case without the written consent of the Company and the Holders of a majority of the Registrable Securities. No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

 

15


SECTION 3.4. Notices . All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery:

 

(1) if to any DLR Person, initially c/o the Operating Partnership initially at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (Attention: Chief Executive Officer), or to such other address and to such other Persons as any DLR Person may hereafter specify in writing; and

 

(2) if to the Company, initially at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (Attention: President), or to such other address as the Company may hereafter specify in writing.

 

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery.

 

SECTION 3.5. Successors and Assigns . Except as expressly provided in this Agreement the rights and obligations of the DLR Persons under this Agreement shall not be assignable by any DLR Person to any Person that is not a DLR Person. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

 

SECTION 3.6. Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

 

SECTION 3.7. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to the choice of law provisions thereof.

 

SECTION 3.8. Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

SECTION 3.9. Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

16


SECTION 3.10. Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

SECTION 3.11. No Third Party Beneficiaries . Nothing express or implied herein is intended or shall be construed to confer upon any person or entity, other than the parties hereto and their respective successors and assigns and all Indemnified Parties, any rights, remedies or other benefits under or by reason of this Agreement.

 

[Signature Pages Follow]

 

17


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

COMPANY

DIGITAL REALTY TRUST, INC.,

a Maryland corporation

By:

 

/s/ A. William Stein


   

A. William Stein

   

Chief Financial Officer and

   

Chief Investment Officer

OPERATING PARTNERSHIP

DIGITAL REALTY TRUST, L.P.,

a Maryland limited partnership

By:

 

Digital Realty Trust, Inc.

   

General Partner

   

By:

 

/s/ A. William Stein


       

A. William Stein

       

Chief Financial Officer and

       

Chief Investment Officer

OPTION ENTITY

GLOBAL INNOVATION PARTNERS, LLC

a Delaware limited liability company

By:

 

Global Innovation Manager, LLC,

a Delaware limited liability company

Its:

 

Manager

   

By:

 

/s/ Richard A. Magnuson


       

Richard A. Magnuson

       

Chief Executive Officer

 

S-1

Signature Page to Registration Rights Agreement (Option Properties)


ROFO ENTITIES

(Denver Data Center)

GLOBAL INNOVATION PARTNERS, LLC

a Delaware limited liability company

By:

 

Global Innovation Manager, LLC, a

Delaware limited liability company

Its:

 

Manager

   

By:

 

/s/ Richard A. Magnuson


       

Richard A. Magnuson

       

Chief Executive Officer

(Frankfurt Property)

GLOBAL INNOVATION PARTNERS, LLC

a Delaware limited liability company

By:

 

Global Innovation Manager, LLC, a

Delaware limited liability company

Its:

 

Manager

   

By:

 

/s/ Richard A. Magnuson


       

Richard A. Magnuson

       

Chief Executive Officer

 

S-2

Signature Page to Registration Rights Agreement (Option Properties)

Exhibit 10.37

 

EXECUTION COPY

 

$200,000,000

 

REVOLVING CREDIT AGREEMENT

 

Dated as of November 3, 2004

 

among

 

DIGITAL REALTY TRUST, L.P.,

 

as Borrower ,

 

DIGITAL REALTY TRUST, INC.,

 

as Parent Guarantor ,

 

THE SUBSIDIARY GUARANTORS NAMED HEREIN,

 

as Subsidiary Guarantors ,

 

THE INITIAL LENDERS, INITIAL ISSUING BANK AND

SWING LINE BANK NAMED HEREIN,

 

as Initial Lenders , Initial Issuing Bank and Swing Line Bank

 

CITICORP NORTH AMERICA, INC.,

 

as Administrative Agent ,

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

 

as Syndication Agent ,

 

BANK OF AMERICA, N.A., KEYBANK NATIONAL ASSOCIATION AND

ROYAL BANK OF CANADA,

 

as Co-Documentation Agents ,

 

and

 

CITIGROUP GLOBAL MARKETS INC. AND

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

 

as Joint Lead Arrangers and Joint Book Running Managers


TABLE OF CONTENTS

 

Section


       Page

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01.

  Certain Defined Terms    1

SECTION 1.02.

  Computation of Time Periods; Other Definitional Provisions    24

SECTION 1.03.

  Accounting Terms    24

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT

SECTION 2.01.

  The Advances and the Letters of Credit    25

SECTION 2.02.

  Making the Advances    26

SECTION 2.03.

  Issuance of and Drawings and Reimbursement Under Letters of Credit    28

SECTION 2.04.

  Repayment of Advances    29

SECTION 2.05.

  Termination or Reduction of the Commitments    30

SECTION 2.06.

  Prepayments    31

SECTION 2.07.

  Interest    32

SECTION 2.08.

  Fees    33

SECTION 2.09.

  Conversion of Advances    34

SECTION 2.10.

  Increased Costs, Etc.    34

SECTION 2.11.

  Payments and Computations    36

SECTION 2.12.

  Taxes    38

SECTION 2.13.

  Sharing of Payments, Etc.    40

SECTION 2.14.

  Use of Proceeds    40

SECTION 2.15.

  Evidence of Debt    41

SECTION 2.16.

  Extension of Termination Date    41

SECTION 2.17.

  Cash Collateral Account    41

ARTICLE III

CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT

SECTION 3.01.

  Conditions Precedent to Initial Extension of Credit    43

SECTION 3.02.

  Conditions Precedent to Each Borrowing, Issuance and Renewal    47

SECTION 3.03.

  Determinations Under Section 3.01    47

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01.

  Representations and Warranties of the Loan Parties    48

ARTICLE V

COVENANTS OF THE LOAN PARTIES

SECTION 5.01.

  Affirmative Covenants    53

SECTION 5.02.

  Negative Covenants    57

SECTION 5.03.

  Reporting Requirements    64

SECTION 5.04.

  Financial Covenants    67

 

i


ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01.

  Events of Default    68

SECTION 6.02.

  Actions in Respect of the Letters of Credit upon Default    71

ARTICLE VII

GUARANTY

SECTION 7.01.

  Guaranty; Limitation of Liability    71

SECTION 7.02.

  Guaranty Absolute    72

SECTION 7.03.

  Waivers and Acknowledgments    73

SECTION 7.04.

  Subrogation    73

SECTION 7.05.

  Guaranty Supplements    74

SECTION 7.06.

  Indemnification by Guarantors    74

SECTION 7.07.

  Subordination    75

SECTION 7.08.

  Continuing Guaranty    75

ARTICLE VIII

THE ADMINISTRATIVE AGENT

SECTION 8.01.

  Authorization and Action    76

SECTION 8.02.

  Administrative Agent’s Reliance, Etc.    76

SECTION 8.03.

  CNAI and Affiliates    77

SECTION 8.04.

  Lender Party Credit Decision    77

SECTION 8.05.

  Indemnification by Lender Parties    77

SECTION 8.06.

  Successor Administrative Agents    78

ARTICLE IX

MISCELLANEOUS

SECTION 9.01.

  Amendments, Etc    78

SECTION 9.02.

  Notices, Etc.    79

SECTION 9.03.

  No Waiver; Remedies    80

SECTION 9.04.

  Costs and Expenses    80

SECTION 9.05.

  Right of Set-off    82

SECTION 9.06.

  Binding Effect    82

SECTION 9.07.

  Assignments and Participations; Replacement Notes    82

SECTION 9.08.

  Execution in Counterparts    85

SECTION 9.09.

  No Liability of the Issuing Banks    85

SECTION 9.10.

  Confidentiality    85

SECTION 9.11.

  Patriot Act Notification    86

SECTION 9.12.

  Jurisdiction, Etc.    86

SECTION 9.13.

  Governing Law    86

SECTION 9.14.

  WAIVER OF JURY TRIAL    86

 

ii


SCHEDULES

 

Schedule I

   -    Commitments and Applicable Lending Offices

Schedule II

   -    Unencumbered Assets

Schedule 4.01(b)

   -    Subsidiaries

Schedule 4.01(f)

   -    Disclosed Litigation

Schedule 4.01(n)

   -    Existing Debt

Schedule 4.01(o)

   -    Surviving Debt

Schedule 4.01(p)

   -    Existing Liens

Schedule 4.01(q)

   -    Owned Real Property

Schedule 4.01(r)

   -    Leased Real Property

Schedule 4.01(s)

   -    Environmental Concerns

Schedule 4.01(y)

   -    Excluded Subsidiaries and Excluded Subsidiary Agreements
EXHIBITS          

Exhibit A

   -    Form of Note

Exhibit B

   -    Form of Notice of Borrowing

Exhibit C

   -    Form of Guaranty Supplement

Exhibit D

   -    Form of Assignment and Acceptance

Exhibit E-1

   -    Form of Opinion of Counsel to the Loan Parties

Exhibit E-2

   -    Form of Opinion of Maryland Counsel to the Loan Parties

Exhibit F

   -    Form of Unencumbered Assets Certificate

 

iii


REVOLVING CREDIT AGREEMENT

 

REVOLVING CREDIT AGREEMENT dated as of November 3, 2004 (this “ Agreement ”) among DIGITAL REALTY TRUST, L.P., a Maryland limited partnership (the “ Borrower ”), DIGITAL REALTY TRUST, INC., a Maryland corporation (the “ Parent Guarantor ”), the entities listed on the signature pages hereof as the guarantors (together with any Additional Guarantors (as hereinafter defined) acceding hereto pursuant to Section 7.05, the “ Subsidiary Guarantors ” and, together with the Parent Guarantor, the “ Guarantors ”), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the initial lenders (the “ Initial Lenders ”), CITIBANK, N.A., as the initial issuer of Letters of Credit (as hereinafter defined) (the “ Initial Issuing Bank ”), the Swing Line Bank (as hereinafter defined), CITICORP NORTH AMERICA, INC. (“ CNAI ”), as administrative agent (together with any successor administrative agent appointed pursuant to Article VIII, the “ Administrative Agent ”) for the Lender Parties (as hereinafter defined), BANK OF AMERICA, N.A., KEYBANK NATIONAL ASSOCIATION AND ROYAL BANK OF CANADA, as co-documentation agents, and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (“ Merrill Lynch ”), as syndication agent, and CITIGROUP GLOBAL MARKETS INC. (“ CGMI ”) and MERRILL LYNCH, as joint lead arrangers and joint book running managers (the “ Arrangers ”).

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

Additional Guarantor ” has the meaning specified in Section 7.05.

 

Adjusted EBITDA ” means the product of (a) four (4) times (b) (i) EBITDA for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, less (ii) an amount equal to the Capital Expenditure Reserve for all Assets; provided, however, that for purposes of this definition, in the case of any acquisition or disposition of any direct or indirect interest in any Asset (including through the acquisition of Equity Interests) by the Parent Guarantor or any of its Subsidiaries during any fiscal quarter, Adjusted EBITDA will be adjusted (1) in the case of an acquisition, by adding thereto an amount equal to (A) four (4) times (B) the acquired Asset’s actual EBITDA (computed as if such Asset was owned by the Parent or one of its Subsidiaries for the entire fiscal quarter) generated during the portion of such fiscal quarter that such Asset was not owned by the Parent or such Subsidiary and (2) in the case of a disposition, by subtracting therefrom an amount equal to (A) four (4) times (B) the actual EBITDA generated by the Asset so disposed of during such fiscal quarter.

 

Adjusted Net Operating Income ” means, with respect to any Unencumbered Asset, the product of (a) four (4) times (b) (i) Net Operating Income attributable to such Unencumbered Asset less (ii) the sum of (A) the amount, if any, by which (1) 3% of all rental and other income from the operation of such Unencumbered Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, exceeds (2) all management fees payable in respect of such Unencumbered Asset for such fiscal period plus (B) the total Capital Expenditure Reserve for such Unencumbered Asset.


Administrative Agent ” has the meaning specified in the recital of parties to this Agreement.

 

Administrative Agent’s Account ” means the account of the Administrative Agent maintained by the Administrative Agent with Citibank, N.A., at its office at 2 Penns Way, Suite 200, New Castle, Delaware 19720, ABA No. 021000089, Account No. 36852248, Account Name: Agency/Medium Term Finance, Reference: Digital Realty, Attention: Global Loans/Agency, or such other account as the Administrative Agent shall specify in writing to the Lender Parties.

 

Advance ” means a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance.

 

Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

 

“Agreement” has the meaning specified in the recital of parties to this Agreement.

 

Agreement Value ” means, for each Hedge Agreement, on any date of determination, an amount determined by the Administrative Agent equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the “ Master Agreement ”), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole “Affected Party”, and (iii) the Administrative Agent was the sole party determining such payment amount (with the Administrative Agent making such determination pursuant to the provisions of the form of Master Agreement); or (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent based on the settlement price of such Hedge Agreement on such date of determination, or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement.

 

Applicable Lending Office ” means, with respect to each Lender Party, such Lender Party’s Domestic Lending Office in the case of a Base Rate Advance and such Lender Party’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

 

2


Applicable Margin ” means, at any date of determination, a percentage per annum determined by reference to the Leverage Ratio as set forth below:

 

Pricing
Level


  

Leverage Ratio


   Applicable Margin
for Base Rate
Advances


    Applicable Margin
for Eurodollar Rate
Advances


 

I

  

> 55%

   0.750 %   1.750 %

II

   > 45% but < 55%    0.625 %   1.625 %

III

   > 40% but < 45%    0.500 %   1.500 %

IV

   < 40%    0.375 %   1.375 %

 

The Applicable Margin for each Base Rate Advance shall be determined by reference to the Leverage Ratio in effect from time to time and the Applicable Margin for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing shall be determined by reference to the Leverage Ratio in effect on the first day of such Interest Period; provided, however, that (a) the Applicable Margin shall initially be at Pricing Level II on the Closing Date, (b) no change in the Applicable Margin resulting from the Leverage Ratio shall be effective until three Business Days after the date on which the Administrative Agent receives (x) the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and (y) a certificate of the Chief Financial Officer of the Borrower demonstrating the Leverage Ratio, and (c) the Applicable Margin shall be at Pricing Level I for so long as the Borrower has not submitted to the Administrative Agent as and when required under Section 5.03(b) or (c), as applicable, the information described in clause (b) of this proviso.

 

Arrangers ” has the meaning specified in the recital of parties to this Agreement.

 

ASML Ground Lease means that certain Ground Lease dated as of October 8, 1984 between The Arizona Board of Regents, acting for and on behalf of Arizona State University, as lessor, and Price-Elliott Research Park, Inc., as lessee, the lessee’ s interest in which was assigned to Global ASML, LLC prior to the date hereof.

 

ASML Asset ” means the Asset subject to the ASML Ground Lease.

 

Assets ” means Office Assets, Development Assets and Joint Venture Assets.

 

Asset Value ” means, at any date of determination, (a) in the case of any Office Asset, the Adjusted EBITDA of such Asset divided by 9.5%, (b) in the case of any Development Asset, the book value of such Development Asset as determined in accordance with GAAP, (c) in the case of any Joint Venture Asset that, but for such Asset being owned by a Joint Venture, would qualify as an Office Asset under the definition thereof, the JV Pro Rata Share of the Adjusted EBITDA of such Asset divided by 9.5%, and (d) in the case of any other Joint Venture Asset, the JV Pro Rata Share of the book value of such Joint Venture Asset as determined in accordance with GAAP.

 

Assignment and Acceptance ” means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit D hereto.

 

3


Available Amount ” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).

 

Bankruptcy Law ” means any applicable law governing a proceeding of the type referred to in Section 6.01(f) or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

 

Base Rate ” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.’s base rate and (b)  1 / 2 of 1% per annum above the Federal Funds Rate.

 

Base Rate Advance ” means an Advance that bears interest as provided in Section 2.07(a)(i).

 

Borrower ” has the meaning specified in the recital of parties to this Agreement.

 

Borrower’s Account ” means the account of the Borrower maintained by the Borrower with Bank of America NT&SA at its office at 1850 Gateway Boulevard, Concord, California 94520-3282, ABA No. 121-000-358, Account No. 1420-036-112, Reference: Digital Realty Trust, L.P., or such other account as the Borrower shall specify in writing to the Administrative Agent.

 

Borrowing ” means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Lenders or a Swing Line Borrowing.

 

Business Day ” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.

 

Capital Expenditure Reserve ” means, with respect to any Asset on any date of determination, the product of (A) $0.25 times (B) the total number of square feet within such Asset.

 

Capitalized Leases ” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

 

Cash Equivalents ” means any of the following, to the extent owned by the Parent Guarantor or any of its Subsidiaries free and clear of all Liens (other than Permitted Liens) and having a maturity of not greater than 90 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) readily marketable direct obligations of any state of the United States or any political subdivision of any such state or any public instrumentality thereof having, at the time of acquisition, the highest rating obtainable from either Moody’s or S&P, (c) certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (d) below, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1,000,000,000, (d) commercial paper in an aggregate amount of not more than $50,000,000 per issuer outstanding at any time,

 

4


issued by any corporation organized under the laws of any State of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P, or (e) shares of any mutual fund the assets of which are primarily invested in the types of investments referred to in clauses (a) through (d) above.

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

 

CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

 

CGMI ” has the meaning specified in the recital of parties to this Agreement.

 

Change of Control ” means the occurrence of any of the following (after giving effect to the consummation of the IPO and the Formation Transactions): (a) any Person or two or more Persons acting in concert shall have acquired and shall continue to have following the date hereof beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent Guarantor (or other securities convertible into such Voting Interests) representing 35% or more of the combined voting power of all Voting Interests of the Parent Guarantor; or (b) during any consecutive twenty-four month period commencing on or after the date hereof, individuals who at the beginning of such period constituted the Board of Directors of the Parent Guarantor (together with any new directors whose election by the Board of Directors or whose nomination for election by the Parent Guarantor stockholders was approved by a vote of at least a majority of the members of the Board of Directors then in office who either were members of the Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office, except for any such change resulting from (x) death or disability of any such member, (y) satisfaction of any requirement for the majority of the members of the Board of Directors of the Parent Guarantor to qualify under applicable law as independent directors, or (z) the replacement of any member of the Board of Directors who is an officer or employee of the Parent Guarantor with any other officer or employee of the Parent Guarantor or any of its Affiliates ; or (c) any Person or two or more Persons acting in concert shall have acquired and shall continue to have following the date hereof, by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to direct, directly or indirectly, the management or policies of the Parent Guarantor; or (d) the Parent Guarantor ceases to be the general partner of the Borrower; or (e) the Parent Guarantor ceases to be the legal and beneficial owner of all of the general partnership interests of the Borrower; or (f) the Parent Guarantor shall create, incur, assume or suffer to exist any Lien on the Equity Interests in the Borrower owned by it.

 

Closing Date ” means November 3, 2004 or such other date as may be agreed upon by the Borrower and the Administrative Agent.

 

CNAI ” has the meaning specified in the recital of parties to this Agreement.

 

Commitment ” means a Revolving Credit Commitment, a Swing Line Commitment or a Letter of Credit Commitment.

 

Communications ” has the meaning specified in Section 9.02(b).

 

5


Confidential Information ” means information that any Loan Party furnishes to the Administrative Agent or any Lender Party in writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender Party from a source other than the Loan Parties or the Administrative Agent or any other Lender Party.

 

Consolidated ” refers to the consolidation of accounts in accordance with GAAP.

 

Contingent Obligation ” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith, all as recorded on the balance sheet or on the footnotes to the most recent financial statements of such Person in accordance with GAAP.

 

Contributing Entities ” means Global Innovation Partners, LLC, Pacific-Bryan Partners, L.P., San Francisco Wave eXchange, LLC, eXchange colocation, LLC and Santa Clara Wave eXchange, LLC.

 

Conversion ”, “ Convert ” and “ Converted ” each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07(d), 2.09 or 2.10.

 

Customary Carve-Out Agreement ” has the meaning specified in the definition of Non-Recourse Debt.

 

Debt ” of any Person means, without duplication for purposes of calculating financial ratios, (a) all Debt for Borrowed Money of such Person, (b) all Obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and not overdue by more than 60 days, (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such 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),

 

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(e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment (but excluding for the avoidance of doubt (i) regular quarterly dividends and (ii) special year-end dividends made in connection with maintaining the Parent Guarantor’s status as a REIT) in respect of any Equity Interests in such Person or any other Person (other than Preferred Interests that are issued by any Loan Party or Subsidiary thereof and classified as either equity or minority interests pursuant to GAAP) or any warrants, rights or options to acquire such Equity Interests, (h) all Obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (i) all Contingent Obligations of such Person and (j) all indebtedness and other payment Obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations; provided , however , that in the case of the Parent Guarantor and its Subsidiaries “Debt” shall also include, without duplication, the JV Pro Rata Share of Debt for each Joint Venture.

 

Debt for Borrowed Money ” of any Person means all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person; provided , however , that in the case of the Parent Guarantor and its Subsidiaries “Debt for Borrowed Money” shall also include, without duplication, the JV Pro Rata Share of Debt for Borrowed Money for each Joint Venture; and provided further, however, that as used in the definition of “Fixed Charge Coverage Ratio”, in the case of any acquisition or disposition of any direct or indirect interest in any Asset (including through the acquisition of Equity Interests) by the Parent Guarantor or any of its Subsidiaries during the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, the term “Debt for Borrowed Money” (a) shall include, in the case of an acquisition, an amount equal to (i) four (4) times (ii) the Debt for Borrowed Money directly relating to such Asset existing immediately following such acquisition (computed as if such indebtedness in respect of such Asset was in existence for the Parent Guarantor or such Subsidiary for the entire fiscal quarter), and (b) shall exclude, in the case of a disposition, an amount equal to (i) four (4) times (ii) the actual Debt for Borrowed Money to which such Asset was subject to the extent such Debt for Borrowed Money was repaid or otherwise terminated upon the disposition of such Asset during such fiscal quarter.

 

Debt Rating ” means, as of any date, the lowest rating that has been most recently assigned by either S&P or Moody’s, as the case may be, to the long-term senior unsecured non-credit enhanced debt of the Parent Guarantor or, if applicable, to the “implied rating” of the Parent Guarantor’s long-term senior unsecured credit enhanced debt. For purposes of the foregoing, (a) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (b) if S&P or Moody’s shall change the basis on which ratings are established, each reference to the Parent Guarantor’s Debt Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.

 

Default ” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

 

Default Termination Notice ” has the meaning specified in Section 2.01(b).

 

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Development Asset ” means Real Property acquired for development into an Office Asset that, in accordance with GAAP, would be classified as a development property on a Consolidated balance sheet of the Parent Guarantor and its Subsidiaries. For the avoidance of any doubt, Development Assets shall not constitute Office Assets.

 

Digital Realty Predecessor ” means the real estate activities and holdings of Global Innovation Partners, LLC related to the Real Property, as more particularly described in and as such term is defined in, the Registration Statement.

 

Disclosed Litigation ” has the meaning specified in Section 3.01(f).

 

Domestic Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

 

EBITDA ” means, for any period, (a) the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary and unusual items, one-time expenses related to the Formation Transactions and the non-cash component of non-recurring items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense and (v) amortization expense, in each case of the Parent Guarantor and its Subsidiaries determined on a Consolidated basis and in accordance with GAAP for such period, plus (b) with respect to each Joint Venture, the JV Pro Rata Share of the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary and unusual items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense and (v) amortization expense of such Joint Venture, in each case determined on a Consolidated basis and in accordance with GAAP for such period, provided that there shall be no rent leveling adjustments made (and only actual cash rents will be used) when computing EBITDA.

 

Effective Date ” means the first date on which the conditions set forth in Article III shall be satisfied.

 

Eligible Assignee ” means (a) with respect to the Revolving Credit Facility, (i) a Lender; (ii) an Affiliate or Fund Affiliate of a Lender and (iii) any other Person approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Borrower, each such approval not to be unreasonably withheld or delayed, and (b) with respect to the Letter of Credit Facility, a Person that is approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

 

Environmental Action ” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

 

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Environmental Law ” means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

 

Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

 

Equity Interests ” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

ERISA Affiliate ” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code.

 

ERISA Event ” means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan.

 

Eurocurrency Liabilities ” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

Eurodollar Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “Eurodollar Lending Office” opposite its name on Schedule I hereto

 

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or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

 

Eurodollar Rate ” means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period or, if for any reason such rate is not available, the average (rounded upward, if necessary, to the nearest 1/100 of 1%, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank’s Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period (or, if such Reference Bank shall not have such a Eurodollar Rate Advance, U.S.$1,000,000) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.

 

Eurodollar Rate Advance ” means an Advance that bears interest as provided in Section 2.07(a)(ii).

 

Eurodollar Rate Reserve Percentage ” means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period.

 

Events of Default ” has the meaning specified in Section 6.01.

 

Existing Debt ” means Debt of each Loan Party and its Subsidiaries outstanding immediately before giving effect to the Formation Transactions.

 

Excluded Subsidiary ” at any time means (a) any direct or indirect Subsidiary of the Borrower that is unable to guaranty the Obligations of the Loan Parties under the Loan Documents at such time because (i) it is party to one or more Excluded Subsidiary Agreements that prohibit such Excluded Subsidiary from entering into the Guaranty set forth in Article VII or a Guaranty Supplement or (ii) entering into the Guaranty set forth in Article VII or a Guaranty Supplement would cause a default under an Excluded Subsidiary Agreement, (b) any direct or indirect Subsidiary of the Borrower listed on Part B of Schedule 4.01(y) on the Effective Date or hereafter designated as an “Excluded Subsidiary” by Borrower and approved by the Administrative Agent and the Required Lenders, in their sole discretion, and (c) any Foreign Subsidiary.

 

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Excluded Subsidiary Agreement ” for each Excluded Subsidiary means any agreement set forth opposite the name of such Excluded Subsidiary on Schedule 4.01(y) hereto (as such Schedule may be supplemented from time to time pursuant to Sections 5.01(j)(i) and 5.01(j)(ii)) and any agreement pursuant to which such Excluded Subsidiary (or a Subsidiary related thereto) incurs Refinancing Debt with regard to the Debt, if any, incurred pursuant to such Excluded Subsidiary Agreement.

 

Extension Date ” has the meaning specified in Section 2.16.

 

Facility ” means the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility.

 

Facility Exposure ” means, at any date of determination, the sum of the aggregate principal amount of all outstanding Advances and the Available Amount under all outstanding Letters of Credit.

 

Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

Fee Letter ” means the fee letter dated September 28, 2004 among the Borrower, CNAI, CGMI, Merrill Lynch and MLCC, as the same may be amended from time to time.

 

Fiscal Year ” means a fiscal year of the Parent Guarantor and its Consolidated Subsidiaries ending on December 31 in any calendar year.

 

Fixed Charge Coverage Ratio ” means, at any date of determination, the ratio of (a) (i) Adjusted EBITDA, to (b) the product of (i) four times (ii) the sum of (A) interest (including capitalized interest) payable on, and amortization of debt discount in respect of, all Debt for Borrowed Money plus (B) scheduled amortization of principal amounts of all Debt for Borrowed Money payable (not including balloon maturity amounts) plus (C) all cash dividends payable on any Preferred Interests plus (D) all rentals paid under leases of real property, in each case, of or by the Parent Guarantor and its Subsidiaries for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided , however , that at any date of determination occurring during the fiscal quarter of the Parent Guarantor ending December 31, 2004, the Fixed Charge Coverage Ratio shall be determined on a pro forma basis after having given effect to the IPO and the Formation Transactions.

 

Foreign Lender ” has the meaning specified in Section 2.12(e).

 

Foreign Subsidiary ” means any Subsidiary of the Borrower (a) that is not incorporated or organized under the laws of any State of the United States or the District of Columbia, and (b) the principal assets, if any, of which are not located in the United States.

 

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Formation Transactions ” means (a) the contribution of certain assets by the Contributing Entities to the Borrower in exchange for cash and limited partnership units in the Borrower and (b) following completion of the IPO, the pro rata allocation by Global Innovation Partners, LLC to its investors of limited partnership units in the Borrower and the purchase by the Parent Guarantor of such limited partnership units in the Borrower for cash, in each case, as more fully described in the Registration Statement and otherwise on terms reasonably acceptable to the Administrative Agent.

 

Fund Affiliate ” means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

Funds From Operations ” means net income (or loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and extraordinary and unusual items, plus depreciation and amortization, and after adjustments for unconsolidated Joint Ventures, provided that the determination of Funds From Operations shall be made on a pro forma basis after giving effect to the IPO and the Formation Transactions. Adjustments for unconsolidated Joint Ventures will be calculated to reflect funds from operations on the same basis.

 

GAAP ” has the meaning specified in Section 1.03.

 

Good Faith Contest ” means the contest of an item as to which: (a) such item is contested in good faith, by appropriate proceedings, (b) reserves that are adequate are established with respect to such contested item in accordance with GAAP and (c) the failure to pay or comply with such contested item during the period of such contest is not reasonably likely to result in a Material Adverse Effect.

 

Guaranteed Hedge Agreement ” means any Hedge Agreement required or not prohibited under Article V that is entered into by and between any Loan Party and any Hedge Bank.

 

Guaranteed Obligations ” has the meaning specified in Section 7.01.

 

Guarantors ” means the Parent Guarantor and the Subsidiary Guarantors.

 

Guaranty ” means the Guaranty by the Guarantors pursuant to Article VII, together with any and all Guaranty Supplements required to be delivered pursuant to Section 5.01(j).

 

Guaranty Supplement ” means a supplement entered into by an Additional Guarantor in substantially the form of Exhibit C hereto.

 

Hazardous Materials ” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, radon gas and mold and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

 

Hedge Agreements ” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

 

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Hedge Bank ” means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Guaranteed Hedge Agreement.

 

Indemnified Costs ” has the meaning specified in Section 8.05(a).

 

Indemnified Party ” has the meaning specified in Section 7.06(a).

 

Information Memorandum ” means the information memorandum dated September, 2004 used by the Arrangers in connection with the syndication of the Commitments.

 

Initial Extension of Credit ” means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder.

 

Initial Issuing Bank ” has the meaning specified in the recital of parties to this Agreement.

 

Initial Lenders ” has the meaning specified in the recital of parties to this Agreement.

 

Insufficiency ” means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, but utilizing the actuarial assumptions used in such Plan’s most recent valuation report.

 

Interest Period ” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 12:00 Noon (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:

 

(a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance that ends after the Termination Date;

 

(b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;

 

(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

 

(d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.

 

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Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

Investment ” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of “ Debt ” in respect of such Person.

 

IPO ” means the initial public offering of common stock in the Parent Guarantor and its registration as a public company with the Securities and Exchange Commission.

 

Issuing Bank ” means the Initial Issuing Bank and any other Lender approved as an Issuing Bank by the Administrative Agent and the Borrower and any Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07 so long as each such Lender or each such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Letter of Credit Commitment (which information shall be recorded by the Administrative Agent in the Register) for so long as such Initial Issuing Bank, Lender or Eligible Assignee, as the case may be, shall have a Letter of Credit Commitment.

 

Joint Venture ” means any joint venture (a) in which the Parent Guarantor or any of its Subsidiaries holds any Equity Interest, (b) that is not a Subsidiary of the Parent Guarantor or any of its Subsidiaries and (c) the accounts of which would not appear on the Consolidated financial statements of the Parent Guarantor.

 

Joint Venture Assets ” means, with respect to any Joint Venture at any time, the assets owned by such Joint Venture at such time.

 

JV Pro Rata Share ” means, with respect to any Joint Venture at any time, the fraction, expressed as a percentage, obtained by dividing (a) the total book value of all Equity Interests in such Joint Venture held by the Parent Guarantor and any of its Subsidiaries by (b) the total book value of all outstanding Equity Interests in such Joint Venture at such time.

 

L/C Account Collateral ” has the meaning specified in Section 2.17(a).

 

L/C Cash Collateral Account ” means the account of the Borrower to be maintained with the Administrative Agent, in the name of the Administrative Agent and under the sole control and dominion of the Administrative Agent and subject to the terms of this Agreement.

 

L/C Related Documents ” has the meaning specified in Section 2.04(c)(ii)(A).

 

Lender Party ” means any Lender, the Swing Line Bank or any Issuing Bank.

 

Lenders ” means the Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement.

 

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Letter of Credit Advance ” means an advance made by any Issuing Bank or any Lender pursuant to Section 2.03(c).

 

Letter of Credit Agreement ” has the meaning specified in Section 2.03(a).

 

Letter of Credit Commitment ” means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment” or, if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Issuing Bank’s “Letter of Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

 

Letter of Credit Facility ” means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Issuing Banks’ Letter of Credit Commitments at such time, and (b) $30,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

 

Letters of Credit ” has the meaning specified in Section 2.01(b).

 

Leverage Ratio ” means, at any date of determination, the ratio, expressed as a percentage, of (a) Consolidated Debt of the Parent Guarantor and its Subsidiaries to (b) Total Asset Value, in each case as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be.

 

Lien ” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

 

Limited Subsidiary ” has the meaning specified in Section 5.01(j)(ii).

 

Loan Documents ” means (a) this Agreement, (b) the Notes, (c) the Fee Letter, (d) each Letter of Credit Agreement, (e) each Guaranty Supplement and (f) each Guaranteed Hedge Agreement, in each case, as amended.

 

Loan Parties ” means the Borrower and the Guarantors.

 

Margin Stock ” has the meaning specified in Regulation U.

 

Material Adverse Change ” means any material adverse change in the business, condition (financial or otherwise), results of operations or prospects of the Borrower or the Borrower and its Subsidiaries, taken as a whole.

 

Material Adverse Effect ” means a material adverse effect on (a) the business, condition (financial or otherwise), operations or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

 

Material Contract ” means each contract to which the Borrower or any of its Subsidiaries is a party involving aggregate consideration payable to or by the Borrower or such

 

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Subsidiary in an amount of $5,000,000 or more per annum or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries, taken as a whole.

 

Material Debt ” means Debt of any Loan Party or any Subsidiary of a Loan Party that is outstanding in a principal amount (or, in the case of any Hedge Agreement, an Agreement Value) of $10,000,000 or more, either individually or in the aggregate; in each case (a) whether the primary obligation of one or more of the Loan Parties or their respective Subsidiaries, (b) whether the subject of one or more separate debt instruments or agreements, and (c) exclusive of Debt outstanding under this Agreement.

 

Merrill Lynch has the meaning specified in the recital of parties to this Agreement.

 

MLCC ” means Merrill Lynch Capital Corporation.

 

Moody’s ” means Moody’s Investors Services, Inc. and any successor thereto.

 

Multiemployer Plan ” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

Multiple Employer Plan ” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, in which (a) any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates are contributing sponsors or (b) any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates were previously contributing sponsors if such Loan Party or ERISA Affiliate could reasonably be expected to have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

 

Negative Pledge ” means, with respect to any asset, any provision of a document, instrument or agreement (other than a Loan Document) which prohibits or purports to prohibit the creation or assumption of any Lien on such asset as security for Obligations under or in respect of the Loan Documents.

 

Net Asset Sale Proceeds ” has the meaning specified in Section 5.02(e).

 

Net Operating Income ” means, with respect to any Unencumbered Asset, the total rental revenue and other income from the operation of such Unencumbered Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, minus (i) all expenses and other proper charges incurred by the applicable Loan Party in connection with the operation and maintenance of such Unencumbered Asset during such fiscal period, including, without limitation, management fees, repairs, real estate and chattel taxes and bad debt expenses, but before payment or provision for debt service charges, income taxes and depreciation, amortization and other non-cash expenses, all as determined in accordance with GAAP, provided that there shall be no rent leveling adjustments made (and only actual cash rents will be used) when computing Net Operating Income.

 

Non-Recourse Debt ” means Debt for Borrowed Money with respect to which recourse for payment is limited to (a) any building(s) or parcel(s) of real property or any related assets

 

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encumbered by a Lien securing such Debt for Borrowed Money and/or (b) the general credit of the Property-Level Subsidiary that has incurred or guaranteed such Debt for Borrowed Money and/or the Equity Interests therein and/or the general credit of the immediate parent entity of such Property-Level Subsidiary provided that such parent entity’s assets consist solely of Equity Interests in one or more Property-Level Subsidiaries or immediate parent entities thereof, it being understood that the instruments governing such Debt may include customary carve-outs to such limited recourse (any such customary carve-outs or agreements limited to such customary carve-outs, being a “ Customary Carve-Out Agreement ”) such as, for example, personal recourse to the Parent Guarantor or any Subsidiary of the Parent Guarantor for fraud, willful misrepresentation, misapplication or misappropriation of cash, waste, environmental claims, damage to properties, non-payment of taxes or other liens despite the existence of sufficient cash flow, interference with the enforcement of loan documents upon maturity or acceleration, violation of loan document prohibitions against voluntary or involuntary bankruptcy filings, transfer of properties or ownership interests therein and liabilities and other circumstances customarily excluded at the time of the incurrence of such Debt by lenders from exculpation provisions and/or included in separate indemnification agreements in non-recourse financings of real estate.

 

Note ” means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender.

 

Notice ” has the meaning specified in Section 9.02(c).

 

Notice of Borrowing ” has the meaning specified in Section 2.02(a).

 

Notice of Issuance ” has the meaning specified in Section 2.03(a).

 

Notice of Renewal ” has the meaning specified in Section 2.01(b).

 

Notice of Swing Line Borrowing ” has the meaning specified in Section 2.02(b).

 

Notice of Termination ” has the meaning specified in Section 2.01(b).

 

NPL ” means the National Priorities List under CERCLA.

 

Obligation ” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.

 

OECD ” means the Organization for Economic Cooperation and Development.

 

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Office Asset ” means Real Property (other than any Joint Venture Asset) that operates or is intended to operate as a telecommunications infrastructure building, information technology infrastructure building, technology manufacturing building or technology office/corporate headquarter building, in each case, as more particularly described in the Information Memorandum.

 

Other Taxes ” has the meaning specified in Section 2.12(b).

 

Parent Guarantor ” has the meaning specified in the recital of parties to this Agreement.

 

Patriot Act ” has the meaning specified in Section 9.12.

 

PBGC ” means the Pension Benefit Guaranty Corporation (or any successor).

 

Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet delinquent or which are the subject of a Good Faith Contest; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate unless, in the case of (i) or (ii) above, such liens are the subject of a Good Faith Contest; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) easements, zoning restrictions, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use or value of such property for its present purposes; (e) Tenancy Leases and other interests of lessees and lessors under leases or real or personal property made in the ordinary course of business that do not materially and adversely affect the use of the Real Property encumbered thereby for its intended purpose or the value thereof; and (f) Liens in favor of any Secured Party pursuant to any Loan Document.

 

Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

 

Plan ” means a Single Employer Plan or a Multiple Employer Plan.

 

Platform ” has the meaning specified in Section 9.02(b).

 

Post Petition Interest ” has the meaning specified in Section 7.07(c).

 

Preferred Interests ” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

 

Property-Level Subsidiary ” means any Subsidiary of the Borrower or any Joint Venture that holds a direct fee or leasehold interest in any single building (or group of related buildings, including, without limitation, buildings pooled for purposes of a Non-Recourse Debt financing) or parcel (or group of related parcels, including, without limitation, parcels pooled for purposes of a Non-Recourse Debt financing) of real property and related assets and not in any other building or parcel of real property.

 

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Proposed Unencumbered Asset ” has the meaning specified in Section 5.01(j)(iii).

 

Pro Rata Share ” of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the Revolving Credit Facility at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, the Revolving Credit Facility as in effect immediately prior to such termination).

 

Qualifying Ground Lease ” means a lease of Real Property containing the following terms and conditions: (a) a remaining term (including any unexercised extension options as to which there are no conditions precedent to exercise thereof other than the giving of a notice of exercise) of 30 years or more from the Closing Date; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor; (c) the obligation of the lessor to give the holder of any mortgage Lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so; (d) reasonable transferability of the lessee’s interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of a leasehold estate demised pursuant to a ground lease; provided, however , that (i) the ASML Ground Lease shall be deemed to constitute a Qualifying Ground Lease on the Closing Date, (ii) the Borrower shall use its best efforts to obtain, within 180 days after the Closing Date (which time period may be extended, in the sole discretion of the Administrative Agent, for not more than 90 additional days without the consent of the Required Lenders), an agreement from the lessor under the ASML Ground Lease addressing the matters described in clauses (b), (c) and (e) above in form and substance satisfactory to the Administrative Agent, and (iii) if the Borrower shall fail to obtain the agreement referred to in the foregoing clause (ii) within the applicable time period set forth therein, the ASML Ground Lease shall be deemed not to be a Qualifying Ground Lease and the Unencumbered Asset Value attributable to the ASML Asset shall be deemed to be $0.

 

Real Property ” means all right, title and interest of the Borrower and each of its Subsidiaries in and to any land and any improvements located thereon, together with all equipment, furniture, materials, supplies and personal property in which such Person has an interest now or hereafter located on or used in connection with such land and improvements, and all appurtenances, additions, improvements, renewals, substitutions and replacements thereof now or hereafter acquired by such Person, in each case to the extent of such Person’s interest therein.

 

Recourse Debt ” means Debt for Borrowed Money for which the Borrower or any of its Subsidiaries has personal or recourse liability in whole or in part, exclusive of any such Debt for which such personal or recourse liability is limited to obligations under Customary Carve-Out Agreements.

 

Redeemable ” means, with respect to any Equity Interest, any Debt or any other right or Obligation, any such Equity Interest, Debt, right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

 

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Reference Banks ” means Citibank, N.A., Bank of America, N.A. and Key Bank National Association.

 

Refinancing Debt ” means, with respect to any Debt, any Debt extending the maturity of, or refunding or refinancing, in whole or in part, such Debt, provided that (a) the terms of any Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, do not provide for any Lien on any Unencumbered Assets and are otherwise not prohibited by the Loan Documents, (b) the principal amount of such Debt shall not be increased above the principal amount thereof outstanding immediately prior to such extension, refunding or refinancing plus the amount of any applicable premium and expenses, and the direct and contingent obligors therefor shall not be changed (other than to include new and/or additional Excluded Subsidiaries as obligors), as a result of or in connection with such extension, refunding or refinancing and (c) the provisions relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material provisions taken as a whole, of any such Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are on then current market terms, and (d) the interest rate applicable to any such Refinancing Debt does not exceed the then applicable market interest rate.

 

Register ” has the meaning specified in Section 9.07(d).

 

Registration Statement ” means the Parent’s Form S-11 Registration Statement filed with the Securities and Exchange Commission in connection with the IPO.

 

Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

REIT ” means a Person that is qualified to be treated for tax purposes as a real estate investment trust under Sections 856-860 of the Internal Revenue Code.

 

Required Lenders ” means, at any time, Lenders owed or holding greater than 50% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) the aggregate Unused Revolving Credit Commitments at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Lenders ratably in accordance with their respective Revolving Credit Commitments.

 

Responsible Officer ” means any executive officer (including a vice president) of, or any executive officer (including a vice president) of any general partner or managing member or manager of, any Loan Party or any of its Subsidiaries.

 

Revolving Credit Advance ” has the meaning specified in Section 2.01(a).

 

Revolving Credit Commitment ” means, (a) with respect to any Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Revolving Credit Commitment” or (b) if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender’s “Revolving Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05.

 

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Revolving Credit Facility ” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time.

 

S&P ” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

Sarbanes-Oxley ” means the Sarbanes-Oxley Act of 2002, as amended.

 

Secured Debt Leverage Ratio ” means, at any date of determination, the ratio, expressed as a percentage, of (a) Consolidated secured Debt of the Parent Guarantor and its Subsidiaries to (b) Total Asset Value, in each case as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be.

 

Secured Parties ” means the Administrative Agent, the Lender Parties and the Hedge Banks.

 

Securities Act ” means the Securities Act of 1933, as amended to the date hereof and from time to time hereafter, and any successor statute.

 

Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended to the date hereof and from time to time hereafter, and any successor statute.

 

Single Employer Plan ” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, in which (a) any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates is a contributing sponsor or (b) any Loan Party or any ERISA Affiliate, and no Person other than the Loan Parties and the ERISA Affiliates, is a contributing sponsor if such Loan Party or ERISA Affiliate could reasonably be expected to have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

 

Solvent ” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person, on a going-concern basis, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person, on a going-concern basis, 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 does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) 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 an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time (including, without limitation, after taking into account appropriate discount factors for the present value of future contingent liabilities), represents the amount that can reasonably be expected to become an actual or matured liability.

 

Standby Letter of Credit ” means any Letter of Credit issued under the Letter of Credit Facility, other than a Trade Letter of Credit.

 

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Subordinated Obligations ” has the meaning specified in Section 7.07(a).

 

Subsidiary ” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate (i) of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, in each case, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries, or (ii) the accounts of which would appear on the Consolidated financial statements of such Person in accordance with GAAP.

 

Subsidiary Guarantor ” has the meaning specified in the recital of parties to this Agreement.

 

Surviving Debt ” means Debt of each Loan Party and its Subsidiaries outstanding immediately before and after giving effect to the Formation Transactions.

 

Swing Line Advance ” means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(c) or (b) any Lender pursuant to Section 2.02(b).

 

Swing Line Bank ” means CNAI, in its capacity as the Lender of Swing Line Advances, and its successors and permitted assigns in such capacity.

 

Swing Line Borrowing ” means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank pursuant to Section 2.01(c) or the Lenders pursuant to Section 2.02(b).

 

Swing Line Commitment ” means, with respect to the Swing Line Bank, the amount of the Swing Line Facility set forth in Section 2.01(b), as such amount may be reduced at or prior to such time pursuant to Section 2.05.

 

Swing Line Facility ” has the meaning specified in Section 2.01(c).

 

Taxes ” has the meaning specified in Section 2.12(a).

 

Tenancy Leases means operating leases, subleases, licenses, occupancy agreements and rights-of-use entered into by the Borrower or any of its Subsidiaries in its capacity as a lessor or a similar capacity in the ordinary course of business that do not materially and adversely affect the use of the Real Property encumbered thereby for its intended purpose.

 

Termination Date ” means the earlier of (a) the third anniversary of the Closing Date, subject to the extension thereof pursuant to Section 2.16, and (b) the date of termination in whole of the Revolving Credit Commitments, the Letter of Credit Commitments and the Swing Line Commitment pursuant to Section 2.05 or 6.01.

 

Total Asset Value ” means, on any date of determination, the sum of the Asset Values for all Assets at such date.

 

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Total Unencumbered Asset Value ” means an amount equal to the sum of the Unencumbered Asset Values of all Unencumbered Assets; provided , however, that, if at any time (a) there shall be fewer than three Unencumbered Assets, (b) the sum of the Unencumbered Asset Values of all Unencumbered Assets shall not be equal to or greater than $115,000,000 or (c) the weighted average occupancy of all Unencumbered Assets shall not be greater than or equal to 85%, “ Total Unencumbered Asset Value ” shall be $0.

 

Trade Letter of Credit ” means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory.

 

Transfer ” has the meaning specified in Section 5.02(e).

 

Type ” refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate.

 

UCC ” means the Uniform Commercial Code as in effect, from time to time, in the State of New York, provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest under any Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “ UCC ” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

 

Unencumbered Asset Conditions ” means, with respect to any Proposed Unencumbered Asset, that such Proposed Unencumbered Asset (a) is an Office Asset located in the United States of America, (b) is owned in fee simple absolute or subject to a Qualifying Ground Lease, (d) is income-producing, at least 80% occupied and not more than 20% of which is under development or redevelopment; (e) is free of all structural defects or material architectural deficiencies, title defects, environmental conditions or other matters (including a casualty event or condemnation) that would have a material adverse affect on the value, use or ability to sell or refinance such Asset, (f) is operated by a property manager reasonably acceptable to the Administrative Agent, (g) is not subject to mezzanine Debt financing, (h) is not subject to any Lien (other than Permitted Liens) or any Negative Pledge, (i) to the extent owned by a Loan Party that is a Subsidiary of the Borrower, none of the Borrower’s direct or indirect Equity Interests in such Subsidiary owner is subject to any Lien (other than Permitted Liens) or any Negative Pledge, and (j) the Borrower directly, or indirectly through such Subsidiary owner, has the right to take the following actions without the need to obtain the consent of any Person: (i) to create Liens on such Asset as security for the Obligations of the Loan Parties under or in respect of the Loan Documents, and (ii) to sell, transfer or otherwise dispose of such Asset.

 

Unencumbered Asset Value ” means, at any date of determination, for any Unencumbered Asset, the Adjusted Net Operating Income of such Unencumbered Asset divided by 9.5%.

 

Unencumbered Assets ” means (a) Office Assets for which the applicable conditions (as may be determined by the Administrative Agent in its sole discretion) in Section 3.01 and, if applicable, 5.01(j)(iii) have been satisfied and as the Administrative Agent or the Required Lenders, in their sole discretion, shall from time to time elect to consider Unencumbered Assets for purposes of this Agreement, and (b) the Office Assets listed on Schedule II hereto (as supplemented from time to time pursuant to Section 5.01(j)(iii)).

 

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Unencumbered Assets Certificate ” means a certificate in substantially the form of Exhibit F hereto, duly certified by the Chief Financial Officer or other Responsible Officer of the Parent Guarantor.

 

Unencumbered Assets Debt Service Coverage Ratio ” means, at any date of determination, the ratio of (a) the aggregate Adjusted Net Operating Income for all Unencumbered Assets to (b) four times the greater of (i) the actual interest expense of the Borrower under this Agreement for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered pursuant to Section 5.03(b) or (c), as the case may be and (ii) the interest that would have been required to be paid by the Borrower under this Agreement for such fiscal period had the applicable interest rate been equal to (A) the Applicable Margin for Eurodollar Rate Advances plus (B) the greater of (1) 3.0% and (2) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) as published on Reuters Page ISDAFIX1 (or any successor page) as the International Swaps and Derivatives Association mid-market par 3-year swap rate, in each case, in effect at such date of determination.

 

Unsecured Debt Exposure ” means, at any date of determination, the amount at such time of Consolidated Debt of the Parent Guarantor and its Subsidiaries, including, without limitation, the Facility Exposure, that is not secured by any Liens.

 

Unused Fee ” has the meaning specified in Section 2.08(a).

 

Unused Revolving Credit Commitment ” means, with respect to any Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender’s Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at such time.

 

Voting Interests ” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

Withdrawal Liability ” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02. Computation of Time Periods; Other Definitional Provisions . In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “ from ” means “from and including” and the words “ to ” and “ until ” each mean “to but excluding”. References in the Loan Documents to any agreement or contract “ as amended ” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

 

SECTION 1.03. Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements of the Parent Guarantor referred to in the Registration Statement (“ GAAP ”).

 

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ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT

 

SECTION 2.01. The Advances and the Letters of Credit . (a) The Revolving Credit Advances . Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a “ Revolving Credit Advance ”) to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an amount for each such Advance not to exceed such Lender’s Unused Revolving Credit Commitment at such time. Each Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $500,000 in excess thereof and shall consist of Revolving Credit Advances made simultaneously by the Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Lender’s Unused Revolving Credit Commitment in effect from time to time and prior to the Termination Date, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(a).

 

(b) Letters of Credit . Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue (or cause its Affiliate that is a commercial bank to issue on its behalf) letters of credit (the “ Letters of Credit ”), for the account of the Borrower from time to time on any Business Day during the period from the date hereof until 60 days before the Termination Date in an aggregate Available Amount (i) for all Letters of Credit not to exceed at any time the Letter of Credit Facility at such time, (ii) for all Letters of Credit issued by such Issuing Bank not to exceed such Issuing Bank’s Letter of Credit Commitment at such time, and (iii) for each such Letter of Credit not to exceed the Unused Revolving Credit Commitments of the Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and (A) in the case of a Standby Letter of Credit one year after the date of issuance thereof, but may by its terms be renewable annually upon notice (a “ Notice of Renewal ”) given to the Issuing Bank that issued such Standby Letter of Credit and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless such Issuing Bank has notified the Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a “ Notice of Termination ”) and (B) in the case of a Trade Letter of Credit, 60 days after the date of issuance thereof; provided , however , that the terms of each Standby Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Standby Letter of Credit to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date. If either a Notice of Renewal is not given by the Borrower or a Notice of Termination is given by the relevant Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, that even in the absence of receipt of a Notice of Renewal the relevant Issuing Bank may in its discretion, unless instructed to the contrary by the Administrative Agent or the Borrower, deem that a Notice of Renewal had been timely delivered and in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. Each Standby Letter of Credit shall contain a provision authorizing the Issuing Bank that issued such Letter of Credit to deliver to the beneficiary of such Letter of Credit, upon the occurrence and during the continuance of an

 

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Event of Default, a notice (a “ Default Termination Notice ”) terminating such Letter of Credit and giving such beneficiary 15 days to draw such Letter of Credit. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(b), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.03(c) and request the issuance of additional Letters of Credit under this Section 2.01(b).

 

(c) The Swing Line Advances . The Borrower may request the Swing Line Bank to make, and the Swing Line Bank agrees to make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $5,000,000 (the “ Swing Line Facility ”) and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $250,000 or an integral multiple of $250,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.01(c), repay pursuant to Section 2.04(b) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c).

 

SECTION 2.02. Making the Advances . (a) Except as otherwise provided in Section 2.03, each Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or not later than 12:00 P.M. (New York City time) on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telex or telecopier. Each such notice of a Borrowing (a “ Notice of Borrowing ”) shall be by telephone, confirmed immediately in writing, or telex or telecopier or e-mail, in each case in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances and 2:00 P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Base Rate Advances, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Borrowing in accordance with the respective Commitments of such Lender and the other Lenders. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account; provided, however, that the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or any Issuing Bank, as the case may be, and by any other Lender and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank or such Issuing Bank, as the case may be, and such other Lenders for repayment of such Swing Line Advances and Letter of Credit Advances.

 

(b) Each Swing Line Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a “ Notice of Swing Line Borrowing ”) shall be by telephone, confirmed immediately in writing or by telecopier or e-mail, in each case specifying therein the requested (i) date of such Borrowing, (ii) amount of such

 

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Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the earlier of (A) the seventh day after the requested date of such Borrowing and (B) the Termination Date). The Swing Line Bank shall, before 2:00 P.M. (New York City time) on the date of such Swing Line Borrowing, make the amount thereof available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender’s Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than 1:00 P.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day.

 

(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for the initial Borrowing hereunder or for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.07(d)(ii), 2.09 or 2.10 and (ii) there may not be more than seven (7) separate Borrowings outstanding at any time.

 

(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

 

(e) Unless the Administrative Agent shall have received notice from a Lender prior to (x) the date of any Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 Noon (New York City time) on the date of any Borrowing consisting of Base Rate Advances that such Lender will not make

 

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available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes.

 

(f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.

 

SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit . (a) Request for Issuance . Each Letter of Credit shall be issued upon notice, given not later than 12:00 Noon (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to any Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telex, telecopier or e-mail or by means of the Platform. Each such notice of issuance of a Letter of Credit (a “ Notice of Issuance ”) shall be by telephone, confirmed immediately in writing, telex, telecopier or e-mail, in each case specifying therein the requested (i) date of such issuance (which shall be a Business Day), (ii) Available Amount of such Letter of Credit, (iii) expiration date of such Letter of Credit, (iv) name and address of the beneficiary of such Letter of Credit and (v) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit (a “ Letter of Credit Agreement ”). If (y) the requested form of such Letter of Credit is acceptable to such Issuing Bank in its sole discretion and (z) it has not received notice of objection to such issuance from the Required Lenders, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern.

 

(b) Letter of Credit Reports . Each Issuing Bank shall furnish (i) to each Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (ii) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank.

 

(c) Drawing and Reimbursement . The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. Upon written demand by any Issuing Bank with an outstanding Letter of Credit Advance, with a copy of such demand to the Administrative Agent, each Lender shall purchase from such Issuing Bank, and such

 

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Issuing Bank shall sell and assign to each such Lender, such Lender’s Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank which made such Advance, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by an Issuing Bank to any Lender of a portion of a Letter of Credit Advance, such Issuing Bank represents and warrants to such other Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day.

 

(d) Failure to Make Letter of Credit Advances . The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date.

 

SECTION 2.04. Repayment of Advances. (a) Revolving Credit Advances . The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding.

 

(b) Swing Line Advances . The Borrower shall repay to the Administrative Agent for the account of (i) the Swing Line Bank and (ii) each other Lender that has made a Swing Line Advance by purchase from the Swing Line Bank pursuant to Section 2.02(b), the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the seventh day after the requested date of such Swing Line Borrowing) and the Termination Date.

 

(c) Letter of Credit Advances . (i) The Borrower shall repay to the Administrative Agent for the account of each Issuing Bank and each other Lender that has made a Letter of Credit Advance on the same day on which such Advance was made the outstanding principal amount of each Letter of Credit Advance made by each of them.

 

(ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit (and the obligations of

 

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each Lender to reimburse the Issuing Bank with respect thereto) shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances:

 

(A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “ L/C Related Documents ”);

 

(B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;

 

(C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;

 

(D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit;

 

(F) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or

 

(G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.

 

SECTION 2.05. Termination or Reduction of the Commitments . (a) Optional . The Borrower may, upon at least three Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Swing Line Facility, the Letter of Credit Facility and the Unused Revolving Credit Commitments; provided, however, that each partial reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 (or in the case of the Swing Line Facility, $250,000) or an integral multiple of $250,000 in excess thereof and (ii) shall be made ratably among the Lenders in accordance with their Commitments with respect to such Facility.

 

(b) Mandatory . (i) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

 

(ii) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility.

 

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SECTION 2.06. Prepayments . (a) Optional . The Borrower may, upon same day notice in the case of Base Rate Advances and two Business Days’ notice in the case of Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $250,000 in excess thereof or, if less, the amount of the Advances outstanding and (ii) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance, the Borrower shall also pay any amounts owing pursuant to Section 9.04(c).

 

(b) Mandatory . (i) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Swing Line Advances and the Letter of Credit Advances and deposit an amount in the L/C Cash Collateral Account in an amount equal to the amount by which (A) the sum of the aggregate principal amount of (1) the Revolving Credit Advances then outstanding, (2) the Swing Line Advances then outstanding and (3) the Letter of Credit Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the lesser of (I) the Revolving Credit Facility and (II) 60% of the Total Unencumbered Asset Value on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility.

 

(ii) The Borrower shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility.

 

(iii) In the event the aggregate Available Amount under all outstanding Letters of Credit shall exceed the aggregate Letter of Credit Commitments of the Lenders, the Borrower shall, within five Business Days after written demand by the Administrative Agent, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility.

 

(iv) In accordance with Section 5.02(e), the Borrower shall, within 12 months following the date of receipt of any Net Asset Sales Proceeds by the Borrower or any of its Subsidiaries, prepay an aggregate principal amount of the Advances comprising part of the same Borrowings and deposit an amount in the L/C Cash Collateral Account, in an aggregate amount equal to the amount of such Net Asset Sales Proceeds that have not been reinvested as permitted under Section 5.02(e), provided that such deposit shall only be required to be maintained therein for so long as the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on the date of such prepayment.

 

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(v) Prepayments of the Revolving Credit Facility made pursuant to clauses (i), (ii), (iii) and (iv) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full, third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full and fourth deposited in the L/C Cash Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding to the extent required under the foregoing clauses. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable. On the earlier to occur of the (A) Termination Date, (B) the date on which funds are no longer required to be maintained in the L/C Cash Collateral Account pursuant to Section 2.06(b)(ii), (b)(iii) or (b)(iv), as applicable, and (C) the expiration or other termination of any Letters of Credit for which funds are on deposit in the L/C Cash Collateral Account without any drawings thereon, then, in each case, so long as no Default shall have occurred and be continuing, any remaining funds on deposit in the L/C Cash Collateral Account (together with any interest earned thereon) shall be returned to the Borrower.

 

(vi) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid.

 

SECTION 2.07. Interest . (a) Scheduled Interest . The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:

 

(i) Base Rate Advances . During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last day of each December, March, June and September during such periods and on the date such Base Rate Advance shall be Converted or paid in full.

 

(ii) Eurodollar Rate Advances . During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.

 

(b) Default Interest . Upon the occurrence and during the continuance of an Event of Default of the type described in Section 6.01(a) or (f) or, at the election of the Administrative Agent and the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under the Loan Documents that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate Advances pursuant to clause (a)(i) above.

 

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(c) Notice of Interest Period and Interest Rate . Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to Section 2.09 or a notice of selection of an Interest Period pursuant to the terms of the definition of “Interest Period”, the Administrative Agent shall give notice to the Borrower and each Lender of the applicable Interest Period and the applicable interest rate determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii) above, and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under clause (a)(ii) above.

 

(d) Interest Rate Determination . (i) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.

 

(ii) If Telerate Page 3750 is unavailable and fewer than two Reference Banks are able to furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances,

 

(A) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances,

 

(B) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and

 

(C) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

 

SECTION 2.08. Fees . (a) Unused Fee . The Borrower shall pay to the Administrative Agent for the account of the Lenders an unused commitment fee (the “ Unused Fee ”), from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable in arrears quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and on the Termination Date. The Unused Fee payable for the account of each Lender shall be calculated for each period for which the Unused Fee is payable on the average daily Unused Revolving Credit Commitment of such Lender during such period at the rate per annum equal to, (a) for any period in which the average daily Facility Exposure for such period is equal to or exceeds 50% of the aggregate Revolving Credit Commitments, 0.15% per annum, and (b) in all other cases, 0.25% per annum.

 

(b) Letter of Credit Fees, Etc . (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commission, payable in arrears, (a) quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and (b) on the earliest to occur of the full drawing, expiration, termination or cancellation of any Letter of Credit, and (c) on the Termination Date, on such Lender’s Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time at the rate per annum equal to the Applicable Margin for Eurodollar Rate Advances in effect from time to time.

 

(ii) The Borrower shall pay to each Issuing Bank, for its own account, (A) a fronting fee for each Letter of Credit issued by such Issuing Bank in an amount equal to 0.125% of the Available

 

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Amount of such Letter of Credit on the date of issuance of such Letter of Credit, payable on such date and (B) such other customary commissions, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree.

 

(c) Administrative Agent’s Fees . The Borrower shall pay to the Administrative Agent for its own account the fees, in the amounts and on the dates, set forth in the Fee Letter and such other fees as may from time to time be agreed between the Borrower and the Administrative Agent.

 

(d) Extension Fee . The Borrower shall pay to the Administrative Agent on the Extension Date, for the account of each Lender, a Facility extension fee, in an amount equal to 0.25% of each Lender’s Revolving Credit Commitment then outstanding.

 

SECTION 2.09. Conversion of Advances . (a) Optional . The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower.

 

(b) Mandatory . (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall automatically as of the last day of the then applicable Interest Period Convert into Base Rate Advances.

 

(ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance.

 

(iii) Upon the occurrence and during the continuance of any Event of Default, (y) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (z) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended.

 

SECTION 2.10. Increased Costs, Etc . (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance 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 any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances

 

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(excluding, for purposes of this Section 2.10, any such increased costs resulting from (y) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (z) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, within 2 Business Days after demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that a Lender Party claiming additional amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error.

 

(b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations), then, within 2 Business Days after demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error.

 

(c) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist.

 

(d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided, however, that, before making any such demand, such

 

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Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

 

SECTION 2.11. Payments and Computations . (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.13), not later than 2:00 P.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

 

(b) The Borrower hereby authorizes each Lender Party and each of its Affiliates, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time, to the fullest extent permitted by law, against any or all of the Borrower’s accounts with such Lender Party any amount so due.

 

(c) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Rate and of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

(d) Whenever any payment hereunder or under the Notes shall be 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 payment of interest or commitment fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

 

(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such

 

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assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate.

 

(f) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lender Parties under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lender Parties in the following order of priority:

 

(i) first, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Administrative Agent (solely in its capacity as Administrative Agent) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Administrative Agent on such date;

 

(ii) second , to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Issuing Banks (solely in their respective capacities as such) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Issuing Banks on such date;

 

(iii) third , to the payment of all of the indemnification payments, costs and expenses that are due and payable to the Lenders under Section 9.04 and any similar section of any of the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such indemnification payments, costs and expenses owing to the Lenders on such date;

 

(iv) fourth , to the payment of all of the amounts that are due and payable to the Administrative Agent and the Lender Parties under Sections 2.10 and 2.12 on such date, ratably based upon the respective aggregate amounts thereof owing to the Administrative Agent and the Lender Parties on such date;

 

(v) fifth , to the payment of all of the fees that are due and payable to the Lenders under Section 2.08(a), (b)(i) and (d) on such date, ratably based upon the respective aggregate Commitments of the Lenders under the Facilities on such date;

 

(vi) sixth , to the payment of all of the accrued and unpaid interest on the Obligations of the Borrower under or in respect of the Loan Documents that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(b) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date;

 

(vii) seventh , to the payment of all of the accrued and unpaid interest on the Advances that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(a) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date;

 

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(viii) eighth , to the payment of the principal amount of all of the outstanding Advances and any reimbursement obligations that are due and payable to the Administrative Agent and the Lender Parties on such date, ratably based upon the respective aggregate amounts of all such principal and reimbursement obligations owing to the Administrative Agent and the Lender Parties on such date, and to deposit into the L/C Cash Collateral Account any contingent reimbursement obligations in respect of outstanding Letters of Credit to the extent required by Section 6.02; and

 

(ix) ninth , to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date.

 

SECTION 2.12. Taxes . (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.11, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Administrative Agent, taxes that are imposed on its overall net income by the United States (including branch profits taxes or alternative minimum tax) and taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or the Administrative Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as “ Taxes ”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or the Administrative Agent, (i) the sum payable by the Borrower shall be increased as may be necessary so that after the Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender Party or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make all such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

 

(b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement, or any other Loan Document (hereinafter referred to as “ Other Taxes ”).

 

(c) The Borrower shall indemnify each Lender Party and the Administrative Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.12, imposed on or paid by such Lender Party or the Administrative Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Administrative Agent (as the case may be) makes written demand therefor.

 

(d) Within 60 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a

 

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receipt evidencing such payment or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Administrative Agent. For purposes of subsections (d) and (e) of this Section 2.12, the terms “ United States ” and “ United States person ” shall have the meanings specified in Section 7701 of the Internal Revenue Code.

 

(e) Each Lender Party organized under the laws of a jurisdiction outside the United States (each, a “ Foreign Lender ”) shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender Party, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Borrower (i) two duly completed and signed copies of either Internal Revenue Service Form W-8BEN (claiming an exemption from or a reduction in United States withholding tax under an applicable treaty) or its successor form or Form W-8ECI (claiming an exemption from United States withholding tax as effectively connected income) or its successor from and related applicable forms, as the case may be; or (ii) in the case of a Foreign Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code and that cannot comply with the requirements of clause (i) hereof, (x) a statement to the effect that such Lender is eligible for a complete exemption from withholding of United States Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8BEN or successor and related applicable form. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.12 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W8-ECI or W8-BEN or the statement set forth in (ii)(x) above, that the applicable Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Upon the request of the Borrower, any Lender that is a United States person and is not an exempt recipient for United States backup withholding purposes shall deliver to the Borrower two copies of Internal Revenue Service form W-9 (or any successor form).

 

(f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in subsection (e) above ( other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such reasonable steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes.

 

(g) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.12 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change

 

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would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party.

 

(h) If any Lender Party or the Administrative Agent receives a refund of Taxes or Other Taxes paid by the Borrower or for which the Borrower has indemnified any Lender Party or the Administrative Agent, as the case may be, pursuant to this Section 2.12, then such Lender Party or the Administrative Agent, as applicable, shall pay such amount, net of any expenses incurred by such Lender Party or the Administrative Agent, to the Borrower within 30 days of the receipt of such Taxes or Other Taxes. Notwithstanding the foregoing, (i) the Borrower shall not be entitled to review the tax records or financial information of any Lender Party or the Administrative Agent and (ii) neither the Administrative Agent nor any Lender Party shall have any obligation to pursue (and no Loan Party shall have any right to assert) any refund of Taxes or Other Taxes that may be paid by the Borrower.

 

SECTION 2.13. Sharing of Payments, Etc . If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party’s ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such other Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such interest or participating interest, as the case may be.

 

SECTION 2.14. Use of Proceeds . The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely for the acquisition and development of Assets, for working capital and the general corporate purposes of the Borrower and its Subsidiaries.

 

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SECTION 2.15. Evidence of Debt . (a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender Party resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender Party from time to time hereunder. The Borrower agrees that upon notice by any Lender Party to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender Party to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender Party, the Borrower shall promptly execute and deliver to such Lender Party, with a copy to the Administrative Agent, a Note, in substantially the form of Exhibit A hereto, payable to the order of such Lender Party in a principal amount equal to the Revolving Credit Commitment of such Lender Party. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder.

 

(b) The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party’s share thereof.

 

(c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender Party to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.

 

SECTION 2.16. Extension of Termination Date . At least 30 days but not more than 90 days prior to the Termination Date, the Borrower, by written notice to the Administrative Agent, may request, with respect to the Commitments then outstanding, a single one-year extension of the Termination Date. The Administrative Agent shall promptly notify each Lender of such request and the Termination Date in effect at such time shall, effective as at the Termination Date (the “ Extension Date ”), be extended for an additional one year period, provided that, on the Extension Date the following statements shall be true and the Administrative Agent shall have received for the account of each Lender Party a certificate signed by a duly authorized officer of the Borrower, dated the Extension Date, stating that: (x) the representations and warranties contained in Section 4.01 are true and correct on and as of the Extension Date (except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date)), and (y) no Default has occurred and is continuing or would result from such extension. In the event that an extension is effected pursuant to this Section 2.16, the aggregate principal amount of all Advances shall be repaid in full ratably to the Lenders on the Termination Date as so extended. As of the Extension Date, any and all references in this Agreement, the Notes, if any, or any of the other Loan Documents to the “Termination Date” shall refer to the Termination Date as so extended.

 

SECTION 2.17. Cash Collateral Account . (a) Grant of Security . The Borrower hereby pledges to the Administrative Agent, as collateral agent for the ratable benefit of the Secured

 

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Parties, and hereby grants to the Administrative Agent, as collateral agent for the ratable benefit of the Secured Parties, a security interest in, the Borrower’s right, title and interest in and to the L/C Cash Collateral Account and all (i) funds and financial assets from time to time credited thereto (including, without limitation, all Cash Equivalents), all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds and financial assets, and all certificates and instruments, if any, from time to time representing or evidencing the L/C Cash Collateral Account, (ii) and all promissory notes, certificates of deposit, deposit accounts, checks and other instruments from time to time delivered to or otherwise possessed by the Administrative Agent, as collateral agent for or on behalf of the Borrower, in substitution for or in addition to any or all of the then existing L/C Account Collateral and (iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing L/C Account Collateral, in each of the cases set forth in clauses (i), (ii) and (iii) above, whether now owned or hereafter acquired by the Borrower, wherever located, and whether now or hereafter existing or arising (all of the foregoing, collectively, the “ L/C Account Collateral ”).

 

(b) Maintaining the L/C Account Collateral . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding, any Guaranteed Hedge Agreement shall be in effect or any Lender Party shall have any Commitment:

 

(i) the Borrower will maintain all L/C Account Collateral only with the Administrative Agent, as collateral agent; and

 

(ii) the Administrative Agent shall have the sole right to direct the disposition of funds with respect to the L/C Cash Collateral Account subject to the provisions of this Agreement, and it shall be a term and condition of such L/C Cash Collateral Account that, except as otherwise provided herein, notwithstanding any term or condition to the contrary in any other agreement relating to the L/C Cash Collateral Account, as the case may be, that no amount (including, without limitation, interest on Cash Equivalents credited thereto) will be paid or released to or for the account of, or withdrawn by or for the account of, the Borrower or any other Person from the L/C Cash Collateral Account; and

 

(iii) the Administrative Agent may (with the consent of the Required Lenders and shall at the request of the Required Lenders), at any time and without notice to, or consent from, the Borrower, transfer, or direct the transfer of, funds from the L/C Account Collateral to satisfy the Borrower’s Obligations under the Loan Documents if an Event of Default shall have occurred and be continuing.

 

(c) Investing of Amounts in the L/C Cash Collateral Account . The Administrative Agent will, from time to time invest (i)(A) amounts received with respect to the L/C Cash Collateral Account in such Cash Equivalents credited to the L/C Cash Collateral Account as the Borrower may select and the Administrative Agent, as collateral agent, may approve in its reasonable discretion, and (B) interest paid on the Cash Equivalents referred to in clause (i)(A) above, and (ii) reinvest other proceeds of any such Cash Equivalents that may mature or be sold, in each case in such Cash Equivalents credited in the same manner. Interest and proceeds that are not invested or reinvested in Cash Equivalents as provided above shall be deposited and held in the L/C Cash Collateral Account. In addition, the Administrative Agent shall have the right at any time to exchange such Cash Equivalents for similar Cash Equivalents of smaller or larger determinations, or for other Cash Equivalents, credited to the L/C Cash Collateral Account.

 

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(d) Release of Amounts . So long as no Event of Default under the Credit Agreement shall have occurred and be continuing, the Administrative Agent will pay and release to the Borrower or at its order or, at the request of the Borrower, to the Administrative Agent to be applied to the Obligations of the Borrower under the Loan Documents such amount, if any, as is then on deposit in the L/C Cash Collateral Account.

 

(e) Remedies . Upon the occurrence and during the continuance of any Event of Default, in addition to the rights and remedies available pursuant to Article VI hereof and under the other Loan Documents, (i) the Administrative Agent may exercise in respect of the L/C Account Collateral all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected L/C Account Collateral), and (ii) the Administrative Agent may, without notice to the Borrower, except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Obligations of the Borrower under the Loan Documents against any funds held with respect to the L/C Account Collateral or in any other deposit account.

 

ARTICLE III

CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT

 

SECTION 3.01. Conditions Precedent to Initial Extension of Credit . The obligation of each Lender to make an Advance or of any Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit:

 

(a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the items specified in clauses (i) and (ii) below) in sufficient copies for each Lender Party:

 

(i) A Note payable to the order of each Lender requesting the same.

 

(ii) Completed requests for information, dated on or before the date of the Initial Extension of Credit, listing all effective financing statements filed in the jurisdictions that the Administrative Agent may deem necessary or desirable that name any Loan Party as debtor, together with copies of such other financing statements, and evidence that all other actions that the Administrative Agent may deem reasonably necessary or desirable have been taken (including, without limitation, receipt of duly executed payoff letters and UCC termination statements).

 

(iii) As to each Unencumbered Asset:

 

(A) A current record owner and lien search performed by a title insurer acceptable to the Administrative Agent showing that the applicable Loan Party identified in Schedule II is the current record title holder of such Unencumbered Asset and showing no Liens on record other than Permitted Liens,

 

(B) An American Land Title Association/American Congress on Surveying and Mapping form survey for which all necessary fees have been paid, dated no more than 180 days before the date of their delivery to the Administrative Agent and reasonably acceptable to the Administrative Agent with respect to each Unencumbered Asset referred to in clause (A) above of this Section 3.01(a)(iii), showing a metes and bounds description of such property, all

 

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buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects reasonably acceptable to the Administrative Agent,

 

(C) engineering, soils, environmental and other similar reports, in form and substance and from professional firms reasonably acceptable to the Administrative Agent, and

 

(D) evidence of the insurance required by Section 5.01(d).

 

(iv) Certified copies of the resolutions of the Board of Directors, general partner or managing member, as applicable, of each Loan Party and of each general partner or managing member (if any) of each Loan Party approving the transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the transactions under the Loan Documents and each Loan Document to which it is or is to be a party.

 

(v) A copy of a certificate of the Secretary of State (or equivalent authority) of the jurisdiction of incorporation, organization or formation of each Loan Party and of each general partner or managing member (if any) of each Loan Party, dated reasonably near the Closing Date, certifying, if and to the extent such certification is generally available for entities of the type of such Loan Party, (A) as to a true and correct copy of the charter, certificate of limited partnership, limited liability company agreement or other organizational document of such Loan Party, general partner or managing member, as the case may be, and each amendment thereto on file in such Secretary’s office and (B) that (1) such amendments are the only amendments to the charter, certificate of limited partnership, limited liability company agreement or other organizational document, as applicable, of such Loan Party, general partner or managing member, as the case may be, on file in such Secretary’s office and (2) such Loan Party, general partner or managing member, as the case may be, has paid all franchise taxes to the date of such certificate and (C) such Loan Party, general partner or managing member, as the case may be, is duly incorporated, organized or formed and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation, organization or formation.

 

(vi) A copy of a certificate of the Secretary of State (or equivalent authority) of each jurisdiction in which any Loan Party or any general partner or managing member of a Loan Party owns or leases property or in which the conduct of its business requires it to qualify or be licensed as a foreign corporation except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect, dated reasonably near (but prior to) the Closing Date, stating, with respect to each such Loan Party, general partner or managing member, that such Loan Party, general partner or managing member, as the case may be, is duly qualified and in good standing as a foreign corporation, limited partnership or limited liability company in such State and has filed all annual reports required to be filed to the date of such certificate.

 

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(vii) A certificate of each Loan Party and of each general partner or managing member (if any) of each Loan Party, signed on behalf of such Loan Party, general partner or managing member, as applicable, by its President or a Vice President and its Secretary or any Assistant Secretary (or those of its general partner or managing member, if applicable), dated the Closing Date (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the constitutive documents of such Loan Party, general partner or managing member, as applicable, since the date of the certificate referred to in Section 3.01(a)(vi), (B) a true and correct copy of the bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, as applicable, as in effect on the date on which the resolutions referred to in Section 3.01(a)(v) were adopted and on the date of the Initial Extension of Credit, (C) the due incorporation, organization or formation and good standing or valid existence of such Loan Party, general partner or managing member, as applicable, as a corporation, limited liability company or partnership organized under the laws of the jurisdiction of its incorporation, organization or formation and the absence of any proceeding for the dissolution or liquidation of such Loan Party, general partner or managing member, as applicable, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default.

 

(viii) A certificate of the Secretary or an Assistant Secretary of each Loan Party (or Responsible Officer of the general partner or managing member of any Loan Party) and of each general partner or managing member (if any) of each Loan Party certifying the names and true signatures of the officers of such Loan Party, or of the general partner or managing member of such Loan Party, authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

 

(ix) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have reasonably requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements for the year ending December 31, 2003 of Digital Realty Predecessor, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties’ due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the Initial Extension of Credit).

 

(x) Evidence of insurance (which may consist of binders or certificates of insurance with respect to the blanket policies of insurance maintained by the Loan Parties with respect to property, commercial general liability and terrorism risks) with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties.

 

(xi) An opinion of Latham & Watkins LLP, counsel for the Loan Parties, in substantially the form of Exhibit E-1 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request.

 

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(xii) An opinion of Venable LLP, Maryland counsel for the Loan Parties, in substantially the form of Exhibit E-2 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request.

 

(xiii) An opinion of Shearman & Sterling LLP, counsel for the Administrative Agent, in form and substance satisfactory to the Administrative Agent.

 

(xiv) A Notice of Borrowing or Notice of Issuance, as applicable, and an Unencumbered Assets Certificate relating to the Initial Extension of Credit.

 

(b) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of each Loan Party and its Subsidiaries, including the terms and conditions of the charter and bylaws, operating agreement, partnership agreement or other governing document of each of them.

 

(c) The Lender Parties shall be satisfied that all Existing Debt, other than Surviving Debt, has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished and that all Surviving Debt shall be on terms and conditions satisfactory to the Lender Parties.

 

(d) (i) The Formation Transactions and the IPO shall have been, substantially concurrently herewith, consummated, (ii) the Parent Guarantor shall have received gross cash proceeds from the IPO in an amount not less than $235,000,000, and (iii) the common shares of the Parent Guarantor shall have been listed on the New York Stock Exchange.

 

(e) Before and after giving effect to the transactions contemplated by the Loan Documents, there shall have occurred no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of Digital Realty Predecessor since December 31, 2003.

 

(f) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 4.01(f) hereto (the “ Disclosed Litigation ”) or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, and there shall have been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto.

 

(g) All material governmental and third party consents and approvals necessary in connection with the transactions contemplated by the Loan Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lender Parties that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents.

 

(h) The Borrower shall have paid all accrued fees of the Administrative Agent and the Lender Parties and all reasonable, out-of-pocket expenses of the Administrative Agent (including the reasonable fees and expenses of counsel to the Administrative Agent, subject to the terms of the Fee Letter).

 

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SECTION 3.02. Conditions Precedent to Each Borrowing, Issuance and Renewal . The obligation of each Lender to make an Advance (other than a Letter of Credit Advance made by an Issuing Bank or a Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit, the extension of Commitments pursuant to Section 2.16 and the right of the Borrower to request a Swing Line Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing, issuance, renewal or extension the following statements shall be true and the Administrative Agent shall have received for the account of such Lender, the Swing Line Bank or such Issuing Bank (x) an Unencumbered Assets Certificate dated the date of such Borrowing, issuance or renewal and (y) a certificate signed by a duly authorized officer of the Borrower, dated the date of such Borrowing, issuance, renewal or extension, stating that:

 

(i) the representations and warranties contained in each Loan Document are true and correct on and as of such date, before and after giving effect to (A) such Borrowing, issuance, renewal or extension and (B) in the case of any Borrowing or issuance or renewal, the application of the proceeds therefrom, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date));

 

(ii) no Default or Event of Default has occurred and is continuing, or would result from (A) such Borrowing, issuance, renewal or extension or (B) in the case of any Borrowing or issuance or renewal, from the application of the proceeds therefrom; and

 

(iii) for each Revolving Credit Advance or Swing Line Advance made by the Swing Line Bank or issuance or renewal of any Letter of Credit, (A) 60% of the Total Unencumbered Asset Value equals or exceeds the Facility Exposure that will be outstanding after giving effect to such Advance, issuance or renewal, respectively, and (B) before and after giving effect to such Advance, issuance or renewal, the Parent Guarantor shall be in compliance with the covenants contained in Section 5.04, together with supporting information in form satisfactory to the Administrative Agent showing the computations used in determining compliance with such covenants;

 

and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Lender Party through the Administrative Agent may reasonably request in order to confirm (i) the accuracy of the Loan Parties’ representations and warranties contained in the Loan Documents, (ii) the Loan Parties’ timely compliance with the terms, covenants and agreements set forth in the Loan Documents, (iii) the absence of any Default and (iv) the rights and remedies of the Secured Parties or the ability of the Loan Parties to perform their Obligations.

 

SECTION 3.03. Determinations Under Section 3.01 . For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing, such Lender Party shall not have made available to the Administrative Agent such Lender Party’s ratable portion of such Borrowing.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

SECTION 4.01. Representations and Warranties of the Loan Parties . Each Loan Party represents and warrants as follows:

 

(a) Each Loan Party and each general partner or managing member, if any, of each Loan Party (i) is a corporation, limited liability company or partnership duly incorporated, organized or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, (ii) is duly qualified and in good standing as a foreign corporation, limited liability company or partnership in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate, limited liability company or partnership power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. Commencing with its taxable year ending December 31, 2004, the Parent Guarantor will be organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code. All of the outstanding Equity Interests in the Parent Guarantor have been validly issued, are fully paid and non-assessable, all of the general partner Equity Interests in the Borrower are owned by the Parent Guarantor, and all such general partner Equity Interests are owned by the Parent Guarantor free and clear of all Liens.

 

(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, organization or formation, the number of shares (or the equivalent thereof) of each class of its Equity Interests authorized, and the number outstanding, on the date hereof and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party and the number of shares (or the equivalent thereof) covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding Equity Interests in each Loan Party’s Subsidiaries have been validly issued, are fully paid and non-assessable and, to the extent owned by such Loan Party or one or more of its Subsidiaries, are owned by such Loan Party or Subsidiaries free and clear of all Liens.

 

(c) The execution and delivery by each Loan Party and of each general partner or managing member (if any) of each Loan Party of each Loan Document to which it is or is to be a party, and the performance of its obligations thereunder, and the consummation of the IPO, the Formation Transactions and the other transactions contemplated by the Loan Documents, are within the corporate, limited liability company or partnership powers of such Loan Party, general partner or managing member, have been duly authorized by all necessary corporate, limited liability company or partnership action, and do not (i) contravene the charter or bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any Material Contract binding on or affecting any Loan Party or any of

 

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its Subsidiaries or any of their properties, or any general partner or managing member of any Loan Party or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such Material Contract, the violation or breach of which would be reasonably likely to have a Material Adverse Effect.

 

(d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance by any Loan Party or any general partner or managing member of any Loan Party of any Loan Document to which it is or is to be a party or for the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents and the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents, except for authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect.

 

(e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party and general partner or managing member (if any) of each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party and general partner or managing member (if any) of each Loan Party party thereto, enforceable against such Loan Party, general partner or managing member, as the case may be, in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

 

(f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, including any Environmental Action, pending or, to any Loan Party’s knowledge, threatened before any court, governmental agency or arbitrator that (i) could reasonably be expected to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) could reasonably be expected to affect the legality, validity or enforceability of any Loan Document or the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents, and there has been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto.

 

(g) The Consolidated balance sheet of Digital Realty Predecessor as at December 31, 2003 and the related Consolidated statement of income and Consolidated statement of cash flows of Digital Realty Predecessor for the fiscal year then ended, accompanied by an unqualified opinion of KPMG LLP, independent public accountants, and the Consolidated balance sheet of Digital Realty Predecessor as at June 30, 2004, and the related Consolidated statement of income and Consolidated statement of cash flows of Digital Realty Predecessor for the six months then ended, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of such balance sheet as at June 30, 2004, and such statements of income and cash flows for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of Digital Realty Predecessor as at such dates and the Consolidated results of operations of Digital Realty Predecessor for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and since December 31, 2003, there has been (i) with respect to the period prior to the Closing Date, no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of Digital Realty Predecessor, and (ii) with respect to any period after the Closing Date, no Material Adverse Change.

 

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(h) The Consolidated forecasted balance sheets, statements of income and statements of cash flows of the Parent Guarantor and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(ix) or 5.03 were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Parent Guarantor’s best estimate of its future financial performance.

 

(i) Neither the Information Memorandum nor any other information, exhibit or report furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading.

 

(j) No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

 

(k) Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party, as applicable, is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended. Without limiting the generality of the foregoing, each Loan Party and each of its Subsidiaries and each general partner or managing member of any Loan Party, as applicable: (i) is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (ii) is not engaged in, does not propose to engage in and does not hold itself out as being engaged in the business of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (iii) does not own or propose to acquire investment securities (as defined in the Investment Company Act of 1940, as amended) having a value exceeding forty percent (40%) of the value of such company’s total assets (exclusive of government securities and cash items) on an unconsolidated basis; (iv) has not in the past been engaged in the business of issuing face-amount certificates of the installment type; and (v) does not have any outstanding face-amount certificates of the installment type. Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party or Subsidiary of a Loan Party that is a partnership or a limited liability company, as applicable, is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

 

(l) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter, corporate, partnership, membership or other governing restriction that would be reasonably likely to have a Material Adverse Effect (absent a material default under a Material Contract).

 

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(m) Each of the Assets listed on Schedule II hereto satisfies all Unencumbered Asset Conditions. The Loan Parties are the legal and beneficial owners of the Unencumbered Assets free and clear of any Lien, except for the Liens permitted under the Loan Documents.

 

(n) Set forth on Schedule 4.01(n) hereto is a complete and accurate list of all Existing Debt (other than Surviving Debt), showing as of the date hereof the obligor and the principal amount outstanding thereunder.

 

(o) Set forth on Schedule 4.01(o) hereto is a complete and accurate list of all Surviving Debt, showing as of the date hereof the obligor and the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefor.

 

(p) Set forth on Schedule 4.01(p) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or, with respect to Debt for Borrowed Money, any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto.

 

(q) Set forth on Schedule 4.01(q) hereto is a complete and accurate list of all material Real Property owned by any Loan Party or any of its Subsidiaries, showing as of the date hereof, and as of each other date such Schedule 4.01(q) is required to be supplemented pursuant to Section 5.03(i), the street address, county or other relevant jurisdiction, state, record owner and book value thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such Real Property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents.

 

(r) Set forth on Schedule 4.01(r) hereto is a complete and accurate list of all leases of material Real Property under which any Loan Party or any of its Subsidiaries is the lessee, showing as of the date hereof, and as of each other date such Schedule 4.01(r) is required to be supplemented pursuant to Section 5.03(i), the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms.

 

(s) (i) Except as otherwise set forth on Part I of Schedule 4.01(s) hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, there is no past non-compliance with such Environmental Laws and Environmental Permits that has resulted in any ongoing material costs or obligations or that is reasonably expected to result in any future material costs or obligations, and no circumstances exist that could be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law.

 

(ii) Except as otherwise set forth on Part II of Schedule 4.01(s) hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or above ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous

 

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Materials are being or have been treated, stored or disposed on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries that is reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries.

 

(iii) Except as otherwise set forth on Part III of Schedule 4.01(s) hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries.

 

(t) Each Loan Party and each Subsidiary is in compliance with the requirements of all Laws (including, without limitation, the Securities Act and the Securities Exchange Act, and the applicable rules and regulations thereunder, state securities law and “Blue Sky” laws) applicable to it and its business, where the failure to so comply could reasonably be expected to have a Material Adverse Effect.

 

(u) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect.

 

(v) Each Loan Party has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement (and in the case of the Guarantors, to give the guaranty under this Agreement) and each other Loan Document to which it is or is to be a party, and each Loan Party has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party.

 

(w) Each Loan Party is, individually and together with its Subsidiaries, Solvent.

 

(x) No Loan Party has made any extension of credit to any of its directors or executive officers in contravention of any applicable restrictions set forth in Section 402(a) of Sarbanes-Oxley.

 

(y) Set forth on Part A of Schedule 4.01(y) hereto is a complete and accurate list of all Excluded Subsidiaries and their respective Excluded Subsidiary Agreements existing on the date hereof.

 

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(z) (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan that has resulted in or is reasonably expected to result in a material liability of any Loan Party or any ERISA Affiliate.

 

(ii) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service, is complete and accurate in all material respects and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status.

 

(iii) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan, except as would not reasonably be expected to result in a Material Adverse Effect.

 

(iv) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA, in each case, except as would not reasonably be expected to result in a Material Adverse Effect.

 

ARTICLE V

COVENANTS OF THE LOAN PARTIES

 

SECTION 5.01. Affirmative Covenants . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each Loan Party will:

 

(a) Compliance with Laws, Etc . Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970; provided , however that the failure to comply with the provisions of this Section 5.01(a) shall not constitute a default hereunder so long as such non-compliance is the subject of a Good Faith Contest.

 

(b) Payment of Taxes, Etc . Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is the subject of a Good Faith Contest, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors.

 

(c) Compliance with Environmental Laws . Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits, except where such non-compliance could not reasonably expected to result in a Material Adverse Effect; obtain and renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in

 

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accordance with the requirements of all Environmental Laws; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is the subject of a Good Faith Contest.

 

(d) Maintenance of Insurance . Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Loan Party or such Subsidiaries operate.

 

(e) Preservation of Partnership or Corporate Existence, Etc . Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence (corporate or otherwise), legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises, except, in the case of Subsidiaries of the Borrower only, if in the reasonable business judgment of such Subsidiary it is in its best economic interest not to preserve and maintain such rights or franchises and such failure to preserve such rights or franchises is not reasonably likely to result in a Material Adverse Effect (it being understood that the foregoing shall not prohibit, or be violated as a result of, any transactions by or involving any Loan Party or Subsidiary thereof otherwise permitted under Section 5.02(d) or (e) below).

 

(f) Visitation Rights . At any reasonable time and from time to time, permit the Administrative Agent, or any agent or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, any Loan Party and any of its Subsidiaries, and to discuss the affairs, finances and accounts of any Loan Party and any of its Subsidiaries with any of their general partners, managing members, officers or directors.

 

(g) Keeping of Books . Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Loan Party and each such Subsidiary in accordance with GAAP.

 

(h) Maintenance of Properties, Etc . Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted and will from time to time make or cause to be made all appropriate repairs, renewals and replacement thereof except where failure to do so would not have a Material Adverse Effect.

 

(i) Transactions with Affiliates and Excluded Subsidiaries . Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates (other than transactions exclusively among or between the Loan Parties) or with any Excluded Subsidiary on terms that are fair and reasonable and no less favorable to such Loan Party or such Subsidiary than it would obtain at the time in a comparable arm’s-length transaction with a Person not an Affiliate.

 

(j) Covenant to Guarantee Obligations . Each applicable Loan Party shall, in each case at its expense:

 

(i) Within 15 days after any Excluded Subsidiary Agreement terminates or otherwise becomes ineffective as to the Excluded Subsidiary party to such agreement,

 

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cause such Excluded Subsidiary to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the Obligations of the other Loan Parties under the Loan Documents, unless such Excluded Subsidiary (or a related Excluded Subsidiary) shall incur Non-Recourse Debt permitted under Section 5.02(b)(ii)(G) within 60 days after the termination of such Excluded Subsidiary Agreement, and in such case the agreement in respect of such Non-Recourse Debt shall be deemed to be an Excluded Subsidiary Agreement and the Borrower shall, or cause such Excluded Subsidiary to, promptly deliver to the Administrative Agent (x) a copy of such agreement in respect of such Non-Recourse Debt and (y) an amended Schedule 4.01(y) that sets forth such agreement in respect of such Non-Recourse Debt opposite the name of such Excluded Subsidiary.

 

(ii) Within 15 days after the formation or acquisition of any new direct or indirect Subsidiary (other than a Foreign Subsidiary) by any Loan Party, cause each such Subsidiary (other than a Subsidiary (x) that is prohibited by the terms of any loan agreement or indenture or other agreement to which it or a related Excluded Subsidiary is a party (or a default under any such agreement would result therefrom) from providing guarantees of the Obligations of the Loan Parties under the Loan Documents, (y) that is being formed with the intent to incur Non-Recourse Debt permitted under Section 5.02(b)(ii)(G) in respect of Assets that are not Unencumbered Assets, or (z) that is inactive or holds de minimis assets (any Subsidiary described in clauses (x), (y) or (z) of this parenthetical, a “ Limited Subsidiary ”)), and cause each direct and indirect parent of such Subsidiary that is not a Limited Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ Obligations under the Loan Documents, provided that upon the formation or acquisition of any Limited Subsidiary, each such Limited Subsidiary shall be deemed to be an Excluded Subsidiary and each such loan agreement or indenture or other material agreement that restricts such Limited Subsidiary from providing guarantees of the Obligations of the Loan Parties under the Loan Documents shall be deemed to be an Excluded Subsidiary Agreement, and the Borrower shall, or cause such Limited Subsidiary to, promptly deliver to the Administrative Agent (1) copies of such agreements or indentures in respect of such Non-Recourse Debt and (2) an amended Schedule 4.01(y) that sets forth such agreements or indentures in respect of such Non-Recourse Debt opposite the name of such Limited Subsidiary.

 

(iii) Upon the request by the Borrower that any Asset (a “ Proposed Unencumbered Asset ”) be added as an Unencumbered Asset, in each case at the Borrower’s expense:

 

(A) within 10 days after such request, furnish to the Administrative Agent the following items:

 

(1) a description, in detail reasonably satisfactory to the Administrative Agent, of the Proposed Unencumbered Asset,

 

(2) a certificate of the Chief Financial Officer (or other Responsible Officer) of the Borrower confirming that (x) such Asset satisfies all Unencumbered Asset Conditions, and (y) the addition of such Proposed Unencumbered Asset as an Unencumbered Asset shall not cause or result in a Default or Event of Default,

 

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(3) confirmation that the Loan Parties are in compliance with the covenants contained in Section 5.04 (both immediately before and on a pro forma basis immediately after the addition of such Proposed Unencumbered Asset as an Unencumbered Asset), evidenced by a certificate of the Chief Financial Officer (or other Responsible Officer) of the Borrower delivered to the Administrative Agent prior to such addition demonstrating such compliance,

 

(4) each of the items set forth in Sections 3.01(a)(iii) and, if applicable, (x), mutatis mutandis , in each case in respect of such Proposed Unencumbered Asset, and

 

(5) a revised Schedule II hereto reflecting the addition of such Proposed Unencumbered Asset, provided that for purposes of the definition of the term Unencumbered Assets (and subject to the proviso immediately following below), such revised Schedule II shall become effective only upon satisfaction of each of the conditions set forth in this Section 5.01(j)(iii);

 

provided, however, that the failure to comply with one or more of the Unencumbered Asset Conditions or clause (4) above shall not preclude the addition of any Proposed Unencumbered Asset as an Unencumbered Asset so long as the Required Lenders shall have expressly consented to the addition of such Asset as an Unencumbered Asset notwithstanding the failure to satisfy either or both of such conditions; and

 

(B) as promptly as possible, furnish to the Administrative Agent such other approvals or documents as any Lender Party through the Administration Agent may reasonably request.

 

(k) Further Assurances . Promptly upon request by the Administrative Agent, or any Lender Party through the Administrative Agent, correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof.

 

(l) Performance of Material Contracts . Perform and observe in all material respects all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect, enforce in all material respects each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time reasonably requested by the Administrative Agent and, upon request of the Administrative Agent, make to each other party to each such Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract, and cause each of its Subsidiaries to do so.

 

(m) Compliance with Terms of Leaseholds . Make all payments and otherwise perform all obligations in respect of all leases of real property to which the Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, except, in the case

 

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of Subsidiaries of the Borrower only, if in the reasonably business judgment of such Subsidiary it is in its best economic interest not to maintain such lease or prevent such lapse, termination, forfeiture or cancellation and such failure to maintain such lease or prevent such lapse, termination, forfeiture or cancellation is not in respect of a Qualifying Ground Lease for an Unencumbered Asset and is not otherwise reasonably likely to result in a Material Adverse Effect, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so.

 

(n) Interest Rate Hedging . Enter into within 30 days after the Closing Date, and maintain at all times thereafter, interest rate Hedge Agreements (i) with Persons reasonably acceptable to the Administrative Agent, (ii) providing either an interest-rate swap for a fixed rate of interest reasonably acceptable to the Administrative Agent or an interest-rate cap at an interest rate reasonably acceptable to the Administrative Agent, (iii) covering a notional amount equal to the amount, if any, by which (A) 66  2 / 3 % of Consolidated Debt for Borrowed Money of the Parent and its Subsidiaries exceeds (B) all Consolidated Debt for Borrowed Money of the Parent and its Subsidiaries then accruing interest at a fixed rate acceptable to the Administrative Agent and (iv) otherwise on terms and conditions reasonably acceptable to the Administrative Agent.

 

(o) Maintenance of REIT Status . In the case of the Parent Guarantor, at all times, conduct its affairs and the affairs of its Subsidiaries in a manner so as to continue to qualify as a REIT and elect to be treated as a REIT under all applicable laws, rules and regulations.

 

(p) NYSE Listing . In the case of the Parent Guarantor, at all times cause its common shares to be duly listed on the New York Stock Exchange or other national stock exchange.

 

(q) Sarbanes-Oxley . Comply at all times with all applicable provisions of Section 402(a) of Sarbanes-Oxley.

 

(r) Certain Excluded Subsidiaries . After the Closing Date, (i) use best efforts to obtain such consents of lenders as may be required to permit those Subsidiaries presently designated as Excluded Subsidiaries solely on the basis of restrictive provisions in their charters to become Guarantors hereunder, and (ii) within 10 days after obtaining any such required consents, (x) cause the applicable Subsidiary to execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ Obligations under the Loan Documents, and (y) deliver or cause the applicable Subsidiary to deliver an amended Schedule 4.01(y) that no longer lists such Subsidiary as an Excluded Subsidiary.

 

SECTION 5.02. Negative Covenants . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, no Loan Party will, at any time:

 

(a) Liens, Etc . Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement (other than such financing statements filed solely as a precaution in respect of true leases entered in the ordinary course of business) that names such Loan Party or any of its Subsidiaries as debtor, or sign or

 

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suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except, in the case of the Loan Parties (other than the Parent Guarantor) and their respective Subsidiaries:

 

(i) Permitted Liens;

 

(ii) Liens described on Schedule 4.01(p) hereto;

 

(iii) purchase money Liens upon or in equipment acquired or held by such Loan Party or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such equipment or to secure Debt incurred solely for the purpose of financing the acquisition of any such equipment to be subject to such Liens, or Liens existing on any such equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (iii) shall not exceed the amount permitted under Section 5.02(b)(ii)(B) at any time outstanding;

 

(iv) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(ii)(C), provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases;

 

(v) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with any Loan Party or any Subsidiary of any Loan Party or becomes a Subsidiary of any Loan Party, provided that such Liens were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with such Loan Party or such Subsidiary or acquired by such Loan Party or such Subsidiary;

 

(vi) other Liens securing Non-Recourse Debt permitted under Section 5.02(b)(ii)(G);

 

(vii) the replacement, extension or renewal of any Lien permitted by clause (iii) or (v) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal of the Debt secured thereby; and

 

(viii) other Liens incurred in the ordinary course of business with respect to obligations in an amount not to exceed $1,000,000 in the aggregate at any time.

 

(b) Debt . Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except:

 

(i) in the case of any Loan Party or any Subsidiary of a Loan Party, Debt owed to any other Loan Party or any wholly-owned Subsidiary of any Loan Party (other than an Excluded Subsidiary), provided that, in each case, such Debt (y) shall be on terms acceptable to the Administrative Agent and (z) shall be evidenced by promissory notes in

 

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form and substance satisfactory to the Administrative Agent, which promissory notes shall (unless payable to the Borrower) by their terms be subordinated to the Obligations of the Loan Parties under the Loan Documents;

 

(ii) in the case of each Loan Party (other than the Parent Guarantor) and its Subsidiaries,

 

(A) Debt under the Loan Documents,

 

(B) Debt secured by Liens permitted by Section 5.02(a)(iii) not to exceed in the aggregate $5,000,000 at any time outstanding,

 

(C) (1) Capitalized Leases (other than with respect to Real Property) not to exceed in the aggregate $5,000,000 at any time outstanding, and (2) in the case of Capitalized Leases (other than with respect to Real Property) to which any Subsidiary of a Loan Party is a party, Debt of such Loan Party of the type described in clause (i) of the definition of “ Debt ” guaranteeing the Obligations of such Subsidiary under such Capitalized Leases,

 

(D) the Surviving Debt described on Schedule 4.01(o) hereto and any Refinancing Debt, extending, refunding or refinancing such Surviving Debt,

 

(E) Debt in respect of Hedge Agreements entered into by the Borrower and designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice,

 

(F) unsecured Debt incurred in the ordinary course of business for borrowed money, maturing within one year from the date created, and aggregating, on a Consolidated basis, not more than $5,000,000 at any one time outstanding,

 

(G) Non-Recourse Debt (including, without limitation, the JV Pro Rata Share of Non-Recourse Debt of any Joint Venture) in respect of Assets other than Unencumbered Assets, the incurrence of which would not result in a Default under Section 5.04 or any other provision of this Agreement, and

 

(H) Recourse Debt not secured by any Lien in an amount not to exceed in the aggregate the sum of (1) 5% of Total Asset Value, plus (2) the amount, if any, by which $200,000,000 exceeds the aggregate amount of the Revolving Credit Facility; provided, however , that if at any time the Parent Guarantor shall maintain a Debt Rating from S&P of at least BBB – or a Debt Rating from Moody’s of at least Baa3, then the limitation set forth above in this clause (H) shall not apply and Recourse Debt shall be permitted to the extent the incurrence of such Recourse Debt would not result in a Default or Event of Default by the Parent Guarantor in respect of its financial covenants in Section 5.04(a);

 

(iii) in the case of the Parent Guarantor or any of its Subsidiaries, Debt under Customary Carve-Out Agreements; and

 

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(iv) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business.

 

(c) Change in Nature of Business . Engage in, or permit any of its Subsidiaries to engage in, any material new line of business different from those lines of business conducted by the Borrower or any of its Subsidiaries on the Closing Date (after giving effect to the Formation Transactions, the IPO and the other transactions contemplated by the Loan Documents), including the ownership, acquisition, development, construction, rental and management of Real Property (including all Assets), and activities substantially related, necessary or incidental thereto

 

(d) Mergers, Etc . Merge or 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, any Person, or permit any of its Subsidiaries to do so; provided , however , that (i) any Subsidiary of a Loan Party may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of a Loan Party (provided that if one or more of such Subsidiaries is also a Loan Party, a Loan Party shall be the surviving entity) or any other Loan Party (provided that such Loan Party or, in the case of any Loan Party other than the Borrower, another Loan Party shall be the surviving entity), and (ii) any Loan Party may merge with any Person that is not a Loan Party so long as such Loan Party or another Loan Party is the surviving entity, provided , in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. Notwithstanding any other provision of this Agreement, (y) any Subsidiary of a Loan Party (other than the Borrower and any Subsidiary that is the direct owner of an Unencumbered Asset) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and the assets or proceeds from the liquidation or dissolution of such Subsidiary are transferred to the Borrower or any Subsidiary thereof, which Subsidiary shall be a Loan Party if the Subsidiary being liquidated or dissolved is a Loan Party, provided that no Default or Event of Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom, and (z) any Loan Party or Subsidiary of a Loan Party shall be permitted to effect any Transfer of Unencumbered Assets through the sale or transfer of the direct or indirect Equity Interests in the Subsidiary of such Loan Party that owns such Unencumbered Assets so long as Section 5.02(e) would otherwise permit the Transfer of all Unencumbered Assets owned by such Subsidiary at the time of such sale or transfer of such Equity Interests. Upon the sale or transfer of Equity Interests in any Subsidiary or Subsidiaries of a Loan Party permitted under clause (z) above, the Administrative Agent shall, upon the request of the Borrower, release such Subsidiary or Subsidiaries from the Guaranty.

 

(e) Sales, Etc. of Assets . (i) In the case of the Parent Guarantor, sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire any assets and (ii) in the case of the Loan Parties (other than the Parent Guarantor), sell, lease (other than enter into Tenancy Leases), transfer or otherwise dispose of, or grant any option or other right to purchase, lease (other than any option or other right to enter into Tenancy Leases) or otherwise acquire, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire (each action described in clause (ii) of this subsection (e) being a “ Transfer ”), any Unencumbered Asset or Unencumbered Assets (or any direct or indirect Equity Interests in the owner thereof) other than the following Transfers, which shall be permitted hereunder only so long as no Default or Event of Default shall exist or would result therefrom:

 

(A) the Transfer of any Unencumbered Asset or Unencumbered Assets from any Loan Party to another Loan Party or from a Subsidiary of a Loan Party to another Subsidiary of such Loan Party or any other Loan Party, and

 

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(B) the Transfer of any Unencumbered Asset or Unencumbered Assets to any Person, or the designation of an Unencumbered Asset or Unencumbered Assets as a non-Unencumbered Asset or non-Unencumbered Assets, in each case with the intention that such Unencumbered Asset or Unencumbered Assets, upon consummation of such Transfer or upon such designation, shall no longer constitute an Unencumbered Asset or Unencumbered Assets for purposes of this Agreement, provided , that (x) the remaining Unencumbered Assets continue to satisfy all Unencumbered Asset Conditions and (y) the Loan Parties shall be in compliance with the covenants contained in Section 5.04 both immediately before and on a pro forma basis immediately after giving effect to such Transfer, provided , further , that compliance with the foregoing proviso shall be evidenced by a certificate of the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Borrower delivered to the Administrative Agent prior to the date of such Transfer demonstrating such compliance, together with supporting information in detail reasonably satisfactory to the Administrative Agent.

 

If, at any time after the designation in accordance with the foregoing clause (B) of all Unencumbered Assets of any Property-Level Subsidiary as non-Unencumbered Assets, such Subsidiary shall incur any Debt not prohibited by Section 5.02(b) pursuant to an agreement that could qualify as an Excluded Subsidiary Agreement hereunder, (i) the Administrative Agent shall, upon the request of the Borrower, release such Subsidiary (and any other Subsidiary related thereto to the extent reasonably requested by the Borrower) from the Guaranty, (ii) such Subsidiary or Subsidiaries shall constitute Excluded Subsidiaries hereunder and such agreement shall constitute an Excluded Subsidiary Agreement hereunder, and (iii) the Borrower shall, or cause such Excluded Subsidiaries to, promptly deliver to the Administrative Agent (x) a copy of such Excluded Subsidiary Agreement in respect of such Debt and (y) an amended Schedule 4.01(y) that sets forth such Excluded Subsidiary Agreement opposite the name of such Excluded Subsidiaries.

 

(f) Investments in Other Persons . Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than:

 

(i) Investments by the Loan Parties and their Subsidiaries in their Subsidiaries outstanding on the date hereof and additional Investments in Subsidiaries and, in the case of the Loan Parties (other than the Parent Guarantor) and their Subsidiaries, Investments in Assets (including by asset or Equity Interest acquisitions), in each case subject, where applicable, to the limitations set forth in Section 5.02(f)(iv);

 

(ii) Investments in Cash Equivalents;

 

(iii) Investments consisting of intercompany Debt permitted under Section 5.02(b)(i);

 

(iv) Investments consisting of the following items so long as (y) the aggregate amount outstanding, without duplication, of all Investments described in this subsection does not exceed, at any time, 25% of Total Asset Value at such time, and (z) the aggregate amount of each of the following items of Investments does not exceed the specified percentage of Total Asset Value set forth below:

 

(A) Investments in land and Development Assets (including such assets that such Person has contracted to purchase for development with or without options to terminate the purchase agreement), so long as the aggregate amount of such Investments, calculated on the basis of the greater of actual cost or budgeted cost, does not at any time exceed 5.0% of Total Asset Value at such time; provided, however, that the limitation set forth in this clause (A) shall not apply to any Development Asset that is 90% pre-leased pursuant to duly executed Tenancy Leases and all completion and performance guarantees pertaining to such Development Asset are reasonably satisfactory to the Administrative Agent, and

 

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(B) Investments in Joint Ventures of any Loan Party so long as the aggregate amount of such Investments outstanding does not at any time exceed 25% of Total Asset Value of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, at such time;

 

(v) Investments by the Borrower in Hedge Agreements permitted under Section 5.02(b)(ii)(E);

 

(vi) To the extent permitted by applicable law, advances to officers, directors and employees of any Loan Party or any Subsidiary of any Loan Party in the ordinary course of business, for travel, entertainment, relocation and analogous ordinary business purposes;

 

(vii) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit extended in the ordinary course of business in an aggregate amount not to exceed $5,000,000; and

 

(viii) Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss.

 

(g) Restricted Payments . In the case of the Parent Guarantor, declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such; provided , however , that the Parent Guarantor may declare and pay dividends or make other distributions of common stock or cash only (i) so long as no Event of Default under Sections 6.01(a), (c) or (e) shall have occurred and be continuing, (y) in an aggregate amount not to exceed during any four consecutive fiscal quarters of the Parent Guarantor 95% of Funds From Operations for such four fiscal quarter period, or (z) as may otherwise be required to avoid the imposition of income or excise taxes on the Parent Guarantor, and (ii) so long as no Event of Default of the type described in Sections 6.01(a) or (e) shall have occurred and be continuing, as may be required to comply with Section 5.01(o).

 

(h) Amendments of Constitutive Documents . Amend, or permit any of its Subsidiaries to amend, in each case in any material respect, its limited liability company agreement, certificate

 

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of incorporation or bylaws or other constitutive documents, provided that any amendment to any such constitutive document that would be adverse to any of the Lender Parties shall be deemed “material” for purposes of this Section; and provided further that any amendment to any such constitutive document that would designate such Subsidiary as a “special purpose entity” or otherwise confirm such Subsidiary’s status as a “special purpose entity” shall be deemed “not material” for purposes of this Section.

 

(i) Accounting Changes . Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles, or (ii) Fiscal Year.

 

(j) Speculative Transactions . Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions.

 

(k) Payment Restrictions Affecting Subsidiaries . Directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the Borrower (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) any agreement or instrument evidencing Surviving Debt or Refinancing Debt, (iii) any agreement evidencing any Non-Recourse Debt permitted under this Agreement so long as any such limiting agreement or arrangement in such agreement may be triggered only by a default or event of default under the terms of such agreement or is on customary terms otherwise satisfactory to the Administrative Agent; (iv) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower and (v) any Excluded Subsidiary Agreement.

 

(l) Amendment, Etc. of Material Contracts . Cancel or terminate any Material Contract or consent to or accept any cancellation or termination thereof, amend or otherwise modify any Material Contract or give any consent, waiver or approval thereunder, waive any default under or breach of any Material Contract, agree in any manner to any other amendment, modification or change of any term or condition of any Material Contract or take any other action in connection with any Material Contract that would materially impair the value of the interest or rights of any Loan Party thereunder or that would impair or otherwise materially adversely affect the interest or rights of the Administrative Agent or any Lender Party, or permit any of its Subsidiaries to do any of the foregoing.

 

(m) Negative Pledge . Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets (including, without limitation, any Unencumbered Assets), except (i) pursuant to the Loan Documents, (ii) pursuant to any Excluded Subsidiary Agreement, or (iii) in connection with (A) any Surviving Debt and any Refinancing Debt extending, refunding or refinancing such Surviving Debt, (B) any purchase money Debt permitted by Section 5.02(b)(ii)(B) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt, (C) any Capitalized Lease permitted by Section 5.02(b)(ii)(C) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto, or (D) any Debt outstanding on the date any Subsidiary of the Borrower becomes such a Subsidiary (so long as such agreement was not entered into solely in contemplation of such Subsidiary becoming a Subsidiary of the Borrower).

 

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(n) Parent Guarantor as Holding Company . In the case of the Parent Guarantor, not enter into or conduct any business, or engage in any activity (including, without limitation, any action or transaction that is required or restricted with respect to the Borrower and its Subsidiaries under Sections 5.01 and 5.02 without regard to any of the enumerated exceptions to such covenants), other than (i) the holding of the Equity Interests of the Borrower; (ii) the performance of its duties as general partner of the Borrower; (iii) the performance of its Obligations (subject to the limitations set forth in the Loan Documents) under each Loan Document to which it is a party; (iv) the making of equity Investments in the Borrower and its Subsidiaries, provided each such Investment (A) shall be on terms acceptable to the Administrative Agent and (B) shall be evidenced by stock certificates, promissory notes or instruments in form and substance satisfactory to the Administrative Agent; (v) engaging in any activity necessary or desirable to continue to qualify as a REIT and (vi) activities incidental to each of the foregoing.

 

(o) Excluded Subsidiaries . Enter into or suffer to exist, or permit any Excluded Subsidiary to enter into or suffer to exist, any agreement prohibiting or conditioning (i) the guaranty by such Excluded Subsidiary of the Obligations of the Loan Parties under the Loan Documents or (ii) the creation or assumption of any Lien upon any of such Excluded Subsidiary’s property or assets, except (x) as would be permitted under Section 5.02(m) or 5.01(e), (y) pursuant to an Excluded Subsidiary Agreement in effect on the later of the Effective Date and the date on which such Excluded Subsidiary becomes a Subsidiary of such Loan Party or (z) in connection with the incurrence by such Excluded Subsidiary (or Subsidiary of the Borrower directly related Subsidiary thereto) of Debt permitted under Section 5.02(b)(ii)(G) or 5.02(b)(ii)(H).

 

SECTION 5.03. Reporting Requirements . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Administrative Agent for transmission to the Lender Parties in accordance with Section 9.02(b):

 

(a) Default Notice . As soon as possible and in any event within three days after a Responsible Officer obtains knowledge of the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect, in each case, if continuing on the date of such statement, a statement of the Chief Financial Officer (or other Responsible Officer) of the Parent Guarantor setting forth details of such Default or such event, development or occurrence and the action that the Parent Guarantor has taken and proposes to take with respect thereto.

 

(b) Annual Financials . As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Parent Guarantor and its Subsidiaries, including therein Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for such Fiscal Year (it being acknowledged that a copy of the annual audit report filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), in each case accompanied by an opinion reasonably acceptable to the Administrative Agent of KPMG LLP or other independent public accountants of recognized standing reasonably acceptable to the Administrative Agent, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Parent Guarantor and its

 

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Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default with respect to Section 5.04 has occurred and is continuing, or if, in the opinion of such accounting firm, a Default with respect to Section 5.04 has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent Guarantor shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto.

 

(c) Quarterly Financials . As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor as having been prepared in accordance with GAAP (it being acknowledged that a copy of the quarterly financials filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent Guarantor in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent Guarantor shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP, provided further, that items that would otherwise be required to be furnished pursuant to this Section 5.03(c) prior to the 45 th day after the Closing Date shall be furnished on or before the 45 th day after the Closing Date.

 

(d) Unencumbered Assets Certificate . As soon as available and in any event within 30 days after the end of each month, an Unencumbered Assets Certificate, as at the end of such month, certified by the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor.

 

(e) Unencumbered Assets Financials . As soon as available and in any event within 30 days after the end of each month, financial information in respect of all Unencumbered Assets, in form and detail satisfactory to the Administrative Agent.

 

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(f) Annual Budgets . As soon as available and in any event no later than 45 days after the end of each Fiscal Year, forecasts prepared by management of the Parent Guarantor, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on a monthly basis for the then current Fiscal Year and on an annual basis for each Fiscal Year thereafter until the Termination Date.

 

(g) Material Litigation . Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any material adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto.

 

(h) Securities Reports . Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to the holders of its Equity Interests, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange.

 

(i) Real Property . As soon as available and in any event within 30 days after the end of each Fiscal Year, a report supplementing Schedules 4.01(q) and 4.01(r) hereto, including an identification of all owned and leased real property disposed of by any Loan Party or any of its Subsidiaries during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all Real Property acquired or leased by any Loan Party or any of its Subsidiaries during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete.

 

(j) Assets Report . As soon as available and in any event within 45 days after the end of each quarter of each Fiscal Year, a report listing all Assets of the Parent Guarantor and its Subsidiaries as of the end of such quarter in form and substance reasonably satisfactory to the Administrative Agent.

 

(k) Environmental Conditions . Give notice in writing to the Administrative Agent (i) promptly upon obtaining knowledge of any material violation of any Environmental Law affecting any Asset or the operations thereof or the operations of any of its Subsidiaries, (ii) promptly upon obtaining knowledge of any known release, discharge or disposal of any Hazardous Materials at, from, or into any Asset which it reports in writing or is reportable by it in writing to any governmental authority and which is material in amount or nature or which could reasonably be expected to materially adversely affect the value of such Asset, (iii) promptly upon its receipt of any notice of material violation of any Environmental Laws or of any material release, discharge or disposal of Hazardous Materials in violation of any Environmental Laws or any matter that may result in an Environmental Action, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) such Loan Party’s or any other Person’s operation of any Asset, (B) contamination on, from or into any Asset, or (C) investigation or remediation of off-site locations at which such Loan Party or any of its predecessors are alleged to have directly

 

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or indirectly disposed of Hazardous Materials, or (iv) upon such Loan Party’s obtaining knowledge that any expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Materials with respect to which such Loan Party or any Joint Venture may be liable or for which a Lien may be imposed on any Asset, provided that any of the events described in clauses (i) through (iv) above would have a Material Adverse Effect or could reasonably be expected to result in an Environmental Action with respect to any Unencumbered Asset.

 

(l) Unencumbered Asset Conditions . Promptly after discovery of any condition or event which causes any of the Assets listed as Unencumbered Assets on Schedule II hereto to no longer comply with the requirements set forth in the definition of Unencumbered Asset Conditions, provide the Administrative Agent with notice thereof.

 

(m) Other Information . Promptly, such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as the Administrative Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request.

 

SECTION 5.04. Financial Covenants . So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have, at any time after the Initial Extension of Credit, any Commitment hereunder, the Parent Guarantor will:

 

(a) Parent Guarantor Financial Covenants .

 

(i) Maximum Total Leverage Ratio : Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance and the issuance or renewal of any Letter of Credit occurring during any of the periods indicated below (both before and after giving effect to such Advance), a Leverage Ratio not greater than the correlative ratio indicated:

 

Period


  

Leverage Ratio


9/30/04 through 6/30/06

   65.0%

7/1/06 and thereafter

   60%

 

(ii) Minimum Fixed Charge Coverage Ratio . Maintain (A) at the end of each fiscal quarter of the Parent Guarantor and (B) on the date of each Advance (both before and after giving effect to such Advance), a Fixed Charge Coverage Ratio of not less than 1.75:1.00.

 

(iii) Maximum Secured Debt Leverage Ratio : Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance and the issuance or renewal of any Letter of Credit occurring during any of the periods set forth below (both before and after giving effect to such Advance), a Secured Debt Leverage Ratio not greater than the correlative ratio indicated:

 

Period


  

Secured Debt Leverage Ratio


9/30/04 through 6/30/06

   55.0%

7/1/06 and thereafter

   45%

 

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(iv) Minimum Tangible Net Worth : Maintain at all times an excess of Total Asset Value minus Total Debt, in each case, of the Parent Guarantor and its Subsidiaries, of not less than the sum of $300,000,000 plus an amount equal to 75% of the proceeds of all primary issuances or primary sales of Equity Interests of the Parent Guarantor or the Borrower consummated following the Closing Date.

 

(b) Unencumbered Assets Financial Covenants .

 

(i) Unsecured Debt Exposure to Total Unencumbered Asset Value : Not permit at any time Unsecured Debt Exposure to be greater than 60% of the Total Unencumbered Asset Value at such time.

 

(ii) Minimum Unencumbered Assets Debt Service Coverage Ratio : Maintain (A) at the end of each fiscal quarter of the Parent Guarantor and (B) at the time of each Advance (both before and after giving effect to such Advance) an Unencumbered Assets Debt Service Coverage Ratio of not less than 2.00:1.00.

 

All calculations described above in Sections 5.04(a) and 5.04(b) which pertain to the fiscal quarters of the Parent Guarantor ending September 30, 2004 or December 31, 2004 shall be made on a pro forma basis after giving effect to the IPO and Formation Transactions. To the extent any calculations described in Sections 5.04(a) or 5.04(b) are required to be made on any date of determination other than the last day of a fiscal quarter of the Parent Guarantor, such calculations shall be made on a pro forma basis to account for any acquisitions or dispositions of Assets, and the incurrence or repayment of any Debt for Borrowed Money relating to such Assets, that have occurred since the last day of the fiscal quarter of the Parent Guarantor most recently ended. All such calculations shall be reasonably acceptable to the Administrative Agent.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.01. Events of Default . If any of the following events (“ Events of Default ”) shall occur and be continuing:

 

(a) (i) the Borrower shall fail to pay any principal of any Advance when the same shall become due and payable or (ii) the Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document when due and payable, in each case under this clause (ii) within three Business Days after the same becomes due and payable; or

 

(b) any representation or warranty made by any Loan Party (or any of its officers or the officers of its general partner or managing member, as applicable) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

 

(c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.14, 5.01(d), (e), (f), (i), (j), (n), (o), (p) or (q), 5.02, 5.03 or 5.04; or

 

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(d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender Party; or

 

(e) (i) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Material Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Debt, if (A) the effect of such event or condition is to permit the acceleration of the maturity of such Material Debt or otherwise permit the holders thereof to cause such Material Debt to mature, and (B) such event or condition shall remain unremedied or otherwise uncured for a period of 30 days; or (iii) the maturity of any such Material Debt shall be accelerated or any such Material Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Debt shall be required to be made, in each case prior to the stated maturity thereof; or

 

(f) any Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or

 

(g) any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $10,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided , however , that any such judgment or order shall not give rise to an Event of Default under this Section 6.01(g) if and so long as (A) the amount of such judgment or order which remains unsatisfied is covered by a valid and binding policy of insurance between the respective Loan Party and the insurer covering full payment of such unsatisfied amount and (B) such insurer, which shall be rated at least “A” by A.M. Best Company, has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or

 

(h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

 

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(i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or

 

(j) a Change of Control shall occur;

 

(k) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $10,000,000;

 

(l) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $2,000,000 per annum; or

 

(m) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $2,000,000;

 

then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, (B) by notice to each party required under the terms of any agreement in support of which a Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable and (C) by notice to each Issuing Bank, direct such Issuing Bank to deliver a Default Termination Notice to the beneficiary of each Letter of Credit issued by it, and each Issuing Bank shall deliver such Default Termination Notices; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under any Bankruptcy Law, (y) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (z) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

 

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SECTION 6.02. Actions in Respect of the Letters of Credit upon Default . If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or 2.17(e) or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent’s office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Administrative Agent or the Issuing Bank determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties with respect to the Obligations of the Loan Parties under the Loan Documents, or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent, as the case may be, determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable, to the extent permitted by applicable law.

 

ARTICLE VII

GUARANTY

 

SECTION 7.01. Guaranty; Limitation of Liability . (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of the Borrower and each other Loan Party now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the “ Guaranteed Obligations ”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or any other Secured Party in enforcing any rights under this Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Secured Party under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party. This Guaranty is a guaranty of payment and not merely of collection.

 

(b) Each Guarantor, the Administrative Agent and each other Lender Party and, by its acceptance of the benefits of this Guaranty, each other Secured Party, hereby confirms that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Guarantors, the Administrative Agent, the other Lender Parties and, by their acceptance of the benefits of this Guaranty, the other Secured Parties hereby irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.

 

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(c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Secured Party under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under or in respect of the Loan Documents.

 

SECTION 7.02. Guaranty Absolute . Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any other Secured Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of this Agreement or the other the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

 

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

 

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower, any other Loan Party or any of their Subsidiaries or otherwise;

 

(c) any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

 

(d) any manner of application of any assets of any Loan Party or any of its Subsidiaries, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any assets of any Loan Party or any of its Subsidiaries for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents;

 

(e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

 

(f) any failure of the Administrative Agent or any other Secured Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to the Administrative Agent or such other Secured Party (each Guarantor waiving any duty on the part of the Administrative Agent and each other Secured Party to disclose such information);

 

(g) the failure of any other Person to execute or deliver this Agreement, any other Loan Document, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

 

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(h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

 

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made.

 

SECTION 7.03. Waivers and Acknowledgments . (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice (except as expressly provided under the Loan Documents) with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person.

 

(b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

 

(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent or any other Secured Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

 

(d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Administrative Agent and the other Secured Parties against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law.

 

(e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any other Secured Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower, any other Loan Party or any of their Subsidiaries now or hereafter known by the Administrative Agent or such other Secured Party.

 

(f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by this Agreement and the other Loan Documents and that the waivers set forth in Section 7.02 and this Section 7.03 are knowingly made in contemplation of such benefits.

 

SECTION 7.04. Subrogation . Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty, this Agreement or any

 

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other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrower, any other Loan Party or any other insider guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit shall have expired or been terminated, all Guaranteed Hedge Agreements shall have expired or been terminated and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the Termination Date and (c) the latest date of expiration or termination of all Letters of Credit and all Guaranteed Hedge Agreements, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents. If (i) any Guarantor shall make payment to any Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Termination Date shall have occurred and (iv) all Letters of Credit and all Guaranteed Hedge Agreements shall have expired or been terminated, the Administrative Agent and the other Secured Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

 

SECTION 7.05. Guaranty Supplements . Upon the execution and delivery by any Person of a Guaranty Supplement, (i) such Person shall be referred to as an “ Additional Guarantor ” and shall become and be a Guarantor hereunder, and each reference in this Agreement to a “Guarantor” or a “Loan Party” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Agreement”, “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Agreement and this Guaranty, and each reference in any other Loan Document to the “Loan Agreement”, “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Agreement and this Guaranty, shall mean and be a reference to this Agreement and this Guaranty as supplemented by such Guaranty Supplement.

 

SECTION 7.06. Indemnification by Guarantors . (a) Without limitation on any other Obligations of any Guarantor or remedies of the Administrative Agent or the Secured Parties under this Agreement, this Guaranty or the other Loan Documents, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Administrative Agent, each other Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “ Indemnified Party ”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Loan Party enforceable against such Loan Party in accordance with their terms.

 

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(b) Each Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any of the Guarantors or any of their respective officers, directors, employees, agents and advisors, and each Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents.

 

SECTION 7.07. Subordination . (a) Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “ Subordinated Obligations ”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 7.07.

 

(b) Prohibited Payments, Etc . Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive payments in the ordinary course of business from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

 

(c) Prior Payment of Guaranteed Obligations . In any proceeding under any Bankruptcy Law relating to any other Loan Party, each Guarantor agrees that the Secured Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“ Post Petition Interest ”)) before such Guarantor receives payment of any Subordinated Obligations.

 

(d) Turn-Over . After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Secured Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

 

(e) Administrative Agent Authorization . After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

 

SECTION 7.08. Continuing Guaranty . This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the Termination Date and (iii) the

 

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latest date of expiration or termination of all Letters of Credit and all Guaranteed Hedge Agreements, (b) be binding upon the Guarantors, their successors and assigns and (c) inure to the benefit of and be enforceable by the Administrative Agent and the other Secured Parties and their successors, transferees and assigns.

 

ARTICLE VIII

THE ADMINISTRATIVE AGENT

 

SECTION 8.01. Authorization and Action . Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable) and as an Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action that exposes it to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Notwithstanding anything to the contrary in any Loan Document, no Person identified as a syndication agent, documentation agent, senior manager, joint lead arranger or joint book running manager, in such Person’s capacity as such, shall have any obligations or duties to any Loan Party, the Administrative Agent or any other Secured Party under any of such Loan Documents.

 

SECTION 8.02. Administrative Agent’s Reliance, Etc . Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (a) in the case of the Administrative Agent, may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex or other electronic communication) believed by it to be genuine and signed or sent by the proper party or parties.

 

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SECTION 8.03. CNAI and Affiliates . With respect to its Commitments, the Advances made by it and the Notes issued to it, CNAI shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not the Administrative Agent; and the term “Lender Party” or “Lender Parties” shall, unless otherwise expressly indicated, include CNAI in its individual capacity. CNAI and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any Subsidiary of any Loan Party and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if CNAI were not the Administrative Agent and without any duty to account therefor to the Lender Parties.

 

SECTION 8.04. Lender Party Credit Decision . Each Lender Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

 

SECTION 8.05. Indemnification by Lender Parties . (a) Each Lender Party severally agrees to indemnify the Administrative Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents (collectively, the “ Indemnified Costs ”); provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 8.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person.

 

(b) Each Lender Party severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse such Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower.

 

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(c) For purposes of this Section 8.05, the Lender Parties’ respective ratable shares of any amount shall be determined, at any time, according to their respective Revolving Credit Commitments at such time. The failure of any Lender Party to reimburse the Administrative Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or such Issuing Bank, as the case may be, for such other Lender Party’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

 

SECTION 8.06. Successor Administrative Agents . The Administrative Agent may resign at any time by giving 30 days’ prior written notice thereof to the Lender Parties and the Borrower and may be removed at any time with or without cause by the Required Lenders; provided, however, that any removal of the Administrative Agent will not be effective until it (or its Affiliate) has been replaced as an Issuing Bank and released from all obligations in respect thereof. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent, which appointment shall, provided that no Default has occurred and is continuing, be subject to the consent of the Borrower, such consent not to be unreasonably withheld or delayed. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent’s resignation or removal under this Section 8.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Agent’s resignation or removal shall become effective, (ii) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent’s resignation or removal hereunder as an Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement.

 

ARTICLE IX

MISCELLANEOUS

 

SECTION 9.01. Amendments, Etc . No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following at any time: (i) change the number of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (ii) release the Borrower with

 

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respect to the Obligations or reduce or limit the obligations of any Guarantor under Article VII or release such Guarantor or otherwise limit such Guarantor’s liability with respect to the Guaranteed Obligations (except as otherwise permitted under the Loan Documents), (iii) amend this Section 9.01, (iv) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (v) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (vi) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or (vii) extend the Termination Date, other than as provided by Section 2.16; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or each Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Banks, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or the other Loan Documents.

 

SECTION 9.02. Notices, Etc . (a) All notices and other communications provided for hereunder shall be either (x) in writing (including telecopier or telegraphic communication) and mailed, telecopied, telegraphed or delivered, (y) as and to the extent set forth in Section 9.02(b) and in the proviso to this Section 9.02(a), in an electronic medium and delivered as set forth in Section 9.02(b) or (z) as and to the extent expressly permitted in this Agreement, transmitted by e-mail, provided that such e-mail shall in all cases include an attachment (in PDF format or similar format) containing a legible signature of the person providing such notice, if to the Borrower, at its address at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025, Attention: Jason Holloway (and in the case of transmission by e-mail, with a copy by e-mail to jason@gipartners.com) and a courtesy copy by U.S. mail to the attention of Jennifer Saunders at Latham & Watkins LLP, 633 West Fifth Street, Suite 4000, Los Angeles, CA 90071; if to any Initial Lender, at its Domestic Lending Office or, if applicable, at the e-mail address specified opposite its name on Schedule I hereto (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to any other Lender Party, at its Domestic Lending Office or, if applicable, at the e-mail address specified in the Assignment and Acceptance pursuant to which it became a Lender Party (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to the Initial Issuing Bank, at its addresses at Two Penns Way, New Castle, Delaware 19720, Attention: Anitra Lawrence, Bank Loan Syndications Department, and 390 Greenwich Street, New York, NY 10013, Attention: Blake Gronich, Bank Loan Syndications Department, or, if applicable, by e-mail to anitra.j.lawrence@citigroup.com and blake.r.gronich@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to each of the aforementioned addresses); and if to the Administrative Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Anitra Lawrence, Bank Loan Syndications Department, or, if applicable, by e-mail to anitra.j.lawrence@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to the aforementioned address) or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or e-mailed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by e-mail, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VIII shall not be effective until received by the Administrative Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

 

(b) So long as CNAI is the Administrative Agent, materials required to be delivered pursuant to Section 5.03(a), (b), (c) and (g) shall be delivered to the Administrative Agent in an electronic medium in a format acceptable to the Administrative Agent and the Lender Parties by e-mail at

 

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oploanswebadmin@citigroup.com. The Borrower agrees that the Administrative Agent may make such materials, as well as any other written information, documents, instruments and other material relating to the Borrower, any Loan Party, any of their Subsidiaries or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “ Communications ”) available to the Lender Parties by posting such notices on Intralinks or a substantially similar electronic transmission system (the “ Platform ”). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.

 

(c) Each Lender Party agrees that notice to it (as provided in the next sentence) (a “ Notice ”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender Party for purposes of this Agreement, provided that if requested by any Lender Party, the Administrative Agent shall deliver a copy of the Communications to such Lender Party by e-mail or telecopier. Each Lender Party agrees (i) to notify the Administrative Agent in writing of such Lender Party’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender Party becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender Party) and (ii) that any Notice may be sent to such e-mail address.

 

SECTION 9.03. No Waiver; Remedies . No failure on the part of any Lender Party or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

SECTION 9.04. Costs and Expenses . (a) Each Loan Party agrees jointly and severally to pay on demand (i) all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses, (B) the reasonable fees and expenses of counsel for such Agent with respect thereto (subject to the terms of the Fee Letter with respect to counsel fees incurred by the Administrative Agent through the Closing Date) with respect to advising such Agent as to its rights and responsibilities (including, without limitation, with respect to reviewing and advising on any matters required to be completed by the Loan Parties on a post-closing basis), or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto and (C) the reasonable fees and expenses of counsel for such Agent with respect to the preparation, execution, delivery and review of any documents and instruments at any time delivered pursuant to Section 5.01(j)) and (ii) all reasonable out-of-pocket costs and expenses of the Administrative Agent and each Lender Party in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, whether in any

 

80


action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for such Agent and each Lender Party with respect thereto).

 

(b) Each Loan Party agrees to indemnify, defend and save and hold harmless each Indemnified Party from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are consummated. Each Loan Party also agrees not to assert any claim against the Administrative Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents.

 

(c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance.

 

(d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion.

 

(e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower and the other Loan Parties contained in Sections 2.10 and 2.12, Section 7.06 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents.

 

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SECTION 9.05. Right of Set-off . Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, the Administrative Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations of the Borrower or such Loan Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. The Administrative Agent and each Lender Party agrees promptly to notify the Borrower or such Loan Party after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender Party and their respective Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have.

 

SECTION 9.06. Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower, each Guarantor named on the signature pages hereto and the Administrative Agent shall have been notified by each Initial Lender and each Initial Issuing Bank that such Initial Lender or such Initial Issuing Bank, as the case may be, has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Guarantors named on the signature pages hereto and the Administrative Agent and each Lender Party and their respective successors and assigns, except that neither the Borrower nor any other Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties.

 

SECTION 9.07. Assignments and Participations; Replacement Notes . (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more of the Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or a Fund Affiliate of any Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 under each Facility or an integral multiple of $1,000,000 in excess thereof (or such lesser amount as shall be approved by the Administrative Agent and, so long as no Default shall have occurred and be continuing at the time of effectiveness of such assignment, the Borrower), (iii) each such assignment shall be to an Eligible Assignee, (iv) no such assignments shall be permitted (A) until the Administrative Agent shall have notified the Lender Parties that syndication of the Commitments hereunder has been completed, without the consent of the Administrative Agent, and (B) at any other time without the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except if such assignment is being made by a Lender to an Affiliate or Fund Affiliate of such Lender, a processing and recordation fee of $3,500.

 

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and,

 

82


to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.12, 7.06, 8.05 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender’s or Issuing Bank’s rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto).

 

(c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be.

 

(d) The Administrative Agent on behalf of Borrower shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the “ Register ”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or the Administrative Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice.

 

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the

 

83


Borrower, at its own expense, shall, if requested by the applicable Lender, execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes, if any, shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto.

 

(f) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank’s rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500, provided that such fee shall not be payable if the assigning Issuing Bank is making such assignment simultaneously with the assignment in its capacity as a Lender of all or a portion of its Revolving Credit Commitment to the same Eligible Assignee.

 

(g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); provided, however, that (i) such Lender Party’s obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, and (vi) if, at the time of such sale, such Lender Party was entitled to payments under Section 2.12(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to such participant on such date, provided that such participant complies with the requirements of Section 2.12(e) as if it were a Lender.

 

(h) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party.

 

84


(i) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

 

(j) Upon notice to the Borrower from the Administrative Agent or any Lender of the loss, theft, destruction or mutilation of any Lender’s Note, the Borrower will execute and deliver, in lieu of such original Note, a replacement promissory note, identical in form and substance to, and dated as of the same date as, the Note so lost, stolen or mutilated, subject to delivery by such Lender to the Borrower of an affidavit of lost note and indemnity in customary form. Upon the execution and delivery of the replacement Note, all references herein or in any of the other Loan Documents to the lost, stolen or mutilated Note shall be deemed references to the replacement Note.

 

SECTION 9.08. Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

 

SECTION 9.09. No Liability of the Issuing Banks . The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank’s willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

SECTION 9.10. Confidentiality . Neither the Administrative Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Administrative Agent’s or such Lender Party’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, Federal or foreign authority or examiner regulating such Lender Party and (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party.

 

85


SECTION 9.11. Patriot Act Notification . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Parent Guarantor and the Borrower shall, and shall cause each of their Subsidiaries to, provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act.

 

SECTION 9.12. Jurisdiction, Etc . (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

 

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

SECTION 9.13. Governing Law . This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

 

SECTION 9.14. WAIVER OF JURY TRIAL . EACH OF THE BORROWER, THE OTHER LOAN PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

 

[Balance of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

BORROWER:
   

DIGITAL REALTY TRUST, L.P.

   

By:

 

DIGITAL REALTY TRUST, INC., its sole general partner

       

By

 

/s/ A. William Stein


       

Name:

 

A. William Stein

       

Title:

 

Chief Financial Officer

           

and Chief Investment Officer

GUARANTORS:
   

DIGITAL REALTY TRUST, INC.

       

By

 

/s/ A. William Stein


       

Name:

 

A. William Stein

       

Title:

 

Chief Financial Officer

           

and Chief Investment Officer

   

DIGITAL SERVICES, INC.

       

By

 

/s/ A. William Stein


       

Name:

 

A. William Stein

       

Title:

 

Authorized Signatory

 

Signature Page


GLOBAL ASML, LLC

By:

 

DIGITAL REALTY TRUST, L.P.,

   

its member and manager

   

By:

 

DIGITAL REALTY TRUST, INC., its

       

Sole general partner

By

 

/s/ A. William Stein


Name:

 

A. William Stein

Title:

 

Chief Financial Officer

   

and Chief Investment Officer

 

Signature Page


GLOBAL LAFAYETTE STREET

HOLDING COMPANY, LLC

By:

 

DIGITAL REALTY TRUST, L.P.,

   

its member and manager

   

By:

 

DIGITAL REALTY TRUST, INC., its

       

Sole general partner

By

 

/s/ A. William Stein


Name:

 

A. William Stein

Title:

 

Chief Financial Officer

   

and Chief Investment Officer

 

Signature Page


GLOBAL LAFAYETTE STREET, LLC

By:

 

DIGITAL REALTY TRUST, L.P.,

   

its member and manager

   

By:

 

DIGITAL REALTY TRUST, INC., its

       

Sole general partner

By

 

/s/ A. William Stein


Name:

 

A. William Stein

Title:

 

Chief Financial Officer

   

and Chief Investment Officer

 

Signature Page


GIP FAIRMONT HOLDING COMPANY, LLC

By:

 

DIGITAL REALTY TRUST, L.P.,

   

its member and manager

   

By:

 

DIGITAL REALTY TRUST, INC., its

       

Sole general partner

By

 

/s/ A. William Stein


Name:

 

A. William Stein

Title:

 

Chief Financial Officer

   

and Chief Investment Officer

 

Signature Page


GIP FAIRMONT, LLC

By:

 

DIGITAL REALTY TRUST, L.P.,

   

its member and manager

   

By:

 

DIGITAL REALTY TRUST, INC., its

       

Sole general partner

By

 

/s/ A. William Stein


Name:

 

A. William Stein

Title:

 

Chief Financial Officer

   

and Chief Investment Officer

 

Signature Page


 

GLOBAL INNOVATIONS SUNSHINE HOLDINGS LLC

By:

  DIGITAL REALTY TRUST, L.P.,
    its member and manager
   

By:

  DIGITAL REALTY TRUST, INC., its
        Sole general partner

By

 

/s/ A. William Stein


Name:

  A. William Stein

Title:

  Chief Financial Officer
    and Chief Investment Officer

 

Signature Page


 

                                                               ADMINISTRATIVE AGENT, SWING LINE BANK AND
INITIAL LENDER:

 

CITICORP NORTH AMERICA, INC.

By

 

/s/ David Boutin


Name:

  David Boutin

Title:

  Vice President

 

 

            INITIAL ISSUING BANK:

 

CITIBANK, N.A.

By

 

/s/ David Boutin


Name:

  David Boutin

Title:

  Vice President

 

Signature Page


INITIAL LENDERS:

MERRILL LYNCH CAPITAL CORPORATION

By

 

/s/ Stephen B. Pacas


Name:

 

Stephen B. Pacas

Title:

 

Vice President

 

Signature Page


BANK OF AMERICA, N.A.

By

 

/s/ Allison M. Gauthier


Name:

 

Allison M. Gauthier

Title:

 

Senior Vice President

 

Signature Page


KEYBANK NATIONAL ASSOCIATION

By

 

/s/ Jane E. McGrath


Name:

 

Jane E. McGrath

Title:

 

Vice President

 

Signature Page


ROYAL BANK OF CANADA

By

 

/s/ Gordon MacArthur


Name:

  Gordon MacArthur

Title:

  Authorized Signatory

 

Signature Page


CREDIT SUISSE FIRST BOSTON, ACTING

THROUGH ITS CAYMAN ISLANDS BRANCH

By

 

/s/ Bill O’Daly


Name:

 

Bill O’Daly

Title:

 

Director

By

 

/s/ Cassandra Droogan


Name:

 

Cassandra Droogan

Title:

 

Associate

 

Signature Page


UBS SECURITIES LLC

By

 

/s/ Wilfred V. Saint


Name:

 

Wilfred V. Saint

Title:

 

Director, Banking Products Service, US

By

 

/s/ Doris Mesa


Name:

 

Doris Mesa

Title:

 

Associate Director,

   

Banking Products Services, US

 

Signature Page

Exhibit 10.38

 

EXECUTION COPY

 

LOAN AGREEMENT

 

Dated as of November 3, 2004

 

by and among

 

GLOBAL WEBB, L.P.

 

as Borrower,

 

and

 

CITIGROUP GLOBAL MARKETS REALTY CORP.


EXECUTION COPY

 

Table of Contents

 

               Page

ARTICLE I. CERTAIN DEFINITIONS    1
     Section 1.1.    Definitions    1
ARTICLE II. GENERAL TERMS    28
     Section 2.1.    The Loan.    28
     Section 2.2.    Use of Proceeds    28
     Section 2.3.    Security for the Loan    29
     Section 2.4.    Borrower’s Note    29
     Section 2.5.    Principal and Interest.    29
     Section 2.6.    Prepayment.    30
     Section 2.7.    Defeasance.    34
     Section 2.8.    Application of Payments During Event of Default    38
     Section 2.9.    Method and Place of Payment    39
     Section 2.10.    Taxes.    39
     Section 2.11.    Cross-Collateralization; Contribution; Release of Cross-Collateralization.    40
     Section 2.12.    Central Cash Management.    45
     Section 2.13.    Reserve Accounts.    49
     Section 2.14.    Additional Provisions Relating to the Pledged Accounts.    54
     Section 2.15.    Security Agreement.    55
     Section 2.16.    Mortgage Recording Taxes    57
ARTICLE III. CONDITIONS PRECEDENT    57
     Section 3.1.    Conditions Precedent to Closing    57
     Section 3.2.    Execution and Delivery of Agreement    62
ARTICLE IV. REPRESENTATIONS AND WARRANTIES    62
     Section 4.1.    Representations and Warranties as to Borrower    62
     Section 4.2.    Representations and Warranties as to the Mortgaged Property    66
     Section 4.3.    Survival of Representations    70
ARTICLE V. AFFIRMATIVE COVENANTS    70
     Section 5.1.    Affirmative Covenants    70
ARTICLE VI. NEGATIVE COVENANTS    101
     Section 6.1.    Negative Covenants    101
     Section 6.2.    Transfer of Ownership Interests    103
ARTICLE VII. EVENT OF DEFAULT    105
     Section 7.1.    Event of Default    105
     Section 7.2.    Remedies.    106
     Section 7.3.    Remedies Cumulative    107

 

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               Page

     Section 7.4.    Intentionally Omitted.    108
     Section 7.5.    Curative Advances    108
ARTICLE VIII. SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND
COVENANTS
   108
     Section 8.1.    Applicable to Borrower and any SPC Party    108
ARTICLE IX. MISCELLANEOUS    116
     Section 9.1.    Survival    116
     Section 9.2.    Lender’s Discretion    117
     Section 9.3.    Governing Law.    117
     Section 9.4.    Modification, Waiver in Writing    118
     Section 9.5.    Delay Not a Waiver    118
     Section 9.6.    Notices    118
     Section 9.7.    TRIAL BY JURY    118
     Section 9.8.    Headings    119
     Section 9.9.    Assignment.    119
     Section 9.10.    Severability    120
     Section 9.11.    Preferences    120
     Section 9.12.    Waiver of Notice    120
     Section 9.13.    Failure to Consent    120
     Section 9.14.    Schedules Incorporated    120
     Section 9.15.    Offsets, Counterclaims and Defenses    120
     Section 9.16.    No Joint Venture or Partnership    121
     Section 9.17.    Waiver of Marshalling of Assets Defense    121
     Section 9.18.    Waiver of Counterclaim    121
     Section 9.19.    Conflict; Construction of Documents    121
     Section 9.20.    Brokers and Financial Advisors    121
     Section 9.21.    Counterparts    121
     Section 9.22.    Estoppel Certificates    122
     Section 9.23.    Payment of Expenses    122
     Section 9.24.    Non-Recourse    122

 

SCHEDULES
1    –     Immediate Repairs Reserved for in Deferred Maintenance Escrow Account
2    –     Organizational Chart
3    –     Crossed Borrowers and Crossed Loans
4    –     Exceptions to Representations and Warranties
5    –     Addresses for Notices
6    –     Work Reserve Funding Conditions
7    –     DSCR Calculations
8.1(a)    –     Certificate of Executive Officer
8.1(b)    –     List of Prior Loan Documents

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT, made as of November 3, 2004, is by and among GLOBAL WEBB, L.P., a Texas limited partnership, having an address at c/o Digital Realty Trust, L.P., 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (“ Borrower ”), and CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an address at 388 Greenwich Street, 11th Floor, New York, New York 10013 (together with its successors and assigns, whether one or more, “ Lender ”).

 

RECITALS

 

WHEREAS, Borrower desires to obtain from Lender the Loan in an amount equal to the Loan Amount (each as hereinafter defined) to, with respect to the Mortgaged Property (as hereinafter defined), finance a portion of the acquisition cost thereof, and/or refinance existing debt at such Mortgaged Property and to pay certain other fees and expenses;

 

WHEREAS, Lender is unwilling to make the Loan unless Borrower executes and delivers this Agreement, the Note and the Loan Documents (each as hereinafter defined) to which it is a party which shall establish the terms and conditions of, and provide security for, the Loan; and

 

WHEREAS, Borrower has agreed to establish certain accounts and to grant to Lender a security interest therein upon the terms and conditions of the security agreement set forth in Section 2.15.

 

NOW, THEREFORE, in consideration of the making of the Loan by Lender and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereby covenant, agree, represent and warrant as follows:

 

ARTICLE I.

CERTAIN DEFINITIONS

 

Section 1.1. Definitions . For all purposes of this Agreement: (1) the capitalized terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; (2) all accounting terms have the meanings assigned to them in accordance with GAAP (as hereinafter defined) unless otherwise explicitly set forth herein; (3) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision; (4) the words “include,” “includes” or “including” shall be deemed to be followed by the phrase “without limitation,” if not already so drafted; and (5) the following terms have the following meanings:

 

Account Collateral ” has the meaning set forth in Section 2.15(a) hereof.

 

Accounts ” means all accounts (as defined in the relevant UCC), now owned or hereafter acquired by Borrower, and arising out of or in connection with, the operation of the


Mortgaged Property and all other accounts described in the Management Agreement and all present and future accounts receivable, inventory accounts, chattel paper, notes, insurance policies, Instruments, Documents or other rights to payment and all forms of obligations owing at any time to Borrower thereunder, whether now existing or hereafter created or otherwise acquired by or on behalf of Borrower, and all Proceeds thereof and all liens, security interests, guaranties, remedies, privileges and other rights pertaining thereto, and all rights and remedies of any kind forming the subject matter of any of the foregoing.

 

Affiliate ” of any specified Person means any other Person (i) controlling or controlled by or under common control with such specified Person; (ii) directly or indirectly owning or holding twenty percent (20%) or more of any equity interest in the first Person; or (iii) twenty percent (20%) or more of whose equity interests are directly or indirectly owned or held by the first Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Agreement ” means this Loan Agreement, together with the Schedules and Exhibits hereto, as the same may from time to time hereafter be modified, supplemented or amended.

 

Aggregate Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Allocated Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Applicable Crossed Loan Partial Defeasance Amount ” means, with respect to a Crossed Loan Total Defeasance, the portion of the “Aggregate Amount”, as defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance, which is equal to the “Allocated Amount” for the Loan (as a “Crossed Loan” as defined in such Crossed Loan Agreement), as such “Allocated Amount” is defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance.

 

Appraisal ” means each appraisal with respect to the Mortgaged Property prepared by an Appraiser in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches.

 

Appraiser ” means a nationally recognized MAI appraiser selected by Borrower and reasonably approved by Lender.

 

Approved Capital Expenditures ” has the meaning set forth in Section 2.13(a)(iii) hereof.

 

Approved Leasing Costs ” has the meaning set forth in Section 2.13(a)(iv) hereof.

 

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Assignment of Rents and Leases ” means the Assignment of Rents and Leases, dated as of the Closing Date, granted by the Borrower to Lender with respect to the Leases, as same may thereafter from time to time be supplemented, amended, modified or extended.

 

Basic Carrying Costs ” means the following costs with respect to the Mortgaged Property: (i) Impositions and (ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents.

 

Borrower ” has the meaning provided in the first paragraph of this Agreement.

 

Borrower Single Member ” has the meaning set forth in Section 8.1(ff)(A) .

 

Borrower’s Organizational Documents ” shall mean: (i) Borrower’s limited partnership agreement, if Borrower is a limited partnership, and (ii) Borrower’s limited liability company operating agreement, if Borrower is a limited liability company.

 

Business Day ” means any day other than a Saturday, a Sunday or a day on which commercial banks in the State of New York or the State of Illinois are authorized or obligated by law, governmental decree or executive order to be closed.

 

Capital Improvement Costs ” means costs incurred or to be incurred in connection with replacements and capital repairs made to the Mortgaged Property which would be capitalized in accordance with GAAP (including without limitation, TI Costs and Leasing Commissions).

 

CEC ” means American Intercontinental University, Inc., a Georgia corporation.

 

CEC Lease ” means that certain lease dated as of May 6, 2004 by and between Borrower, as landlord, and CEC, as tenant.

 

CEC Phase 2 Space ” means the approximately 10,000 rentable square feet of space described in the CEC Lease as the “Phase 2 Premises” and which constitutes a portion of the premises that are currently leased to CEC pursuant to the CEC Lease.

 

CEC Phase 3 Space ” means the approximately 10,000 rentable square feet of space described in the CEC Lease as the “Phase 3 Premises” and which constitutes a portion of the premises that are currently leased to CEC pursuant to the CEC Lease.

 

CEC Prepaid Rent Reserve Account ” has the meaning set forth in Section 2.13(a)(i) .

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended, and as it may be further amended from time to time and any successor statutes thereto.

 

Chattel Paper ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “chattel paper” as defined in the UCC (whether tangible chattel paper or electronic chattel paper).

 

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Closing Date ” means the date of the funding of the Loan.

 

Code ” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

Collateral ” means, collectively, the Land, Improvements, Leases, Rents, Personalty, and all Proceeds, and (to the full extent assignable) Permits, which is or hereafter may become subject to a Lien in favor Lender as security for the Loan (whether pursuant to the Mortgage, any other Loan Document or otherwise), all whether now owned or hereafter acquired and all other property which is or hereafter may become subject to a Lien in favor Lender as security for the Loan and including all property of any kind described as part of the Mortgaged Property under the Mortgage.

 

Collateral Security Instrument ” means any right, document or instrument, other than the Mortgage, given as security for the Loan, including, without limitation, and the Contract Assignment.

 

Collection Account ” has the meaning set forth in Section 2.12(a)(i) hereof.

 

Collection Account Agreement ” means the Collection Account Agreement, dated as of the applicable date and executed by Borrower, Lender and the Collection Account Bank, relating to the Collection Account and the Reserve Accounts and any other accounts maintained with the Collection Account Bank.

 

Collection Account Bank ” means LaSalle Bank, National Association, or any successor financial institution appointed by Lender.

 

Condemnation Proceeds ” means, in the event of a Taking with respect to the Mortgaged Property, the proceeds in respect of such Taking less any reasonable third party out-of-pocket expenses incurred in prosecuting the claim for and otherwise collecting such proceeds.

 

Consumer Price Index ” means the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, in the area where the Mortgaged Property is located; All Items (1982-84 = 100), or any successor index thereto, appropriately adjusted and if the Consumer Price Index ceases to be published and there is no successor thereto, such other index as Agent and Borrower shall mutually agree upon.

 

Contest ” has the meaning set forth in Section 9.24(E)(11) hereof.

 

Contingent Obligation ” means, as used in the definition of Other Borrowings, without duplication, any obligation of Borrower guaranteeing any indebtedness, leases, dividends or other obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly. Without limiting the generality of the foregoing, the term “ Contingent Obligation ” shall include any obligation of Borrower:

 

(i) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

 

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(ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor;

 

(iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or

 

(iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof.

 

The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming Borrower is required to perform thereunder).

 

Contract Assignment ” means, with respect to the Mortgaged Property, the Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the Closing Date and executed by the Borrower in favor of Lender.

 

Contracts ” means the Management Agreement and all other agreements to which Borrower is a party or which are assigned to Borrower by the Manager in the Management Agreement and which are executed in connection with the construction, operation and management of the Mortgaged Property (including, without limitation, agreements for the sale, lease or exchange of goods or other property and/or the performance of services by it, in each case whether now in existence or hereafter arising or acquired), as any such agreements have been or may be from time to time amended, supplemented or otherwise modified.

 

Crossed Borrowers ” shall mean the mortgage loan borrowers (other than Borrower) listed on Schedule 3 attached hereto and made a part hereof, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Indebtedness ” shall mean the Crossed Loans and all other “Indebtedness” as defined in each Crossed Loan Agreement.

 

Crossed Loan Agreements ” shall mean each Loan Agreement, each dated as of the date hereof, between Lender and each Crossed Borrower (i.e., a separate Loan Agreement for each Crossed Loan and Crossed Borrower), each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Default ” shall mean any “Event of Default” as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Documents ” shall mean the “Loan Documents” as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory

 

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note(s), mortgage(s) and/or deed(s) of trust and Crossed Loan Agreement evidencing and/or securing each Crossed Loan and each of the Crossed Guaranties of the Crossed Loans, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Partial Defeasance Conditions ” shall have the meaning set forth in Section 2.7(b) hereof.

 

Crossed Loans ” shall mean each of the mortgage loans (other than the Loan) listed on Schedule 3 attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loans Collection ” has the meaning set forth in Section 2.11(e) .

 

Crossed Loan Total Defeasance ” with respect to a Crossed Loan shall mean a “Total Defeasance” (as defined in the Crossed Loan Agreement for such Crossed Loan) of such Crossed Loan.

 

Crossed Loan Total Defeasance Date ” with respect to a Crossed Loan subject to a Crossed Loan Total Defeasance, shall mean the “Total Defeasance Date” (as defined in the Crossed Loan Agreement for such Crossed Loan) for such Crossed Loan Total Defeasance of such Crossed Loan.

 

Crossed Obligor Insolvency Event ” has the meaning set forth in Section 2.11(d) .

 

Crossed Obligors ” has the meaning set forth in Section 2.11(c) .

 

Crossed Party Obligations ” has the meaning set forth in Section 2.11(c) .

 

Crossed Properties ” shall mean the “Mortgaged Property” securing each Crossed Loan, as defined in each Crossed Loan Agreement for each Crossed Loan, subject to modification pursuant to Section 2.11(g) hereof.

 

Cross Guaranties ” shall mean (i) each Guaranty of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) each Guaranty, each dated as of the date hereof, of each of the Crossed Loans, each executed by the Borrower.

 

Cross Release Notice ” has the meaning set forth in Section 2.11(g) .

 

Debt Service Reserve Account ” has the meaning set forth in Section 2.13(c) .

 

Deed of Trust Trustee ” means the trustee under any Mortgage that constitutes a “deed of trust” under applicable law.

 

Default ” means the occurrence of any event which, but for the giving of notice or the passage of time, or both, would be an Event of Default.

 

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Default Rate ” means the per annum interest rate equal to the lesser of (a) 5.0% per annum in excess of the rate otherwise applicable hereunder and (b) the maximum rate allowable by applicable law.

 

Defeasance ” means any of a Total Defeasance or a Partial Defeasance.

 

Defeasance Collateral ” shall mean Partial Defeasance Collateral or Total Defeasance Collateral, as applicable.

 

Defeasance Collateral Account ” has the meaning set forth in Section 2.7(d) .

 

Defeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Deferred Maintenance Escrow Account ” has the meaning set forth in Section 2.13(a) .

 

Delaware Law Firm ” has the meaning set forth in Section 8.1(ff)(C) hereof.

 

Deposit Account ” means all “deposit accounts” as defined in the UCC.

 

Digital Realty Trust ” means Digital Realty Trust, Inc., a Maryland corporation.

 

Disclosure Certificate ” has the meaning set forth in Section 5.1(w) hereof.

 

Disclosure Documents ” has the meaning set forth in Section 5.1(w) hereof.

 

Documents ” means all “documents” as defined in the UCC (whether negotiable or non-negotiable) or other receipts covering, evidencing or representing goods.

 

DRT Operating Partnership ” means Digital Realty Trust, L.P., a Maryland limited partnership.

 

EO13224 ” has the meaning set forth in Section 4.1(v) hereof.

 

Eligible Account ” means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with a federal or state chartered depository institution or trust company that satisfies the Rating Criteria, or (ii) a segregated trust account maintained with the corporate trust department of a federal or state chartered depository institution or trust company subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either case, has corporate trust powers, acting in its fiduciary capacity and in either case having combined capital and surplus of at least $100,000,000 or otherwise acceptable to the Rating Agencies. An Eligible Account shall not be evidenced by a certificate of deposit, passbook, other instrument or any other physical indicia of ownership. Following a downgrade below the Rating Criteria, or a withdrawal, qualification or suspension of such institution’s rating, each account must at Lender’s request promptly (and in any case within not more than thirty (30) calendar days) be moved to a qualifying institution or to one or more segregated trust accounts in the trust department of such institution, if permitted.

 

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Eligible Bank ” shall mean a bank that (i) satisfies the Rating Criteria and (ii) insures the deposits hereunder through the Federal Deposit Insurance Corporation.

 

Engineer ” means an Independent engineer selected by Borrower and reasonably approved by Lender.

 

Environmental Auditor ” means an Independent environmental auditor selected by Borrower and reasonably approved by Lender.

 

Environmental Claim ” means any notice, notification, request for information, claim, administrative, regulatory or judicial action, suit, judgment, demand or other written communication by any Person or Governmental Authority alleging or asserting liability with respect to Borrower or any Mortgaged Property (whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, response, remedial or cleanup costs, damages to natural resources, personal injuries, fines or penalties) arising out of, based on or resulting from (i) the presence, Use or Release into the environment of any Hazardous Substance at any location (whether or not owned, managed or operated by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law or (iii) any alleged injury or threat of injury to human health, safety or the environment.

 

Environmental Indemnity Agreement ” means the Environmental Indemnity Agreement dated as of the Closing Date, from Borrower and the Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as the same may be amended, modified or supplemented from time to time.

 

Environmental Laws ” means any and all present and future federal, state or local laws, statutes, ordinances, rules or regulations, or any judicial interpretation thereof, any judicial or administrative orders, decrees or judgments thereunder issued by a Governmental Authority, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to the environment, the effect of the environment on human health or safety, or the Release or threatened Release of Hazardous Substances or otherwise relating to the Use of Hazardous Substances.

 

Environmental Reports ” means each and every “Phase I Environmental Site Assessment” (and, if applicable, “Phase II Environment Site Assessment”) as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-2000, and an asbestos survey, in each case with respect to the Mortgaged Property, prepared by one or more Environmental Auditors and delivered to Lender and any amendments or supplements thereto delivered to Lender.

 

Equipment ” means all (i) all “equipment” as defined in the UCC, and (ii) all of the following (regardless of how classified under the UCC): all personal property constituting furniture, fittings, appliances, apparatus, leasehold improvements, machinery, devices, interior improvements, appurtenances, equipment, plant, furnishings, fixtures, computers, electronic data processing equipment, telecommunications equipment and other fixed assets now owned or hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all additions to,

 

8


substitutions for, replacements of or accessions to any of the items recited as aforesaid and all attachments, components, parts (including spare parts) and accessories, whether installed thereon or affixed thereto, all regardless of whether the same are located on any Mortgaged Property or are located elsewhere (including, without limitation, in warehouses or other storage facilities or in the possession of or on the premises of a bailee, vendor or manufacturer) for purposes of manufacture, storage, fabrication or transportation and all extensions and replacements to, and proceeds of, any of the foregoing.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

ERISA Affiliate ” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower is a member.

 

Event of Default ” has the meaning set forth in Section 7.1 hereof.

 

Excluded Borrower ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Guaranties ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan(s) ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Agreement ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Documents ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Property ” has the meaning set forth in Section 2.11(g) hereof.

 

First Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

First Open Defeasance Date ” shall mean the earlier of (i) the Payment Date in December, 2008, or (ii) the date that is two (2) years from the “start up day” (within the meaning of Section 860G(a)(9) of the IRC) of the REMIC Trust established in connection with the final Securitization involving the Loan.

 

First Open Prepayment Date ” is the Payment Date which is in the second month preceding the month in which the Scheduled Maturity Date occurs. For example, if the Scheduled Maturity Date is November 11, 2014, the First Open Prepayment Date is the Payment Date in the month of September, 2014.

 

First Payment Date ” has the meaning set forth in Section 2.5 hereof.

 

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Fiscal Year ” means the 12-month period ending on December 31st of each year (or, in the case of the fiscal year in which the Closing Date occurs, such shorter period from the Closing Date through such date) or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender.

 

First Prepaid Rent Disbursement ” has the meaning set forth in Section 2.13(a)(v) .

 

Fitch ” means Fitch, Inc. and its successors.

 

Foreign Lender ” has the meaning set forth in Section 2.10(b) hereof.

 

Fund ” has the meaning set forth in the definition of “Permitted Investments”.

 

GAAP ” means generally accepted accounting principles in the United States of America as of the date of the applicable financial report, consistently applied.

 

General Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “general intangibles” as defined in the relevant UCC, now owned or hereafter acquired by Borrower and (ii) all of the following (regardless of how characterized): all agreements, covenants, restrictions or encumbrances affecting the Mortgaged Property or any part thereof.

 

Governmental Authority ” means any national or federal government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality of any of the foregoing (including, without limitation, any court or tribunal) lawfully exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

Gross Revenue ” means, for any period, the total dollar amount of all income and receipts received by, or for the account of, Borrower in the ordinary course of business with respect to the Mortgaged Property, but excluding Loss Proceeds (other than the proceeds of business interruption insurance or the proceeds of a temporary Taking in lieu of Rents which shall be included in Gross Revenue).

 

Guarantor ” means Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, on a joint and several basis.

 

Guaranty of Nonrecourse Obligations ” means, with respect to the Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse provisions of the Loan Documents for which liability is retained as described in Section 9.24 hereof from the Guarantor to Lender.

 

Hazardous Substance ” means, collectively, (i) any petroleum or petroleum products or waste oils, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls (“ PCBs ”), lead in drinking water, lead-based paint and radon, (ii) any chemicals or other materials or substances which are now or hereafter become defined as or included in the definitions of “hazardous substances”, “hazardous wastes”,

 

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“hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import under any Environmental Law, and (iii) any other chemical or any other hazardous material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law.

 

Immediate Repairs ” has the meaning set forth in Section 2.13(a)(ii) hereof.

 

Impositions ” means all real estate and personal property taxes and assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed within the term of the Loan), ground rents, water, sewer or other rents and charges, excises, levies, governmental fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, in respect of the Mortgaged Property (including all interest and penalties thereon), accruing during or in respect of the term hereof and which may be assessed against or imposed on or in respect of or be a Lien upon any Mortgaged Property, or any other collateral delivered or pledged to Lender in connection with the Loan, or any part thereof or any Rents therefrom or any estate, right, title or interest therein.

 

Improvements ” means all buildings, structures, fixtures and improvements now or hereafter owned by Borrower of every nature whatsoever situated on any Land constituting part of the Mortgaged Property (including, without limitation, all gas and electric fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, carpeting and other floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus which are or shall be affixed to the Land or said buildings, structures or improvements and including any additions, enlargements, extensions, modifications, repairs or replacements thereto).

 

Indebtedness ” means the Principal Indebtedness, together with all other obligations and liabilities due or to become due to Lender pursuant hereto, under the Note or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses paid by or payable to Lender hereunder or pursuant to the Note or any of the other Loan Documents.

 

Indemnified Parties ” has the meaning set forth in Section 5.1(i) .

 

Independent ” means, when used with respect to any Person, a Person that (i) does not have any direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower (other than any such Affiliate of Borrower that is an Affiliate of Borrower solely as a result of such Affiliate’s ownership of a less than twenty percent (20%) ownership interest in Digital Realty Trust), (ii) is not connected with Borrower or any Affiliate of Borrower as an officer, employee, trustee, partner, director or person performing similar functions, and (iii) is not a member of the immediate family of any Person described in clauses (i) or (ii).

 

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Independent Director ” means, (a) with respect to the SPC Party if the SPC Party is a corporation, one (1) duly appointed member of the board of directors of the SPC Party who is reasonably satisfactory to Lender who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a shareholder of, or an officer, director, partner, paid consultant or employee of, Borrower or any of its shareholders, subsidiaries or affiliates, a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or affiliates, or a person or other entity controlling or under common control with any such shareholder, partner, supplier or customer, or a member of the immediate family of any such shareholder, officer, director, partner, employee, supplier or customer of Borrower, and (b) with respect to the SPC Party if the SPC Party is a limited liability company, and with respect to the Borrower if the Borrower is a limited liability company, one (1) duly appointed independent manager of the SPC Party or Borrower (as applicable) who is also a non-economic member of SPC Party or Borrower (as applicable), who is reasonably satisfactory to Lender and who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a member or manager of, or an officer, director, partner, paid consultant or employee of, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), a customer of, or supplier to, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), or a person or other entity controlling or under common control with any such member, partner, supplier or customer, or a member of the immediate family of any such member, officer, director, partner, employee, supplier or customer of SPC Party or Borrower (as applicable). As used herein, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract or otherwise.

 

Instruments ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “instruments” as defined in the UCC.

 

Insurance Gap ” has the meaning set forth in Section 5.1(x)(iv)(F) hereof.

 

Insurance Escrow Account ” has the meaning set forth in Section 2.13(b) .

 

Insurance Premiums ” has the meaning set forth in Section 5.1(x)(iii) .

 

Insurance Proceeds ” means, in the event of a casualty with respect to the Mortgaged Property, the proceeds received under any insurance policy applicable thereto.

 

Insurance Requirements ” means all material terms of any insurance policy required pursuant to this Agreement or the Mortgage and all material regulations, rules and other requirements of the National Board of Fire Underwriters or such other body exercising similar functions applicable to or affecting the Mortgaged Property or any part thereof or any use or condition thereof.

 

Insured Casualty ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Intellectual Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under the trademark licenses, trademarks, rights in

 

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intellectual property, trade names, service marks and copyrights, copyright licenses, patents, patent licenses or the license to use intellectual property such as computer software owned or licensed by Borrower or other proprietary business information relating to Borrower’s policies, procedures, manuals and trade secrets with respect to the Mortgaged Property.

 

Interested Parties ” has the meaning set forth in Section 5.1(w) hereof.

 

Inventory ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “inventory” as defined in the UCC and shall include all Documents representing the same.

 

Investment Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “investment property” as defined in the UCC.

 

Land ” means the parcels of real estate described on Exhibit A attached to the Mortgage and made a part hereof.

 

Leases ” means all leases, subleases, lettings, occupancy agreements, tenancies and licenses by Borrower as landlord of the Mortgaged Property or any part thereof now or hereafter entered into, and all amendments, extensions, renewals and guarantees thereof, and all security therefor.

 

Leasing Commissions ” means leasing commissions incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located at the Mortgaged Property.

 

Leasing Costs/TI Costs Account ” has the meaning set forth in Section 2.13(a) .

 

Legal Requirements ” means all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, any of the foregoing relating to zoning, parking or land use, any and all Environmental Laws and the Americans with Disabilities Act) affecting Borrower or any Mortgaged Property or any part thereof or the construction, use, alteration or operation thereof, or any part thereof (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto, at any time in force affecting Borrower or the Mortgaged Property or any part thereof (including, without limitation, any which may require repairs, modifications or alterations in or to the Mortgaged Property or any part thereof).

 

Lender ” has the meaning provided in the first paragraph of this Agreement.

 

Letter of Credit Rights ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “letter of credit rights” as defined in the UCC.

 

Lien ” means any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, assignment, security interest, or any other encumbrance or charge on Borrower or any Mortgaged Property or any portion thereof, or any interest therein (including, without

 

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limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and mechanic’s, materialmen’s and other similar liens and encumbrances).

 

Loan ” means the loan made by Lender to Borrower pursuant to the terms of this Agreement.

 

Loan Amount ” means an amount equal to $34,500,000.

 

Loan Documents ” means this Agreement, the Note, the Contract Assignment, the Management Agreement, the Manager’s Subordination, the Mortgage, the Assignment of Rents and Leases, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse Obligations, the Crossed Guaranties of the Loan (subject to modification pursuant to Section 2.11(g) hereof) and all other agreements, instruments, certificates and documents delivered by or on behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan, as the same may be amended or modified from time to time.

 

Local Collection Account ” and “ Local Collection Account Bank ” have the meanings set forth in Section 2.12(a)(i) .

 

Local Collection Account Agreement ” means with respect to the Local Collection Account, the lockbox agreement, dated as of the applicable date and executed by Borrower, Lender and the Local Collection Account Bank.

 

Loss Proceeds ” means Condemnation Proceeds and/or Insurance Proceeds.

 

Loss Proceeds Account ” has the meaning set forth in Section 2.12(e) hereof.

 

Losses ” has the meaning set forth in Section 5.1(j)(i) .

 

Management Agreement ” means with respect to any Mortgaged Property, the property management agreement entered into between the Borrower and the Manager, in such form as may be reasonably approved by Lender, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time, and any management agreement which may hereafter be entered into with respect to any Mortgaged Property in accordance with the terms and conditions hereof, as the same may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time.

 

Manager ” means Capstar Commercial Real Estate Services, Ltd., a Texas limited partnership, the current manager of the Mortgaged Property under the current Management Agreement, or such other Person as may hereafter be charged with management of any Mortgaged Property pursuant to a Management Agreement entered into in accordance with the terms and conditions hereof.

 

Manager’s Subordination ” means, with respect to the Mortgaged Property, initially each Manager’s Consent and Subordination of Management Agreement, each executed by the Manager, Borrower and Lender, dated as of the Closing Date, and in the event a successor

 

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or assignee Manager is engaged at any Mortgaged Property, a subordination agreement executed by Manager, Borrower and Lender in form and substance satisfactory to Lender, whereby, among other things, the Management Agreement is subordinated to the Indebtedness and to the Lien of the Mortgage so long as the Loan remains outstanding.

 

Material Adverse Effect ” means a material adverse effect upon (i) the business operations, properties, assets or condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or (iii) the aggregate value of the Mortgaged Property.

 

Material Action ” has the meaning set forth in Section 8.1(ee)(A) .

 

Maturity Date ” means the earlier of (a) the Scheduled Maturity Date or (b) such earlier date on which the entire Loan is required to be paid in full, by acceleration or otherwise under this Agreement or any of the other Loan Documents.

 

Maximum Rate ” has the meaning set forth in Section 2.5(e) hereof.

 

Moody’s ” means Moody’s Investors Services, Inc. and its successors.

 

Money ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “money” as defined in the UCC and (ii) all moneys, cash, or other items of legal tender generated from the use or operation of the Mortgaged Property.

 

Monthly Debt Service Payment ” has the meaning set forth in Section 2.5(a) hereof.

 

Monthly Debt Service Payment Amount ” has the meaning set forth in Section 2.5(a) hereof.

 

Mortgage ” means, with respect to the Mortgaged Property, a first priority (subject to Permitted Encumbrances) Mortgage or Deed of Trust (as applicable), Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date (and, if there are more than one, each and every one of them), granted by the Borrower to or for the benefit of Lender or Deed of Trust Trustee for the benefit of Lender, respectively, with respect to the Mortgaged Property as security for the Loan, as same may thereafter from time to time be supplemented, amended, modified or extended by one or more agreements supplemental thereto.

 

Mortgaged Property ” means, at any time, individually or collectively, as applicable, the Land, the Improvements, the Personalty, the Leases and the Rents, and all rights, titles, interests and estates appurtenant thereto, encumbered by, and more particularly described in, the Mortgage.

 

Multiemployer Plan ” means a multiemployer plan defined as such in Section 3(37) of ERISA and which is covered by Title IV of ERISA (i) to which contributions have been, or were required to have been made by Borrower or any ERISA Affiliate within the past six years or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

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Net Proceeds ” means either (x) the purchase price (at foreclosure or otherwise) actually received by Lender from a third party purchaser with respect to any Mortgaged Property, as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default or (y) in the event that Lender (or its nominee) is the purchaser at foreclosure of any Mortgaged Property, the higher of (i) the amount of Lender’s credit bid or (ii) such amount as shall be determined in accordance with applicable law, and in either case minus all reasonable third party, out of pocket costs and expenses (including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable) incurred by Lender (and its nominee, if applicable) in connection with the exercise of such remedies; provided , however , that such costs and expenses shall not be deducted to the extent such amounts previously have been added to the Indebtedness in accordance with the terms of the Loan Documents or applicable law.

 

Note ” means one or more promissory notes made by Borrower to Lender pursuant to this Agreement, as such note may be modified, amended, supplemented, restated or extended, and any replacement notes therefor.

 

Noteholder ” has the meaning set forth in Section 2.10(b) hereof.

 

O&M Program ” has the meaning set forth in Section 5.1(d)(iv) hereof.

 

OFAC ” has the meaning set forth in Section 4.1(v) hereof.

 

Officer’s Certificate ” means a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower.

 

Operating Budget ” means, with respect to any Fiscal Year, the operating budget for the Mortgaged Property reflecting Borrower’s projections of Gross Revenues and Property Expenses for the Mortgaged Property for such Fiscal Year, prepared on an annual and monthly basis, and submitted by Borrower to Lender in accordance with the provisions of Section 5.1(r)(viii) .

 

Operating Expense Account ” has the meaning provided in Section 2.13(c) .

 

Operating Expenses ” means, for any period of calculation, all expenditures incurred and required to be expensed under GAAP during such period in connection with the ownership, operation, maintenance, repair and/or leasing of the Mortgaged Property, including without limitation (or duplication) Property Expenses. Notwithstanding the foregoing, Operating Expenses shall not include (a) Capital Improvement Costs, (b) any extraordinary items (unless Lender and Borrower approve of the inclusion of such items as Operating Expenses), (c) depreciation, amortization and other non-cash charges or (d) any payments of principal or interest on the Indebtedness or otherwise payable to the holder of the Indebtedness. Operating Expenses shall be calculated on the accrual basis of accounting.

 

Organizational Agreements ” means, with respect to a particular Person, individually or collectively, as applicable: the operating agreements and certificates of organization of any such Person that is a limited liability company, the limited partnership agreement and certificate of limited partnership of any such Person that is a limited partnership, or the bylaws and articles of organization of any such Person that is a corporation, each as in effect on the Closing Date, each as amended or restated from time to time.

 

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Other Borrowings ” means, with respect to Borrower, without duplication (but not including the Indebtedness or any interest rate protection agreement entered into pursuant hereto) (i) all indebtedness of Borrower for borrowed money or for the deferred purchase price of property or services, (ii) all indebtedness of Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the face amount of all letters of credit issued for the account of Borrower and, without duplication, all unreimbursed amounts drawn thereunder, and obligations evidenced by bankers’ acceptances, (iv) all indebtedness of Borrower secured by a Lien on any property owned by Borrower (whether or not such indebtedness has been assumed), (v) all Contingent Obligations of Borrower, (vi) liabilities and obligations for the payment of money relating to a capitalized lease obligation or sale/leaseback obligation, (vii) liabilities and obligations representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of Borrower’s business that would constitute ordinarily a trade payable to trade creditors, and (viii) all payment obligations of Borrower, if any, under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars or similar agreements) and similar agreements.

 

Partial Defeasance ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Amount ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Defeased Note after the Partial Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

Partial Defeasance Date ” has the meaning set forth in Section 2.7(c) .

 

Payment Date ” has the meaning provided in Section 2.5(a) .

 

Payment Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “payment intangibles” as defined in the UCC.

 

PBGC ” means the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.

 

Permits ” means all licenses, permits, variances and certificates required by Legal Requirements to be obtained by Borrower and used in connection with the ownership, operation, use or occupancy of the Mortgaged Property (including, without limitation, certificates of occupancy, building permits, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority or private Person concerning ownership, operation, use or occupancy of the Mortgaged Property).

 

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Permitted Encumbrances ” means, with respect to the Mortgaged Property, collectively, (i) the Lien created by the Mortgage, or any other Loan Documents of record encumbering the Mortgaged Property, (ii) all Liens and other matters disclosed on the Title Insurance Policy concerning the Mortgaged Property, (iii) Liens, if any, for Impositions imposed by any Governmental Authority not yet delinquent or being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, (iv) mechanic’s or materialmen’s Liens, if any, being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, provided that no foreclosure has been commenced by the lien claimant, (v) rights of existing and future tenants and residents as tenants only pursuant to Leases, (vi) Liens for public utilities, (vii) Liens, if any, for charges or fees relating to the maintenance of any of the Pledged Accounts, in favor of the depository institution at which such Pledged Accounts are maintained, and (viii) Liens, if any, relating to financing leases and purchase money debt permitted under Section 8.1(e)(iii) , in each case only on the applicable equipment or other personal property which is the subject of such financing lease or purchase money debt), which Liens and encumbrances referred to in clauses (i)-(viii) above do not materially and adversely affect (1) the ability of Borrower to pay in full the Principal Indebtedness and interest thereon in a timely manner, (2) the use of any Mortgaged Property for the use currently being made thereof, or (3) the operation of any Mortgaged Property as currently being operated.

 

Permitted Investments ” means any one or more of the following obligations or securities acquired at a purchase price of not greater than par:

 

(i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and provided that such obligations are one or more of the following: (A) U.S. Treasury obligations (all direct or fully guaranteed obligations), (B) General Services Administration participation certificates, and (C) Small Business Administration guaranteed participation certificates and guaranteed pool certificates;

 

(ii) the following obligations of the following United States of America government sponsored agencies: (A) Federal Home Loan Mortgage Corp. debt obligations, (B) Farm Credit System consolidated systemwide bonds and notes, (C) Federal Home Loan Banks consolidated debt obligations, and (D) Federal National Mortgage Association debt obligations;

 

(iii) unsecured certificates of deposit and time deposits with maturities of not more than 365 days of any bank, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies;

 

(iv) certificates of deposit, time deposits and demand deposits issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies, which investments are fully insured by the Federal Deposit Insurance Corp.; and

 

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(v) any other demand, money market or time deposit, demand obligation or any other obligation, security or investment, which Lender shall have approved in writing and for which Borrower shall have delivered a Rating Confirmation;

 

provided , however , that (A) the investments described in clauses (i) through (vii) above must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (C) such investments must not be subject to liquidation prior to their maturity or have an “r” suffix affixed to its rating by S&P; and provided , further , that, in the judgment of Lender, such instrument continues to qualify as a “cash flow investment” pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no instrument or security shall be a Permitted Investment if such instrument or security evidences (x) a right to receive only interest payments or (y) the right to receive principal and interest payments derived from an underlying investment at a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.

 

Permitted Transfer ” means (i) so long as Digital Realty Trust remains a publicly traded company, any Transfer of stock in Digital Realty Trust, (ii) any Transfer of any limited partnership interests in DRT Operating Partnership, or (iii) any creation or sale or other conveyance (but not a mortgage, encumbrance, pledge, hypothecation, or grant of a security interest) of other limited partnership interests in DRT Operating Partnership; provided , in the case of each of the foregoing clauses (i), (ii) and (iii), that after giving effect to any such Transfer, (A) DRT Operating Partnership continues to directly or indirectly (through ownership of the SPC Party and each “SPC Party” (as defined in each Crossed Loan Agreement (a “Crossed SPC Party”)) own 100% of the direct or indirect ownership interests in the SPC Party and Borrower, and each Crossed SPC Party and Crossed Borrower, and control the operations and management of each SPC Party and Borrower and each Crossed SPC Party and Crossed Borrower, and (B) Digital Realty Trust continues to be the sole general partner in DRT Operating Partnership, to own directly not less than 30% of the voting and beneficial ownership interests in DRT Operating Partnership, and to control the operations and management of DRT Operating Partnership, and provided further, that under no circumstance shall any Transfer of any direct ownership interest in Borrower constitute a Permitted Transfer hereunder.

 

Person ” means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

Personalty ” means all Equipment, Inventory, Accounts, General Intangibles, Instruments, Investment Property, Receivables, Pledged Accounts, Deposit Accounts, Contracts and Intellectual Property and all other personal property as defined in the relevant UCC, now owned or hereafter acquired by Borrower and now or hereafter affixed to, placed upon, used in connection with, arising from or otherwise related to the Mortgaged Property or which may be used in or relating to the planning, development, financing or operation of such Mortgaged Property, including, without limitation, furniture, furnishings, equipment, machinery, money, insurance proceeds, accounts, contract rights, trademarks, goodwill, chattel paper, documents,

 

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trade names, licenses and/or franchise agreements, rights of Borrower under leases of fixtures or other personal property or equipment, inventory, all refundable, returnable or reimbursable fees, deposits or other funds or evidences of credit or indebtedness deposited by or on behalf of Borrower with any governmental authorities, boards, corporations, providers of utility services, public or private, including specifically, but without limitation, all refundable, returnable or reimbursable tap fees, utility deposits, commitment fees and development costs.

 

Plan ” means an employee benefit plan (as defined in Section 3(3) of ERISA), other than a Multiemployer Plan, that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, and (i) was established or maintained by Borrower or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Borrower or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

Pledged Accounts ” means the Local Collection Account, the Collection Account, the Reserve Accounts, the Loss Proceeds Account, the Security Deposit Account, any additional accounts now or hereafter maintained by or on behalf of Borrower hereunder and pledged to Lender pursuant to the Loan Documents and any sub-accounts of any of the foregoing and any successor accounts to any of the foregoing.

 

Policies ” has the meaning provided in Section 5.1(x)(iii) .

 

Pre-existing Condition ” has the meaning set forth in Section 5.1(x)(iii)(B) hereof.

 

Prepayment Consideration ” has the meaning set forth in Section 2.6(c) hereof.

 

Principal Indebtedness ” means the principal amount of the Loan outstanding as adjusted by each increase (including advances made by Lender to protect the Collateral), or decrease in such principal amount of the Loan outstanding, whether as a result of prepayment or otherwise, from time to time.

 

Prior Loans ” means the, collectively, the loan or loans made pursuant to the Prior Loan Documents.

 

Prior Loan Documents ” shall mean those documents listed on Schedule 8.1(b) .

 

Proceeds ” shall have the meaning given in the UCC and, in any event, shall include, without limitation, all of Borrower’s right, title and interest in and to proceeds, product, offspring, rents, profits or receipts, in whatever form, arising from the Collateral.

 

Prohibited Person ” has the meaning set forth in Section 4.1(v) hereof.

 

Property Expenses ” means, with respect to the Mortgaged Property (and without duplication), the following costs and expenses but only, in the case of costs and expenses in respect of goods and services, to the extent that they (x) are paid to Persons who are generally in the business of providing such goods and services, (y) are customary for the types of goods or services provided in the geographical area in which such goods or services are provided and (z) do not constitute Capital Improvement Costs:

 

(i) Impositions (other than in the nature of income taxes);

 

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(ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents or otherwise maintained by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary course of business with respect to the Mortgaged Property;

 

(iii) the cost of all electricity, oil, gas, water, steam, heat, ventilation, air conditioning and any other energy, utility or similar item and overtime services with respect to the Mortgaged Property;

 

(iv) payments required under service contracts for any services or items used at the Mortgaged Property or otherwise used in the operation of the Mortgaged Property (including, without limitation, service contracts for heating, ventilation and air conditioning systems, elevators, landscape maintenance, pest extermination, security, furniture, trash removal, answering service and credit checks);

 

(v) wages, benefits, payroll taxes, uniforms, the cost of cleaning supplies and all related expenses for on-site personnel directly involved in the day-to-day operation of the Mortgaged Property (including, without limitation, housekeeping employees, porters and general repair, maintenance and security employees), whether hired by Borrower, Manager or any other Person, except that if such amounts are paid by the Manager using the Manager’s funds, such amounts shall constitute “Property Expenses” only to the extent the Manager is entitled to be reimbursed for such amounts by Borrower or otherwise from revenues of the Mortgaged Property (but without duplication of amounts described in clause (xv) below);

 

(vi) costs required in connection with the enforcement of any Lease (including, without limitation, reasonable attorneys’ fees, charges for lock changes and storage and moving expenses for furniture, fixtures and equipment);

 

(vii) advertising and rent-up expenses (including, without limitation, leasing services, tenant rent concessions, promotions for existing and prospective tenants, banners and signs);

 

(viii) out-of-pocket cleaning, maintenance and repair expenses;

 

(ix) any expense the total cost of which is passed through to tenants pursuant to executed Leases;

 

(x) legal, accounting, auditing and other professional fees and expenses incurred in connection with the ownership, leasing and operation of the Mortgaged Property (including, without limitation, collection costs and expenses), but excluding any such fees and expenses incurred in connection with the closing of the Loan;

 

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(xi) permits, licenses and registration fees and costs;

 

(xii) any expense necessary in order to prevent a breach under a Lease;

 

(xiii) any expense necessary in order to prevent or cure a violation of any Legal Requirement (including Environmental Law), regulation, code or ordinance;

 

(xiv) costs and expenses of security and security systems provided to and/or installed and maintained with respect to the Mortgaged Property;

 

(xv) without duplication of any other expenses enumerated hereunder, fees and expenses of property managers contracted with by Borrower to perform management, administrative, payroll or other services in connection with the operation of the Mortgaged Property (including, without limitation, the fees and expenses owed to Manager under any Management Agreement which the Lender has approved in accordance with this Agreement);

 

(xviii) any other costs and expenses contemplated by the Operating Budget and customarily incurred in connection with operating properties similar in type and character to the Mortgaged Property;

 

(xix) any other category of property expense that is customary for a property of the type and size as the Mortgaged Property and is reasonably approved by Lender; and

 

(xx) any other property expense reasonably approved by Lender.

 

Quarterly Statement ” has the meaning provided in Section 5.1(r)(iv) .

 

Rating Agencies ” means at least two of Fitch, Moody’s and S&P (or, if a Secondary Market Transaction has occurred in which Securities have been issued, each of the foregoing that rated such Securities).

 

Rating Criteria ” with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1” by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by Fitch, if deposits are held by such Person for a period of one month or more.

 

Rating Confirmation ” with respect to any transaction, matter or action in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, the written confirmation of the Rating Agencies that such transaction, matter or action shall not, in and of itself, result in the downgrading, withdrawal or qualification of the then-current ratings assigned to any of the Securities issued in connection with a Securitization; and (ii) if any portion of the Loan has not been the subject of a Securitization, Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which any portion of the Loan reasonably be expected to be securitized) that no rating for any

 

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Securities that would be issued in connection with a Securitization involving any of such portion of the Loan would be downgraded, qualified, or withheld by reason of such transaction, matter or action.

 

Real Estate Taxes Escrow Account ” has the meaning provided in Section 2.13(b) .

 

Receivables ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) any Accounts, Chattel Paper, Instruments, Payment Intangibles, Letter of Credit Rights, Documents, insurance policies, drafts, bills of exchange, trade acceptances, notes or other indebtedness owing to Borrower with respect to the Mortgaged Property, from whatever source arising, (ii) to the extent not otherwise included above, (a) all income, Rents, issues, profits, revenues, deposits and other benefits from the Mortgaged Property and (b) all receivables and other obligations now existing or hereafter arising, or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the Mortgaged Property or other commercial space located at the Mortgaged Property or acquired from others (including, without limiting the generality of the foregoing, from rental of space, halls, stores, and offices, and deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, wholesale and retail sales of food and beverages, merchandise, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance), (iii) all of the books and records (whether in tangible, electronic or other form) now or hereafter maintained by or on behalf of Borrower in connection with the operation of the Mortgaged Property or in connection with any of the foregoing and (iv) all Supporting Obligations and all liens and security interests securing any of the foregoing and all other rights, privileges and remedies relating to any of the foregoing.

 

Register ” has the meaning set forth in Section 9.9(a) .

 

Release ” means any active or passive release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata).

 

REIT ” means a real estate investment trust under Sections 856-860 of the Code.

 

REIT Distribution Requirement ” means distributions reasonably necessary for a Person to maintain its status as a REIT and not be subject to corporate-level tax based on income or to excise tax under Section 4981 of the Code.

 

Remedial Work ” has the meaning set forth in Section 5.1(d)(i) .

 

Rents ” means all income, rents (including base rent), issues, profits, revenues (including all oil and gas or other mineral royalties and bonuses), deposits (other than utility and security deposits) and other benefits from the Mortgaged Property.

 

Replacement Reserve Account ” has the meaning set forth in Section 2.13(a)(i) .

 

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Reserve Account(s) ” means the Deferred Maintenance Escrow Account, the Replacement Reserve Account, the Leasing Costs/TI Costs Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account, the Debt Service Reserve Account and the CEC Prepaid Rent Reserve Account, collectively, and any successor accounts to any of the foregoing.

 

Restoration ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Scheduled Defeasance Payments ” shall mean scheduled payments of interest and principal under the Note in the case of a Total Defeasance and under the Defeased Note in the case of a Partial Defeasance for all Payment Dates occurring after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), and up to and including the Scheduled Maturity Date (including, in the case of a Total Defeasance, the outstanding principal balance of the Loan as of the Scheduled Maturity Date and, in the case of a Partial Defeasance, the outstanding principal balance of the Defeased Note as of the Scheduled Maturity Date), and all payments required after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), if any, under the Loan Documents for servicing fees, and other similar charges, which shall include (and Borrower shall be required hereby to include in the Defeasance Collateral Lender’s reasonable estimate of the cost and expenses of) reasonable fees and charges associated with the maintenance and administration of the Defeasance Collateral and any Successor Borrower.

 

Scheduled Maturity Date ” mean November 11, 2014.

 

S&P ” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc and its successors.

 

Secondary Market Transaction ” has the meaning set forth in Section 5.1(w) .

 

Second Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

Security Agreement ” shall mean a security agreement in form and substance that would be satisfactory to a prudent lender pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral.

 

Securities ” means mortgage pass-through certificates or other securities issued in a Secondary Market Transaction and evidencing a beneficial interest in or secured in whole or in part by the Loan in a rated or unrated public offering or private placement.

 

Securitization ” means a Secondary Market Transaction in which any Securities have been issued which have been rated by any Rating Agency.

 

Security Deposits ” shall mean all security (whether cash, letter of credit or otherwise) given to Borrower or any agent or Person acting on behalf of Borrower in connection with the Leases.

 

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Security Deposit Account ” has the meaning set forth in Section 2.13(a)(i) .

 

SPC Party ” shall have the meaning set forth in Section 8.1(ee)(A) .

 

SPC Party’s Organizational Documents ” shall mean: (i) the SPC Party’s articles of incorporation, if the SPC Party is a corporation, and (ii) the SPC Party’s limited liability company operating agreement, if the SPC Party is a limited liability company.

 

SPC Single Member ” has the meaning set forth in Section 8.1(ee)(A) .

 

Successor Borrower ” has the meaning set forth in Section 2.7(e) .

 

Supporting Obligations ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “supporting obligations” as defined in the UCC and (ii) any other guarantee, letter of credit, secondary obligation, right or privilege that supports or pertains to any of the Mortgaged Property.

 

Survey ” means a certified ALTA/ACSM survey of the Mortgaged Property prepared by a registered Independent surveyor, containing the form of survey or certification provided to Borrower by Lender and in form and content reasonably satisfactory to Lender and the company issuing the Title Insurance Policy for the Mortgaged Property.

 

Taking ” means a taking or voluntary conveyance during the term hereof of all or part of any Mortgaged Property, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority affecting the Mortgaged Property or any portion thereof whether or not the same shall have actually been commenced.

 

TI Costs ” means tenant improvement costs and allowances incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located in the Mortgaged Property.

 

Title Insurance Policy ” means a mortgagee’s title insurance policy or policies (i) issued by one or more title companies reasonably satisfactory to Lender which policy or policies shall (unless Lender otherwise requires or consents) be in form ALTA 1992, where available (with waiver of arbitration provisions), naming Lender as the insured party, (ii) insuring the Mortgage as being a first and prior lien (subject to Permitted Encumbrances) upon the Mortgaged Property constituting real property, (iii) showing no encumbrances against any Mortgaged Property constituting real property (whether junior or superior to the Mortgage) which are not reasonably acceptable to Lender (other than Permitted Encumbrances), (iv) in the amount of the Loan Amount, and (v) otherwise in form and content reasonably acceptable to Lender. Such Title Insurance Policy shall include the following endorsements or affirmative coverages in form and substance reasonably acceptable to Lender, to the extent available in the jurisdiction in which the Land is located: variable rate endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage; separate tax parcel coverage; contiguity (if applicable) coverage; and such other endorsements as Lender shall reasonably require with respect to a particular Mortgaged Property in order to provide insurance against specific risks identified by Lender in connection with the Mortgaged Property.

 

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Total Defeasance ” shall have the meaning set forth in Section 2.7(a) .

 

Total Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note and this Agreement after the Total Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

Total Defeasance Date ” has the meaning set forth in Section 2.7(a)(i) .

 

Transaction ” means the transactions contemplated by the Loan Documents.

 

Transaction Costs ” means all costs and expenses paid or payable by Borrower relating to the Transaction (including, without limitation, appraisal fees, reasonable legal fees and accounting fees and the costs and expenses described in Section 9.23 ).

 

Transfer ” means the conveyance, assignment, sale, mortgaging, encumbrance (other than a Permitted Encumbrance), pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any direct or indirect (irrespective of the number of tiers of ownership) legal or beneficial interest (a) in all or any portion of the Mortgaged Property; or (b) any stock, partnership interests, membership interests, economic rights to distributions or dividends, or other ownership interests in Borrower or the constituent entities directly or indirectly (irrespective of the number of tiers of ownership) owning any such stock, partnership interests, membership interests or other ownership interests. A Transfer shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower (or any Affiliate of Borrower) agrees to sell the Mortgaged Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower (or any Affiliate of Borrower) leasing all or a substantial part of the Mortgaged Property to one or more Persons pursuant to a single or related transactions (but excluding any Leases permitted under the terms of this Agreement), or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Mortgaged Property to a condominium regime or transferring ownership to a cooperative corporation; and any change of control of Borrower or any SPC Party. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

 

Transfer and Assumption ” and “ Transferee Borrower ” have the respective meanings set forth in Section 6.1(p) .

 

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Treasury Rate ” means, on the date on which such rate is calculated, the yield on the ten year “on the run” U.S. Treasury issue (primary issue) with such yield being based on the bid price for such issue as reasonably determined by Lender.

 

UCC ” means with respect to any Collateral, the Uniform Commercial Code as in effect from time to time in the State of New York; provided , that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority. Wherever this agreement refers to terms as defined in the UCC, if such term is defined in more than one Article of the UCC, the definition in Article 9 of the UCC shall control.

 

UCC Searches ” has the meaning set forth in Section 3.1(v) hereof.

 

Undefeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Underwritten DSCR ” has the meaning set forth in Section 2.7(b) hereof.

 

U.S. Obligations ” shall mean securities that:

 

(i) constitute “government securities” (as defined in section 2(a)(16) of the Investment Company Act of 1940 as amended);

 

(ii) are either:

 

(a) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States of America or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and that are one or more of the following: (1) U.S. Treasury obligations (all direct or fully guaranteed obligations), (2) General Services Administration participation certificates, and (3) Small Business Administration guaranteed participation certificates and guaranteed pool certificates; or

 

(b) obligations of the following United States of America government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), or the Federal National Mortgage Association (debt obligations);

 

(iii) are rated at “AAA” by S&P, “Aaa” by Moody’s and “AAA” by Fitch, and do not have an “r” suffix affixed to their rating by S&P;

 

(iv) provide for interest at a fixed rate;

 

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(v) provide for a predetermined fixed dollar amount of principal due at maturity that cannot vary or change;

 

(vi) are not subject to prepayment, call or early redemption; and

 

(vii) are not subject to liquidation prior to their maturity.

 

Use ” means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance in connection with or affecting Borrower or the Mortgaged Property.

 

Welfare Plan ” means an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower or any of its subsidiaries or with respect to which Borrower or any of its subsidiaries has an obligation to make contributions and covers any current or former employee of Borrower or any of its subsidiaries.

 

Work Threshold Amount ” meant the lesser of (a) $1,000,000.00, or (b) three percent (3%) of the Loan Amount, provided, however, that in no event shall “Work Threshold Amount” be less than $500,000.00.

 

ARTICLE II.

GENERAL TERMS

 

Section 2.1. The Loan .

 

(a) Subject to the terms and conditions of this Agreement, Lender shall lend to Borrower on the Closing Date the Loan Amount. The proceeds of the Loan shall be used solely for the purposes identified in Section 2.2 hereof. Lender is hereby authorized to fund directly from the proceeds of the Loan advanced at Closing (net of any deposits or payments made by Borrower or its Affiliates prior to Closing) (i) the deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Leasing Costs/TI Costs Account, the Replacement Reserve Account and the CEC Prepaid Rent Reserve Account required to be funded from Loan proceeds pursuant to Section 2.13 , (ii) the out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan and (iii) the reasonable fees and expenses of Lender’s and Borrower’s counsel.

 

(b) The Loan shall constitute one general obligation of Borrower to Lender and shall be secured by the security interest in and Liens granted upon all of the Collateral, and by all other security interests and Liens at any time or times hereafter granted by Borrower to Lender as security for the Loan, as well as by the Liens against the Crossed Property created under the Crossed Loan Documents.

 

Section 2.2. Use of Proceeds . Proceeds of the Loan shall be used only for the following purposes: (a) to, with respect to certain of the Mortgaged Property, finance a portion of the acquisition cost of, and, with respect to other of the Mortgaged Property, refinance existing mortgage debt at such Mortgaged Property, (b) to make the required deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance

 

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Escrow Account, the Leasing Costs/TI Costs Account, the Replacement Reserve Account and the CEC Prepaid Rent Reserve Account, (c) to pay Transaction Costs (including the reasonable out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan) and (d) to pay reasonable fees, expenses and disbursements of Lender’s and Borrower’s counsel. Any proceeds of the Loan in excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(d) may be used by the Borrower for its general purposes.

 

Section 2.3. Security for the Loan . The Note and Borrower’s obligations hereunder and under all other Loan Documents shall, together with the Crossed Indebtedness, be secured by (a) Liens upon the Mortgaged Property pursuant to the Mortgage, (b) the Contract Assignment, (c) the Manager’s Subordination, (d) the Assignment of Rents and Leases, and (e) all other security interests and Liens granted in this Agreement and in the other Loan Documents and under the Crossed Loan Documents.

 

Section 2.4. Borrower’s Note . Borrower’s obligation to pay the principal of and interest on the Loan and all other amounts due under the Loan Documents shall be evidenced initially by the Note, duly executed and delivered by Borrower on the Closing Date. The Note shall be payable as to principal, interest and all other amounts due under the Loan Documents, as specified in this Agreement, with a final maturity on the Maturity Date. Lender shall have the right to have the Note subdivided, by exchange for promissory notes of lesser denominations in the form of the initial Note, upon written request to Borrower and, in such event, Borrower shall promptly execute additional or replacement Notes. At no time shall the aggregate original principal amount of the Note (or of such replacement Notes) exceed the Loan Amount.

 

Section 2.5. Principal and Interest .

 

(a) Interest on the Loan shall accrue at the rate set forth in Section 2.5(b) below commencing on the Closing Date. Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through the tenth (10 th ) day of November, 2004. Commencing on the eleventh (11 th ) day of December, 2004 (the “ First Payment Date ”) and on the eleventh (11 th ) day of each calendar month thereafter (each, with the First Payment Date, a “ Payment Date ”), Borrower shall make equal monthly payments (each, a “ Monthly Debt Service Payment ”) of principal and interest in the amount of $199,124.54 (the “ Monthly Debt Service Payment Amount ”). The entire outstanding Principal Indebtedness of the Loan and the Note, together with all accrued but unpaid interest thereon and all other amounts due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date. Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed during any month or other accrual period.

 

(b) The Principal Indebtedness shall bear interest at a rate per annum equal to 5.649%, increasing, however, to the Default Rate while an Event of Default has occurred and is continuing.

 

(c) While an Event of Default has occurred and is continuing, Borrower shall pay to Lender interest at the Default Rate on (i) the Principal Indebtedness and (ii) any amount owing to Lender not paid when due, in each case, until such amount is paid in full.

 

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(d) If any payment of principal, interest or other sums shall not be made to Lender on the date the same is due hereunder or under any of the other Loan Documents, then Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder (other than the entire principal balance of the Loan due upon acceleration of the Loan or upon Maturity) or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender.

 

(e) Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law (“ Excess Interest ”). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this paragraph shall govern and control; (2) Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender’s option, (a) applied as a credit against either or both of the Principal Indebtedness of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law and without payment of any Prepayment Consideration with respect thereto), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the “ Maximum Rate ”), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Indebtedness is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Indebtedness shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Indebtedness had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Maximum Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater than the applicable interest rate, then the foregoing provisions of this paragraph shall apply.

 

Section 2.6. Prepayment .

 

(a) Limitation on Prepayment; Prepayment Consideration Due on Acceleration . Borrower shall have no right to prepay the Loan in whole or part at any time, except as expressly set forth in this Section 2.6(a) . Commencing on the First Open Prepayment Date, Borrower may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) Borrower shall provide to Lender not less than thirty (30) days’ prior written notice of such prepayment, (ii) together with such prepayment Borrower also shall pay all accrued and unpaid interest and all other Indebtedness, and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and

 

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including the date of such prepayment to (but excluding) the Payment Date following such date of prepayment. Borrower shall not be required to pay any Prepayment Consideration with respect to an application of insurance proceeds or condemnation awards by Lender pursuant to this Agreement or the Mortgage in the absence of an Event of Default.

 

(b) Prepayment Consideration Due . If the Maturity Date shall be accelerated to a date prior to the Scheduled Maturity Date, or if any prepayment of all or any portion of the Principal Indebtedness hereunder occurs, whether in connection with Lender’s acceleration of the unpaid Principal Indebtedness of the Loan or in any other circumstances whatsoever (other than (1) pursuant to and in accordance with Section 2.6(a) above, (2) as a result of an application by Lender of Loss Proceeds pursuant to this Agreement or the Mortgage in the absence of an Event of Default, or (3) pursuant to and in accordance with Section 2.5(e)(3)(a) above), or if the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means, then the Prepayment Consideration shall become immediately due and owing and Borrower shall forthwith pay the Prepayment Consideration to Lender. The foregoing shall not create any right of prepayment. Borrower shall have no right whatsoever to prepay all or any portion of the Principal Indebtedness of the Note, except as set forth in Section 2.6(a) above.

 

(c) Definitions . The following terms shall have the meanings indicated:

 

The “ Prepayment Consideration ” shall be the amount equal to the sum of (i) an amount equal to the interest which would have accrued on the Principal Indebtedness for the period from and including (A) the date (the “ Event Date ”) which is the earlier of (x) the date of prepayment of the Loan or (y) such earlier date upon which the entire remaining Principal Indebtedness shall become due and payable, whether as a result of acceleration of the maturity of the Loan or otherwise, to but excluding (B) the next Payment Date following the Event Date, plus (ii) the sum of two percent of the Principal Indebtedness on the Event Date plus an amount equal to the “ Present Value Yield Differential ”, calculated as the excess, if any, of (A) the amount of the monthly interest which would otherwise be payable on the principal balance of the Loan from (1) the date (the “ Yield Determination Date ”) which is the Payment Date following the Event Date through and including (2) the Scheduled Maturity Date, over (B) the amount of the monthly interest Lender would earn if an amount equal to the Principal Indebtedness of the Loan as of the Event Date were invested for the period from the Yield Determination Date through the Scheduled Maturity Date at the Yield Rate (as hereinafter defined), such difference (the “ Yield Differential ”) to be discounted to present value at the Yield Rate using the following formula:

 

Present Value Yield Differential =

 

Yield Differential x [1-(1+r) -n ]


    
  r     

 

     where:          
     r=    Yield Rate, and
     n=    the remaining Weighted Average Life to Maturity (as defined below) from the Yield Determination Date.

 

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The “ Yield Rate ” shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the then remaining Weighted Average Life to Maturity (as defined below) of the Loan as determined by Lender, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Yield Rate Determination Date (as defined below), converted to a monthly equivalent yield. If yields for such securities of such maturity are not shown in such publication, then the Yield Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities. If said Federal Reserve Statistical Release or any other information necessary for determination of the Yield Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Yield Rate shall be determined by Lender based on comparable data. The term “ Yield Rate Determination Date ” shall mean the date which is five (5) Business Days prior to the Yield Determination Date. The term “ Weighted Average Life to Maturity ” shall mean, at any date, the number of years (including fractional years, expressed as a decimal (e.g., three years and three months = 3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness on the Event Date into (y) the sum total of the Weighted Amortization Products (as defined below) for each Scheduled Principal Payment (as defined below). The “ Scheduled Principal Payment(s) ” shall mean each then remaining scheduled principal payment (assuming no prepayment or Loan acceleration), including payment of the outstanding principal balance of the Loan on the Scheduled Maturity Date, in respect of the Loan. The “ Weighted Amortization Product ” for each Scheduled Principal Payment shall mean the product of (A) the amount of such Scheduled Principal Payment multiplied by (B) the number of years (including fractional years, expressed as a decimal) which will elapse between the Yield Determination Date and the date on which such Scheduled Principal Payment is to be made under this Agreement.

 

Borrower agrees that the Prepayment Consideration required hereunder is reasonable. Borrower has given individual weight to the consideration in this transaction for this waiver and agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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Borrower hereby expressly waives the benefit of California Civil Code Section 2954.10 and all other statutes, principles, and rules of law of similar effect.

 

BORROWER:

Global Webb, L.P.,

a Texas limited partnership

By:

  Global Webb, LLC,
    a Delaware limited liability company,
    its General Partner    
    By:   Digital Realty Trust, L.P.,
        a Maryland limited partnership,
        its Member and Manager
        By:   Digital Realty Trust, Inc.,
            a Maryland corporation its General Partner
            By:  

 


            Print Name:  

 


            Title:  

 


 

[Remainder of Page Intentionally Left Blank]

 

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Section 2.7. Defeasance .

 

(a) Total Defeasance . Borrower shall have the right at any time on or after the First Open Defeasance Date and prior to the First Open Prepayment Date to obtain a release of the Lien of the Mortgage encumbering the Mortgaged Property (a “ Total Defeasance ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Total Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(a) and on which it shall effect the Total Defeasance;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Total Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Total Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(a) and Sections 2.7(d) and (e) hereof;

 

(iv) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Total Defeasance Collateral;

 

(v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Total Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Total Defeasance pursuant to this Section 2.7(a) , and (y) if a Securitization has occurred, a Total Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vi) If a Securitization has occurred, if and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(vii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the release of the Mortgaged Property from the Lien of the Mortgage as contemplated by this Section 2.7(a) and the substitution of the Total Defeasance Collateral will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

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(viii) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(ix) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Total Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(x) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xi) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(b) If a Total Defeasance occurs and all of the requirements of this Section 2.7 have been satisfied, including those set forth in Section 2.7(f) below, and provided no undefeased Crossed Loans remain outstanding (or the Crossed Partial Defeasance Conditions, as defined below, shall have been satisfied with respect to such Crossed Loans), Lender shall execute any and all documents required to release the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases and the Defeasance Collateral, pledged pursuant to the Security Agreement, shall be the sole source of collateral securing the Loan. In connection with any such release of the Lien, Borrower shall submit to Lender, not less than fifteen (15) days prior to the Total Defeasance Date (or such shorter time as permitted by Lender in its sole discretion), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Mortgaged Property is located and contain standard provisions protecting the rights of a releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage and the Assignment of Rents and Leases, including Lender’s reasonable attorneys’ fees. In the event of a Total Defeasance of the Loan while any of the Crossed Loans remain outstanding, Borrower may obtain a release of the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases (and related Loan Documents) if the following conditions are satisfied at the time of the Total Defeasance (the “ Crossed Partial Defeasance Conditions ”):

 

(i) No Event of Default shall exist;

 

(ii) Immediately prior to the Total Defeasance of the Loan, the aggregate underwritten debt service coverage ratio (“ Underwritten DSCR ”) for the Crossed Loans, as reasonably determined by Lender based upon Lender’s underwritten net cash flow and assumed debt service calculations as described on Schedule 7 attached hereto and made a part hereof, shall be at least equal to 1.45; and

 

(iii) Each of the Crossed Loans shall be partially defeased by each Crossed Borrower in accordance with, and in satisfaction of the terms and conditions of, the terms and provisions of Section 2.7 of each Crossed Loan Agreement. An amount equal to (A)

 

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125% of the Loan Amount, less (B) the amount of the Principal Indebtedness of the Loan as of the Total Defeasance Date (the “ Aggregate Amount ”) will be apportioned among each of the Crossed Loans for purposes of such partial defeasance. The amount of the Aggregate Amount to be allocated to each Crossed Loan (the “ Allocated Amount ”) shall be determined by multiplying the Aggregate Amount by a fraction the numerator of which is the then-outstanding principal balance of such Crossed Loan and the denominator of which is the aggregate total of the then-outstanding principal balances of all of the Crossed Loans. Each Crossed Loan shall be partially defeased in the amount of the Allocated Amount for such Crossed Loan.

 

Except as set forth in this Section 2.7(b) , no repayment, prepayment or defeasance of all or any portion of the Loan, including, without limitation, a Partial Defeasance pursuant to Section 2.7(c) , shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Mortgage on the Mortgaged Property.

 

(c) Partial Defeasance . Borrower shall, as a condition to and only in connection with a Crossed Loan Total Defeasance on or after the First Open Defeasance Date and prior to the First Open Prepayment Date, have the right to defease a portion of the Loan (a “ Partial Defeasance ”) equal to the Applicable Crossed Loan Partial Defeasance Amount with respect to such Crossed Loan Total Defeasance (the “ Partial Defeasance Amount ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Partial Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(c) and on which it shall effect the Partial Defeasance, which date shall be the same date as the Crossed Loan Total Defeasance Date;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Partial Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Partial Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(c) and Sections 2.7(d) and (e) hereof;

 

(iv) Lender shall prepare (at Borrower’s expense) all necessary documents to modify this Loan Agreement and to amend and restate the Note and issue two substitute notes, one note having a principal balance equal to the Partial Defeasance Amount (the “ Defeased Note ”), and the other note having a principal balance equal to the excess of (A) the then-outstanding principal amount of the Loan, over (B) the amount of the Defeased Note (the “ Undefeased Note ”). The Defeased Note and Undefeased Note shall have identical terms as the Note except for the principal balance and monthly payments. The Defeased Note and the Undefeased Note shall be cross defaulted and cross collateralized unless the Rating Agencies shall require otherwise or unless a Successor Borrower that is not an Affiliate of Borrower is established pursuant to Section 2.7(e) . A Defeased Note may not be the subject of any further defeasance;

 

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(v) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Partial Defeasance Collateral;

 

(vi) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Partial Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Partial Defeasance pursuant to this Section 2.7(c) , and (y) if a Securitization has occurred, a Partial Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vii) If a Securitization has occurred, and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(viii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the Partial Defeasance and related transactions, including the substitution of the Partial Defeasance Collateral, will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

(ix) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(x) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Partial Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(xi) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xii) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(d) Defeasance Collateral Account . On or before the date on which Borrower delivers the Defeasance Collateral, Borrower or Successor Borrower (as applicable) shall open at any Eligible Bank the defeasance collateral account (the “ Defeasance Collateral Account ”) which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied to the monthly installments of principal and interest on the Loan (or, in the case of a Partial Defeasance, the portion thereof

 

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evidenced by the Defeased Note) and, upon Maturity, to accrued interest and the Principal Indebtedness of the Loan (or, in the case of a Partial Defeasance, the portion thereof evidenced by the Defeased Note). Borrower shall cause the Eligible Bank at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Bank shall agree to hold and distribute the Defeasance Collateral in accordance with this Loan Agreement. Borrower (or Successor Borrower, as applicable) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Borrower shall prepay all costs and expenses associated with opening and maintaining the Defeasance Collateral Account. Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.

 

(e) Successor Borrower . In connection with a Defeasance under this Section 2.7 , Borrower shall, if required by the Rating Agencies (if a Securitization has occurred) or if Borrower so elects or Lender requires, establish or designate a successor entity (the “ Successor Borrower ”) which shall be a single purpose bankruptcy remote entity and which shall be approved by the Rating Agencies (if a Securitization has occurred). Any such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the Rating Agencies (if a Securitization has occurred) or Lender shall require otherwise. Borrower shall transfer and assign all obligations, rights and duties under and to the Note, together with the Defeasance Collateral, to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Borrower shall pay all reasonable costs and expenses incurred by Lender, including Lender’s reasonable attorney’s fees and expenses incurred in connection therewith, and (if a Securitization has occurred) all fees, expenses and other charges of the Rating Agencies.

 

(f) Crossed Loans . Notwithstanding anything to the contrary contained herein, if any of the Crossed Loans remains outstanding and in any part undefeased, then, in connection with a Defeasance of the Loan, the Mortgaged Property will be released from the Liens of the Loan Documents if and only if either (i) all of the Crossed Loans have been fully defeased in accordance with the terms and conditions of the Crossed Loan Documents, or (ii) all of the Crossed Loans shall have been partially defeased in an aggregate amount equal to the Aggregate Amount (each Crossed Loan being partially defeased in the Allocated Amount with respect thereto) and the Crossed Loan Defeasance Conditions are satisfied at the time of the Total Defeasance of the Loan, and until such full (as indicated in clause (i) above) or partial (as indicated in clause (ii) above) defeasance of all the Crossed Loans, this Loan Agreement and the other Loan Documents as they relate to the Borrower and the Mortgaged Property shall remain in full force and effect notwithstanding the Total Defeasance of the Loan.

 

Section 2.8. Application of Payments During Event of Default . During the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments at any time thereafter received by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that Lender shall have the continuing exclusive right to apply any and all such payments and any and all proceeds and recoveries from the Pledged Accounts, the Mortgaged Property or Borrower after the occurrence and during the continuance of an Event of Default, in Lender’s sole discretion, to any of the following, in such

 

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order and manner as Lender may determine in its sole and absolute discretion: (a) any debt service or other Indebtedness due under this Loan Agreement or the other Loan Documents (including, without limitation, reasonable out-of-pocket costs and expenses of Lender reimbursable pursuant to the terms of this Agreement and any other Loan Document(s) arising as a result of such repayment, any accrued and unpaid interest then payable with respect to the Loan or the portion thereof being repaid, the Principal Indebtedness, any accrued and unpaid Prepayment Consideration in respect of any such Principal Indebtedness or the portion thereof being repaid, any other sums then due and payable to or for the benefit of Lender pursuant to this Agreement or any other Loan Document(s)); (b) any Crossed Indebtedness, (c) any Reserve Account established under this Loan Agreement; (d) otherwise as a reserve for Property Expenses, Capital Improvement Costs, Impositions and other expenditures relating to the use, management, operation or leasing of the Mortgaged Property; and/or (e) any costs and expenses incurred by Lender in connection with such Event of Default, or expended by Lender to protect or preserve the value of the Mortgaged Property.

 

Section 2.9. Method and Place of Payment . Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 p.m., Eastern time, on the date when due and shall be made in lawful money of the United States of America by wire transfer in federal or other immediately available funds to its account at such bank(s) as Lender may from time to time designate. Any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Lender shall notify Borrower in writing of any changes in the account to which payments are to be made. All payments made by Borrower hereunder, or by Borrower under the other Loan Documents, shall be made irrespective of, and without any deduction for, any defenses, set-offs or counterclaims. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day.

 

Section 2.10. Taxes .

 

(a) All payments made by or on behalf of Borrower under the Note and this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income, franchise or similar taxes (including branch profits taxes or alternative minimum tax) imposed or levied on (A) a Noteholder, as defined below, by the jurisdiction under the laws of which such Noteholder is organized or any political subdivision thereof, or (B) on Lender by the jurisdiction in which Lender’s lending office is located or any political subdivision thereof, and (ii) in the case of any Foreign Lender, as defined below, any taxes that are in effect and that would apply to a payment hereunder or under any other Loan Document made to such Foreign Lender as of the date such Foreign Lender becomes a party to this Agreement, or in the case of any other Lender which changes its lending office with respect to the Loan to an office outside the United States, any taxes that are in effect and would apply to a payment to such Lender as of the date of the change of the lending office.

 

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(b) On or prior to the date that Lender or any other subsequent holder of the Note (collectively, a “ Noteholder ”) becomes a Noteholder hereunder, (i) each such Noteholder that is organized under the laws of a jurisdiction outside of the United States within the meaning of the Code (each a “ Foreign Lender ”) shall deliver to Borrower two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Noteholder and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Noteholder under the Loan Documents) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Noteholder under the Loan Documents) or such other evidence satisfactory to Borrower that such Noteholder is entitled to an exemption from, or reduction of, U.S. withholding tax, or (ii) upon request by Borrower, each such Noteholder that is not a Foreign Lender shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. Thereafter and from time to time, each such Noteholder shall (i) upon request by Borrower, promptly submit to Borrower such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Noteholder pursuant to the Loan Documents, (ii) promptly notify Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Noteholder, and as may be reasonably necessary to avoid any Legal Requirement of Borrower to make any deduction or withholding for taxes from amounts payable to such Noteholder. If such Noteholder fails to deliver the above forms or other documentation as required herein, or if the forms or other documentation delivered by such Noteholder indicate that any payments made to such Noteholder pursuant to the Loan Documents are subject to a reduced rate of tax, then Borrower may withhold from any interest payment to such Noteholder an amount equivalent to the applicable withholding tax imposed by the Code or the applicable treaty (but in any event not in excess of the amount Borrower is required by law to withhold), without reduction, and such Noteholder shall not be entitled to additional amounts or indemnification for such withholding hereunder.

 

Section 2.11. Cross-Collateralization; Contribution; Release of Cross-Collateralization .

 

(a) Borrower acknowledges and agrees (subject to Lender’s election(s) at Lender’s sole discretion from time to time pursuant to Section 2.11(g) below): (i) that the Mortgaged Property shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loans to Borrower or the loans constituting the Crossed Loans unless Borrower and the Crossed Borrowers granted liens on the Mortgaged Property and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans.

 

(b) Borrower (i) until all of the Loan and the Crossed Loans shall have been paid and satisfied in full, hereby waives enforcement of any right of subrogation with respect to the Crossed Loans and (ii) waives any right to enforce any remedy which Lender now has or

 

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may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and Borrower waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that Borrower may have to the payment in full in cash of the Loan and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect Borrower’s liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents.

 

(c) Borrower agrees that any and all claims of Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the “ Crossed Obligors ”) with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the “ Crossed Party Obligations ”) shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of Borrower, whether now or hereafter arising and howsoever existing, in any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets and otherwise, under the Loan Documents, the Crossed Loan Documents and otherwise, and Borrower shall not, until the date that is ninety-one (91) days after the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of Borrower.

 

(d) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an “ Crossed Obligor Insolvency Event ”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and

 

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satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by Borrower as the property of Lender. If Borrower fails to make any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, Borrower will not assign or transfer to any individual or entity (other than Lender) any claim Borrower has or may have against any Crossed Obligor.

 

(e) Subject to the provisions of Section 2.11(g) , to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a “ Crossed Loans Collection ”) which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each of Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each of the Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then, following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each of Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the “Allocable Amount” of Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.11(g) below and to amendment by agreement of Borrower and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.11(e) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.11(e) for the benefit of Lender and (subject to the terms thereof) Borrower. This Section 2.11(e) and Section 2.11(e) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrower and Crossed Borrowers, and nothing set forth in this Section 2.11(e) or in Section 2.11(e) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrower and the Crossed Borrowers thereunder. Borrower acknowledges that the rights of contribution and indemnification under this Section 2.11(e) and under Section 2.11(e) of the Crossed Loan Agreements constitute assets of the Borrower or Crossed Borrowers to which such

 

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contribution and indemnification is owing, and any such right of contribution and indemnification owing to Borrower under Section 2.11(e) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.11 .

 

(f) Borrower hereby consents and agrees to each of the following, and agrees that Borrower’s obligations under this Loan Agreement and the other Loan Documents and the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice, except as expressly provided in the Loan Documents) that Borrower might otherwise have as a result of or in connection with any of the following:

 

(i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans, or any failure of Lender to notify Borrower of any such action, except as expressly provided in the Loan Documents.

 

(ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers with respect to the Crossed Loans.

 

(iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers.

 

(iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires , (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason.

 

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(v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by Borrower that Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Loan or Borrower’s obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans.

 

(vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans.

 

(vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans.

 

(viii) The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans.

 

(ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Borrower that Borrower is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans.

 

(x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else.

 

(xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor.

 

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(g) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to Borrower stating that this Loan Agreement and the other Loan Documents shall no longer secure one or more (at Lender’s sole election) of the Crossed Loans (each a “ Cross Release Notice ”), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (the “ Excluded Loan(s) ”; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an “ Excluded Borrower ”, and the Crossed Loan Agreement and other Crossed Loan Documents executed and delivered by an Excluded Borrower with respect to the Excluded Loan made to it are herein referred to as the “ Excluded Loan Agreement ” and “ Excluded Loan Documents ”, respectively, and the Crossed Property encumbered by the Excluded Loan Documents is herein referred to as the “ Excluded Property ”), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by Borrower (herein collectively referred to as the “ Excluded Guaranties ”) shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the “Crossed Loans” shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the “Crossed Loan Agreements”, “Crossed Loan Documents”, “Crossed Properties” and “Cross Guaranties” shall be deemed to exclude the Excluded Loan Agreement, the Excluded Loan Documents, the Excluded Property and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the “Crossed Borrower” and the “Crossed Obligors” shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.11(e) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and Borrower shall have no obligation or liability on account thereof; and (vii) Borrower shall no longer be a beneficiary of the covenants and agreements set forth in Section 2.11(e) of each Excluded Loan Agreement, and Borrower shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.11(e) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, Borrower hereby agrees to fully cooperate with Lender, at Borrower’s expense, provided that Borrower shall not be obligated to incur unreasonable cost or expense, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Borrower’s cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement.

 

Section 2.12. Central Cash Management .

 

(a) Local Collection Account; Collection Account; Deposits to and Withdrawals from the Collection Account .

 

(i) On or before the Closing Date, Lender shall (1) establish on behalf of the Borrower and maintain with the Collection Account Bank a collection account (the “ Collection Account ”), which shall be an Eligible Account with a separate and unique identification number in the name of Lender, as secured party, or, at Lender’s option, in

 

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the name of Borrower for the benefit of Lender, as secured party, and (2) cause the Collection Account Bank to deliver to Lender the Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Collection Account. On or before the Closing Date, Borrower shall (x) establish and maintain with a financial institution acceptable to Lender in its sole reasonable discretion (the “ Local Collection Account Bank ”), one or more local collection accounts for the Mortgaged Property (the “ Local Collection Account ”), which shall be an Eligible Account with a separate and unique identification number and entitled in the same name as the Collection Account and (y) cause the Local Collection Account Bank to deliver to Lender a Local Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Local Collection Account. Not later than the Closing Date, Borrower shall deliver to each tenant under a Lease an irrevocable direction letter in a form approved by Lender requiring the tenant to pay all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and Proceeds thereof owed to Borrower directly to the Local Collection Account. Borrower shall provide to Lender proof of such delivery. In addition, Borrower shall deliver an irrevocable direction letter in such form to each tenant under a new Lease entered into after the date hereof prior to the commencement of such Lease. If a tenant under a Lease forwards such Rents, Money or Proceeds to Borrower rather than directly to the Local Collection Account, Borrower shall (i) deliver an additional irrevocable direction letter to the tenant and make other commercially reasonable efforts to cause the tenant to forward such Rents, Money or Proceeds directly to the Local Collateral Account and (ii) immediately deposit or cause the Manager to deposit in the Local Collection Account such Rents, Money or Proceeds. At all times during this Agreement, Borrower shall deposit or cause Manager to deposit in the Security Deposit Account all cash Security Deposits received from tenants at the applicable Mortgaged Property, by no later than the fifth (5 th ) Business Day following the collection and receipt thereof. Subject to Section 2.12(a)(ii) , Borrower shall sweep or cause to be swept on each Business Day during a calendar month all Money on deposit in the Local Collection Account to the Collection Account. Borrower shall not have any right to withdraw Money from the Local Collection Account, the Security Deposit Account or the Collection Account, which shall be under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Any such Rents, Money or Proceeds held by Borrower or the Manager prior to deposit into the Local Collection Account shall be held in trust for the benefit of Lender. Borrower shall be responsible for the payment of all costs and expenses in connection with establishing and maintaining the Collection Account, the Local Collection Account, the Security Deposit Account and the Reserve Accounts (including, without limitation, Collection Account Bank’s and Local Collection Account Bank’s customary fees and charges) and shall reimburse Lender upon demand for any such costs or expenses incurred by Lender.

 

(ii) In the event that any Event of Default has occurred and is continuing,

 

(A) all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and all Proceeds thereof shall be payable to Lender or as otherwise directed by Lender,

 

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(B) Borrower shall not have any right to direct Lender or any other Person to make any withdrawals from the Collection Account or the Reserve Accounts without the prior written consent of Lender, and

 

(C) proceeds on deposit in the Collection Account and the Reserve Accounts may be applied by Lender for the payment of the Indebtedness pursuant to Section 2.8 of this Agreement.

 

(iii) Borrower shall deposit in the Collection Account all Loss Proceeds received by Borrower.

 

(b) Distribution of Cash . So long as an Event of Default has not occurred and is not continuing, Lender shall apply funds on deposit in the Collection Account (to the extent not held in Reserve Accounts constituting sub-accounts of the Collection Account, if any, and with the exception of Loss Proceeds, which shall be applied as provided in Section 2.12(e) and Section 5.1(x) of this Agreement) on each Payment Date as follows:

 

(i) first , to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in that order, in the respective amounts required to be deposited therein as described in Section 2.13(b) ;

 

(ii) second , to the payment to Lender of any expenses then due and payable to Lender or its servicer(s) pursuant to this Agreement or the other Loan Documents;

 

(iii) third , to the payment to Lender of the Monthly Debt Service Payment due upon such Payment Date;

 

(iv) fourth , to the Replacement Reserve Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(v) fifth , to the Leasing Costs/TI Costs Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(vi) sixth , to the payment of any outstanding indemnification payment to which an Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j) , and any other amounts then due and payable to Lender or its servicer pursuant to this Agreement and the other Loan Documents which are not paid from applications under clause (iii) above;

 

(vii) seventh , if no Event of Default exists, to Borrower in an amount equal to remaining available funds, if any; provided, that if any Event of Default exists, no disbursement shall be made under this clause seventh ; and

 

(viii) eighth , if any Event of Default exists, then to the extent Lender has not made other application of such remaining available funds in Lender’s discretion as provided hereunder, all remaining available funds shall be allocated as determined by Lender in Lender’s sole and absolute discretion (and re-allocated from time to time as Lender may elect) and retained in the Debt Service Reserve Account and/or the Operating Expense Account.

 

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(c) Permitted Investments . So long as no Event of Default has occurred and is continuing, Borrower shall direct Lender in writing to invest and reinvest any balance in the Collection Account from time to time in Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank); provided , however , that

 

(i) the maturity of the Permitted Investments on deposit therein shall be at the discretion of Borrower, but in any event no later than the Business Day of or immediately preceding the date on which such funds are reasonably expected to be required to be withdrawn therefrom pursuant to Section 2.12(a) or 2.12(b) of this Agreement,

 

(ii) after an Event of Default has occurred and for so long as such Event of Default is continuing, Borrower shall not have any right to direct investment of the balance in the Collection Account,

 

(iii) all such Permitted Investments shall be held in the name of Lender or its servicer and shall be credited to the Collection Account, and

 

(iv) if no written investment direction is provided to Lender by Borrower, Lender may at Lender’s option invest any balance in the Collection Account in such Permitted Investments as may be selected by Lender.

 

Lender shall have no liability for any loss in investments of funds in the Collection Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Collection Account. All interest paid or other earnings on funds deposited into the Collection Account made hereunder shall be deposited into the Collection Account. Borrower shall include all earnings on the Collection Account as income of Borrower for federal and applicable state tax purposes.

 

(d) Intentionally Omitted .

 

(e) Loss Proceeds . In the event of a casualty or Taking with respect to the Mortgaged Property, all of Borrower’s interest in Loss Proceeds with respect thereto shall be paid directly to the Collection Account. Subject to the provisions of Section 5.1(x) of this Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of the terms and conditions set forth in Section 5.1(x) be made available for Restoration, Loss Proceeds may, at Lender’s option exercised in Lender’s sole discretion, be applied to the Indebtedness and, upon payment in full of the Indebtedness, to any Crossed Indebtedness or, if an Event of Default exists, in any manner determined by Lender in Lender’s sole discretion in accordance with Section 2.8 hereof. If the Loss Proceeds are to be made available for Restoration pursuant to Section 5.1(x) of this Agreement, such Loss Proceeds shall be held by Lender in a segregated interest-bearing Eligible Account in the name of Lender and under the sole dominion and control of Lender to be opened (if not previously opened and maintained by the Collection Account Bank under the Collection Account Agreement by the Lender) by Lender at a financial institution selected by Lender (the “ Loss Proceeds Account ”). Funds on deposit in the Loss Proceeds Account shall be invested in Permitted Investments (subject to the availability of such

 

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Permitted Investments with the Collection Account Bank) in the same manner and subject to the same restrictions as set forth in Section 2.12(c) with respect to the Collection Account (except that the maturity shall be not later than as reasonably necessary to satisfy any schedule of distributions for Restoration required or approved by Lender). If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid to Lender to the extent necessary to comply with this Agreement.

 

Section 2.13. Reserve Accounts .

 

(a) Deferred Maintenance Escrow Account, Replacement Reserve Account, Leasing Costs/TI Costs Account and CEC Prepaid Rent Reserve Account .

 

(i) On or before the Closing Date, Lender shall establish on behalf of Borrower and maintain with the Collection Account Bank five separate accounts for deferred maintenance, replacement reserves, cash Security Deposits and leasing costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account, for the benefit of Lender, until the Loan is paid in full. The five accounts shall be designated the “Deferred Maintenance Escrow Account” (the “ Deferred Maintenance Escrow Account ”), the “Leasing Costs/TI Costs Account” (the “ Leasing Costs/TI Costs Account ”), the “Replacement Reserve Account” (the “ Replacement Reserve Account ”), the “Security Deposit Account” (the “ Security Deposit Account ”) and the “ CEC Prepaid Rent Reserve Account ” (the “ CEC Prepaid Rent Reserve Account ”). On the Closing Date, Lender shall deposit out of the Loan proceeds $46,250.00 in the Deferred Maintenance Escrow Account, $1,310,479.26 in the Leasing Costs/TI Costs Account, $7,530.31 in the Replacement Reserve Account and $314,625.00 in the CEC Prepaid Rent Reserve Account. On each Payment Date, Borrower shall deposit from the Collection Account (or if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions) to the Replacement Reserve Account, of an amount equal to $7,530.31 per month, and to the Leasing Costs/TI Costs Account an amount equal to $37,402.00 per month. Borrower may request withdrawals from the Replacement Reserve Account pursuant to the procedure set forth in Section 2.13(a)(iii) below. Borrower may request withdrawals from the Leasing Costs/TI Costs Account pursuant to the procedure set forth in Section 2.13(a)(iv) below. Borrower may request withdrawals from the CEC Prepaid Rent Reserve Account pursuant to the procedure set forth in Section 2.13(a)(v) below.

 

(ii) Any and all Moneys remitted to the Deferred Maintenance Escrow Account, together with any interest, earnings or income earned thereon, shall be held in the Deferred Maintenance Escrow Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for repairs set forth on Schedule 1 attached hereto (the “ Immediate Repairs ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof. Within the applicable time period(s) for completion set forth on Schedule 1 , Borrower shall complete such Immediate Repairs and shall provide to Lender such documentation, and other evidence of compliance with law as Lender may reasonably require. The funds contained in the

 

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Deferred Maintenance Escrow Account shall be utilized by Borrower solely for performance of the Immediate Repairs in accordance with the Property Condition Assessments and Environmental Reports, and shall not be used by Borrower for purposes for which any other Reserve Account is established. Upon written application of Borrower (which may be done by electronic mail or e-mail), Borrower shall be entitled to obtain disbursements by Lender from the Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such Immediate Repairs, provided that (a) no Event of Default has occurred and is continuing, (b) Borrower shall provide to Lender (including electronic mail or e-mail) such documentation and certifications as Lender may reasonably request to substantiate the requirement for and entitlement to such disbursement, (c) Borrower shall provide to Lender (including by electronic mail or e-mail) with all invoices, receipts, lien waivers and other documentation of lawful and workmanlike progress or completion, lien-free status, and availability of sufficient funds, all as may be reasonably requested by Lender, and (d) Borrower shall provide Lender such evidence as may be reasonably satisfactory to Lender that after payment of any draw for Immediate Repairs, the funds remaining in the Deferred Maintenance Escrow Account shall be sufficient to pay for the remainder of such Immediate Repairs. In the event Borrower completes the repairs for which funds were reserved in the Deferred Maintenance Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse any and all amounts then on deposit in the Deferred Maintenance Escrow Account to the Collection Account.

 

(iii) Any and all Moneys remitted to the Replacement Reserve Account, together with any interest, earnings or income thereon, shall be held in the Replacement Reserve Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Capital Improvement Costs (other than those for Immediate Repairs) reasonably approved by Lender for disbursements from the Replacement Reserve Account (“ Approved Capital Expenditures ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof, provided that funds in the Replacement Reserve Account shall not be used by Borrower for purposes for which any other Reserve Account is established.

 

(iv) Any and all Moneys remitted to the Leasing Costs/TI Costs Account, together with any interest, earnings or income thereon, shall be held in the Leasing Costs/TI Costs Account to be withdrawn by Lender upon written request by Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Leasing Commissions and TI Costs (other than those for Immediate Repairs) reasonably approved by Lender (it being acknowledged that Leasing Commissions and TI Costs expressly set forth in any Lease approved by Lender in accordance with this Agreement shall be deemed to be reasonable) for disbursements from the Leasing Costs/TI Costs Account incurred in connection with leasing activities relating to the Mortgaged Property after the Closing Date as specified by Borrower in such written request (“ Approved Leasing Costs ”) upon satisfaction, in the case of TI Costs disbursements, of the disbursement conditions listed on Schedule 6 hereof relating to work for which TI Costs disbursements are requested.

 

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(v) Any and all Moneys remitted to the CEC Prepaid Rent Reserve Account, together with any interest, earnings or income thereon, shall be held in the CEC Prepaid Rent Reserve Account to be withdrawn by Lender in accordance with the terms of this Agreement. Lender shall disburse $88,875.00 (the “ First Prepaid Rent Disbursement ”) from the CEC Prepaid Rent Reserve Account to Borrower upon Lender’s receipt of Borrower’s written request on or after July 1, 2005 together with evidence reasonably acceptable to Lender that the CEC Lease is in full force and effect as of the date of Borrower’s request, CEC is in occupancy of the CEC Phase 2 Space as of such date and CEC has commenced paying rent on such CEC Phase 2 Space as of such date. Provided that Lender shall have previously released the First Prepaid Rent Disbursement to Borrower in accordance with this Agreement, Lender shall disburse any amounts remaining on deposit in the CEC Prepaid Rent Reserve Account to Borrower upon Lender’s receipt of Borrower’s written request on or after July 1, 2006 together with evidence reasonably acceptable to Lender that the CEC Lease is in full force and effect as of the date of Borrower’s request, CEC is in occupancy of the CEC Phase 3 Space as of such date and CEC has commenced paying rent on such CEC Phase 3 Space as of such date.

 

(b) Real Estate Taxes Escrow Account and Insurance Escrow Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two separate accounts for Basic Carrying Costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Real Estate Taxes Escrow Account” (the “ Real Estate Taxes Escrow Account ”) and the “Insurance Escrow Account” (the “ Insurance Escrow Account ”). On the Closing Date, the Lender shall deposit out of the Loan proceeds $621,500.00 in the Real Estate Taxes Escrow Account and $0.00 in the Insurance Escrow Account (i.e. the amount necessary to meet the first insurance and real property tax bills due and payable after the Closing Date with credit for existing monthly escrow payments made prior to the applicable due date). With respect to each Payment Date, Borrower shall deposit from the Collection Account (or, if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions),

 

(1) in the Real Estate Taxes Escrow Account, an amount equal to (1/12 th ) one-twelfth of the annual real estate taxes and assessments and any other Impositions that if not paid in a timely manner will result in a Lien on a Mortgaged Property,

 

(2) in the Insurance Escrow Account, an amount equal to one-twelfth (1/12 th ) of the annual insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents.

 

Any and all Moneys remitted to the Real Estate Taxes Escrow Account or Insurance Escrow Account (which shall not bear interest for the benefit of Borrower) shall be held in the Real Estate Taxes Escrow Account or Insurance Escrow Account, respectively, to be withdrawn from

 

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the Real Estate Taxes Escrow Account or Insurance Escrow Account, as applicable, by Lender or its servicer upon written request of Borrower delivered to Lender and its servicer together with documentation and other evidence (including invoices and, in the case of a reimbursement of Borrower, evidence that the related costs have been paid) with respect to the respective Basic Carrying Costs towards which such funds are to be applied, and applied to pay directly (or reimburse Borrower, in the case of insurance premiums only) for (x) any Impositions (in the case of the Real Estate Taxes Escrow Account) or (y) any insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents (in the case of the Insurance Escrow Account). Borrower shall provide Lender or its servicer with bills and other documents necessary for payment of Impositions and insurance premiums at least ten (10) Business Days prior to the due date therefor (in the case of insurance premiums) and at least ten (10) Business Days prior to the first date upon which the same will become delinquent if unpaid (in the case of Impositions). In the event the amount on deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow Account exceeds the amount due for Impositions by more than one-twelfth (1/12 th ) of the annual real estate taxes (in the case of the Real Estate Taxes Escrow Account) or the amount due for insurance premiums (in the case of the Insurance Escrow Account), respectively, Lender or its servicer shall in its sole discretion credit such excess against future payment obligations to the Real Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.

 

(c) Operating Expense Account and Debt Service Reserve Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two accounts for the remittance of funds by Lender or its servicer in its sole discretion after an Event of Default has occurred and is continuing, each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Operating Expense Account” (the “ Operating Expense Account ”) and the “Debt Service Reserve Account” (the “ Debt Service Reserve Account ”). On any Business Day after the occurrence and during the continuance of an Event of Default, Lender or its servicer may in its sole discretion deposit into the Operating Expense Account or the Debt Service Reserve Account any funds then on deposit in the Local Collection Account or the Collection Account. Any and all Moneys remitted to the Operating Expense Account or the Debt Service Reserve Account shall, until otherwise applied by Lender from time to time at Lender’s sole discretion during the existence of any Event of Default, be held in the Operating Expense Account or the Debt Service Reserve Account, as applicable, and applied, if Lender elects in its sole discretion to make such funds available for such application,

 

(x) with respect to the Operating Expense Account only, to pay Property Expenses provided for in the Operating Budget approved by Lender, or for other Property Expenses approved by Lender, and

 

(y) with respect to the Debt Service Reserve Account only, applied to pay the Indebtedness or the Crossed Indebtedness at the sole election of Lender;

 

provided , that (1) notwithstanding the foregoing, Lender may at any time, in its sole discretion, elect to apply the funds on deposit in the Operating Expense Account to pay the Indebtedness

 

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(including without limitation any Prepayment Consideration and other amounts due Lender in connection with such prepayment) and the Crossed Indebtedness while any Event of Default exists, and (2) in the event Lender accepts in writing a proposed cure of the Event of Default which precipitated the deposits to the Operating Expense Account and the Debt Service Reserve Account and no other Event of Default exists, then the funds on deposit in the Operating Expense Account and the Debt Service Reserve Account shall be released to Borrower.

 

(d) Security Deposits . In the case of letters of credit or other non-cash collateral given by tenants or others as security for the performance of the obligations of tenants under any Leases, Borrower shall deliver such letters of credit or other collateral to Lender and at Lender’s request execute such endorsements, instruments and documents and take such actions as are necessary to create a perfected security interest in favor of Lender in such letters of credit and other collateral and the proceeds thereof, as determined by Lender, including without limitation, if Lender requires, causing the Lender or its designee to become the beneficiary under such letters of credit; provided, that so long as no Event of Default exists and Borrower delivers such letters of credit or other collateral to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as the beneficiary under such letters of credit or take other of the foregoing actions, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to transfer or re-issue any such letter of credit to Lender or its designee as beneficiary and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender, during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing such letters of credits to be transferred or re-issued to Lender as beneficiary. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. So long as an Event of Default has not occurred and is not continuing (or if an Event of Default has occurred and is continuing but Borrower is required to return the Security Deposit in accordance with applicable Lease or Lender elects to return the Security Deposit in accordance with such Lease), Lender shall promptly authorize disbursement of any Security Deposits then held in the Security Deposit Account in order to satisfy Borrower’s obligations to return the same to tenants entitled to them under and in accordance with the Leases. In the event of a Lease default or other occurrence whereby Borrower, as landlord, shall become entitled to retain any Security Deposits or apply the same to amounts owed under the applicable Lease, any such Security Deposits, together with any other recoveries from such defaulted tenants in connection with such default, whether by draw upon any letter of credit or other security for such tenant’s obligations, exercise of remedies or settlement of claims, shall be transferred to the Leasing Costs/TI Costs Account as additional deposits therein (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property. Any termination payments paid by tenants under any Leases in connection with any early or scheduled termination of such Leases shall also be deposited as additional deposits into the Leasing Costs/TI Costs Account (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property.

 

(e) Investment of Funds . All or a portion of any Moneys in the Reserve Accounts (other than the Real Estate Tax Escrow Account, the Insurance Escrow Account, the

 

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Operating Expense Account and the Debt Service Reserve Account, none of which shall bear interest for the benefit of Borrower) shall, so long as no Event of Default has occurred and is continuing, be invested and reinvested by Lender in accordance with written instructions delivered by Borrower, or after an Event of Default has occurred and is continuing, by Lender, in one or more Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank). If no written investment direction is provided to Lender by Borrower, Lender may at its option invest such Moneys in a Permitted Investment selected by Lender. All interest paid or other earnings on funds deposited into the Reserve Accounts made hereunder shall be deposited into the Reserve Accounts (other than with respect to the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account or the Debt Service Reserve Account, for which Lender and its servicer shall not have any obligation to deposit such interest or earnings into such accounts). Lender shall have no liability for any loss in investments of funds in any Reserve Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Reserve Accounts. Unless and until title to the funds therein shall have vested in any Person other than Borrower, Borrower shall include all such income or gain on any account of the Reserve Account as income of Borrower for federal and applicable state tax purposes.

 

(f) Event of Default . After an Event of Default has occurred and is continuing, Borrower shall not be permitted to direct Lender or any other Person to make any withdrawal(s) from any Pledged Accounts and Lender, in Lender’s sole and absolute discretion, may liquidate any Permitted Investments of the amount on deposit in such accounts and/or withdraw and use such amounts on deposit in the Pledged Accounts to make payments in accordance with Section 2.8 . Nothing contained in Section 2.8 or this Section 2.13(f) shall in any way limit any rights and remedies otherwise available to Lender under this Agreement, the other Loan Documents or applicable law upon an Event of Default.

 

Section 2.14. Additional Provisions Relating to the Pledged Accounts .

 

(a) Borrower covenants and agrees that: (i) all securities or other property underlying any financial assets credited to any Pledged Account shall be registered in the name of Lender, indorsed to Lender or indorsed in blank or credited to another securities account maintained in the name of Lender and in no case will any financial asset credited to any Pledged Account be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower except to the extent the foregoing have been specially indorsed to Lender or in blank; and (ii) all Permitted Investments and all other property delivered to Lender pursuant to this Agreement will be promptly credited to one of the Pledged Accounts.

 

(b) Borrower hereby agrees that each item of property (whether investment property, financial asset, security, instrument, cash or otherwise) credited to any Pledged Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.

 

(c) Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with all “entitlement orders” (i.e. an order directing transfer or redemption of any financial asset relating to a Pledged Account, and any “entitlement order” as defined in Section 8-102(a)(8) of the UCC) and instructions (including any

 

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“instruction” within the meaning of Section 9-104 of the UCC) originated by Lender without further action or consent by Borrower, Manager or any other Person. Lender shall deliver any such order or instruction in accordance with the terms of this Agreement.

 

(d) Regardless of any provision in any other agreement, for purposes of the UCC, with respect to each Pledged Account, New York shall be deemed to be the bank’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC).

 

(e) Except for the claims and interest of Lender and of Borrower in the Pledged Accounts, Borrower represents and warrants that it does not know of any Lien on or claim to, or interest in, any Pledged Account or in any “financial asset” (as defined in Section 8-102(a) of the UCC) credited thereto. If any Person (other than Lender, Collection Account Bank, as agent for Lender, or Local Collection Account Bank, as agent for Lender) asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Accounts or in any financial asset carried therein, Borrower will promptly notify Lender thereof and shall indemnify, defend and hold Lender and each of the Indemnified Parties harmless from and against any such Lien, encumbrance or claim.

 

Section 2.15. Security Agreement .

 

(a) Pledge of Pledged Accounts . To secure the full and punctual payment and performance of all of the Indebtedness and Crossed Indebtedness, Borrower hereby assigns, conveys, pledges and transfers to Lender, as secured party, and grants Lender a first priority and continuing security interest in and to, the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (collectively, the “ Account Collateral ”):

 

(i) all of Borrower’s right, title and interest in the Pledged Accounts and all Money and Permitted Investments, if any, from time to time deposited or held in the Pledged Accounts or purchased with funds or assets on deposit in the Pledged Accounts;

 

(ii) all of Borrower’s right, title and interest in interest, dividends, Money, Instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any of the foregoing until such time as such items are disbursed from the Pledged Accounts; and

 

(iii) to the extent not covered by clause (i) or (ii ) above, all Proceeds of any or all of the foregoing until such time as such items are disbursed from the Pledged Accounts.

 

Lender and Collection Account Bank and Local Collection Account Bank, each as agent for Lender, shall have with respect to the foregoing collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein.

 

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(b) Covenants; Sole Dominion and Control . Borrower shall not have any right to withdraw Money from the Pledged Accounts. Borrower acknowledges and agrees that the Pledged Accounts are and shall at all times continue to be subject to and under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Notwithstanding anything set forth herein to the contrary, neither Borrower nor Manager nor any other person or entity, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Pledged Accounts, and Borrower acknowledges that the Collection Account Bank and the Local Collection Account Bank shall comply with all instructions originated by Lender without further consent by Borrower. Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with the instructions of Lender with respect to the Pledged Accounts without the further consent of Borrower or Manager. The Account Collateral shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other banking authority or Governmental Authority, as may now or hereafter be in effect, and to the rules, regulations and procedures of the financial institution where the Account Collateral is maintained relating to demand deposit accounts generally from time to time in effect.

 

(c) Financing Statements; Further Assurances . Borrower hereby irrevocably authorizes Lender at any time and from time to time to file any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are necessary or advisable to perfect the security interests granted to Lender in connection herewith. Such financing statements may describe the collateral in the same manner as described in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the collateral granted to Lender in connection herewith, including, without limitation, describing such property as “all assets” or “all personal property” of Borrower whether now owned or hereafter acquired. From time to time, at the expense of Borrower, Borrower shall promptly execute and deliver all further instruments, and take all further action, that Lender may reasonably request, in order to continue the perfection and protection of the pledge and security interest granted or purported to be granted hereby.

 

(d) Transfers and Other Liens . Borrower shall not sell or otherwise dispose of any of the Account Collateral other than pursuant to the terms of this Agreement and the other Loan Documents, or create or permit to exist any Lien upon or with respect to all or any of the Account Collateral, except for the Lien granted to Lender under or as contemplated by this Agreement.

 

(e) No Waiver . Every right and remedy granted to Lender under this Agreement or by law may be exercised by Lender at any time and from time to time, and as often as Lender may deem it expedient. Any and all of Lender’s rights with respect to the pledge of and security interest in the Account Collateral granted hereunder shall continue unimpaired, and to the extent permitted by law, Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (i) any proceeding of Borrower under the United States Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state,

 

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(ii) the release or substitution of Account Collateral at any time, or of any rights or interests therein or (iii) any delay, extension of time, renewal, compromise or other indulgence granted by Lender in the event of any Default with respect to the Account Collateral or otherwise hereunder. No delay or extension of time by Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon Borrower by Lender, shall constitute a waiver thereof, or limit, impair or prejudice Lender’s right, without notice or demand, to take any action against Borrower or to exercise any other power of sale, option or any other right or remedy.

 

(f) Lender Appointed Attorney-In-Fact . Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power of substitution, at any time after the occurrence and during the continuation of an Event of Default, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Account Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower with respect to the Account Collateral, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for herein with respect to the Account Collateral and to accomplish the purposes of this Agreement. The foregoing powers of attorney are irrevocable and coupled with an interest and shall terminate upon repayment of the Indebtedness and (subject to Section 2.11(g) ) Crossed Indebtedness in full.

 

(g) Continuing Security Interest; Termination . This Section 2.15 shall create a continuing pledge of and security interest in the Account Collateral and shall remain in full force and effect until payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) the payment in full of all Crossed Indebtedness. Upon payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) payment in full of all Crossed Indebtedness, Lender shall return to Borrower such of the Account Collateral as shall not have been applied pursuant to the terms hereof, and shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the pledge and lien hereof.

 

Section 2.16. Mortgage Recording Taxes . The Lien to be created by the Mortgage is intended to encumber the Mortgaged Property to the full extent of the Indebtedness. On the Closing Date, Borrower shall have paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage, if any.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.1. Conditions Precedent to Closing . The obligation of the Lender to make the Loan is subject to the satisfaction by Borrower (and Guarantor, where applicable) or waiver by Lender of the following conditions no later than the Closing Date:

 

(a) Loan Agreement . Borrower and Lender shall have executed and delivered this Agreement.

 

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(b) Note . Borrower shall have executed and delivered to Lender the Note.

 

(c) Environmental Indemnity Agreement; Guaranty of Non-Recourse Obligations . Borrower and Guarantor shall have executed and delivered the Environmental Indemnity Agreement to Lender. Guarantor shall have executed and delivered the Guaranty of Non-Recourse Obligations.

 

(d) Opinions of Counsel . Lender shall have received from counsel to Borrower and the Guarantor, legal opinions in form and substance acceptable to Lender, with respect to corporate matters and with respect to substantive non-consolidation of either Guarantor or the Manager, on the one hand, and either Borrower or any SPC Party, on the other, in the event of the bankruptcy of either Guarantor or the Manager. Such legal opinions shall be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(e) Organizational Documents . Lender shall have received with respect to each of Borrower and the Guarantor its certificate of formation, certificate of limited partnership or certificate of incorporation, as applicable, as amended, modified or supplemented to the Closing Date, as filed with the Secretary of State in the jurisdiction of organization and in effect on the Closing Date and certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than thirty (30) days prior to the Closing Date, together with a good standing certificate from such Secretary of State dated not more than thirty (30) days prior to the Closing Date and, for Borrower to the extent required by applicable law, a good standing certificate from the Secretaries of State (or the equivalent thereof) of each other State in which Borrower is required to be qualified to transact business, each dated not more than thirty (30) days prior to the Closing Date.

 

(f) Certified Resolutions, etc . Lender shall have received a certificate of each of Borrower and the Guarantor dated the Closing Date, certifying (i) the names and true signatures of its incumbent officers authorized to sign the Loan Documents to which Borrower or the Guarantor is a party, (ii) the Organizational Agreement of each of Borrower and Guarantor, in each case as in effect on the Closing Date, (iii) the resolutions of each of Borrower and the Guarantor, approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and (iv) that there have been no changes in any Organizational Agreement since the date of execution or preparation thereof.

 

(g) Additional Matters . Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender. All corporate and other organizational proceedings, all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender.

 

(h) Transaction Costs . Borrower shall have paid all Transaction Costs for which bills have been submitted in accordance with the provisions of Section 8.23 .

 

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(i) No Default or Event of Default . No event which would constitute either a Default or Event of Default under this Agreement or the other Loan Documents shall have occurred and be continuing on the Closing Date.

 

(j) No Injunction . No law or regulation shall have been adopted, no order, judgment or decree of any Governmental Authority shall have been issued, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction.

 

(k) Representations and Warranties . The representations and warranties herein and in the other Loan Documents shall be true and correct in all material respects on the Closing Date.

 

(l) Survey; Appraisal . Lender shall have received the Survey and the Appraisal with respect to the Mortgaged Property, which shall be in form and substance reasonably satisfactory to Lender.

 

(m) Property Condition Assessment . Lender shall have received the Property Condition Assessment with respect to the Mortgaged Property prepared by the Engineer or another Person acceptable to the Lender, which Property Condition Assessment shall be reasonably acceptable to Lender.

 

(n) Environmental Matters . Lender shall have received an Environmental Report prepared by an Environmental Auditor with respect to the Mortgaged Property, which Environmental Report shall be reasonably acceptable to Lender.

 

(o) Financial Information . Lender shall have received financial information relating to the Guarantor, Borrower and the Mortgaged Property reasonably satisfactory to Lender. Such information shall include the following, to the extent reasonably available:

 

(i) operating statements for the current year (including actual to date information, an annual budget and trailing twelve month data in hard copy and on diskette) and for not less than the three preceding years (including tenant improvements costs, leasing commissions, capital reserves, major repairs, replacement items and occupancy rates in hard copy and on diskette);

 

(ii) copies of Leases with respect to the tenants of the Mortgaged Property, a copy of the standard lease form, if any, and tenant lease abstracts, if available;

 

(iii) current property rent roll data on a tenant by tenant basis in hard copy (including name, square footage, lease term, expiration date, renewal options, base rent per square foot, sales volume psf (if applicable), percentage rent terms (if applicable), additional rent clauses (including stops, offsets, and other special provisions), escalation clauses for increase in operating expense, maintenance, insurance, real estate taxes and utilities, assignment, sublet and cancellation provisions and purchase options);

 

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(iv) current real estate tax bills and historical real estate tax bills of record for the Mortgaged Property for not less than the three preceding years; and

 

(v) the most recent annual financial statements and unaudited quarterly financial statements (if any).

 

The annual financial statements relating to the Mortgaged Property and Borrower shall be either (x) audited by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender or (y) prepared in accordance with agreed upon procedures reasonably acceptable to Lender to be performed by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender to create similar information.

 

(p) Pro-Forma Financial Statement; Operating Budget . Lender shall have received (i) the initial pro-forma financial statement and Operating Budget for the Mortgaged Property for the following twelve months (including on an annual and monthly basis a break-down of projected Gross Revenues, Property Expenses, Capital Improvement Costs (including Leasing Commissions and TI Costs), replacement reserve costs and average occupancy level (expressed as a percentage)), (ii) a financial statement that forecasts projected revenues and operating expenses for not less than three years (including the assumptions used in such forecast), and (iii) any local market study and/or research and demographics report prepared for Borrower and/or commercially available.

 

(q) Site Inspection . Borrower shall have provided to Lender the opportunity to perform, or cause to be performed on its behalf, an on-site due diligence review of the Mortgaged Property, which inspection is reasonably satisfactory to Lender.

 

(r) Mortgaged Property Documents .

 

(i) Mortgage; Assignment of Rents and Leases . Borrower shall have executed and delivered to Lender the Mortgage and the Assignment of Rents and Leases with respect to the Mortgaged Property and such Mortgage and Assignment of Rents and Leases shall have been filed of record in the appropriate filing office in the jurisdiction in which the Mortgaged Property is located or irrevocably delivered to a title agent for such recordation.

 

(ii) Financing Statements . Borrower shall have executed and delivered to Lender all financing statements required by Lender pursuant hereto and such financing statements shall have been filed of record in the appropriate filing offices in each of the appropriate jurisdictions or irrevocably delivered to a title agent for such recordation.

 

(iii) Management Agreement and Manager’s Subordination . Lender shall have received the executed Management Agreement for the Mortgaged Property and the Manager shall have executed and delivered the Manager’s Subordination to Lender.

 

(iv) Contract Assignment . Borrower shall have executed and delivered to Lender a Contract Assignment with respect to the Mortgaged Property.

 

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(s) Opinions of Counsel . Lender shall have received from counsel to Borrower reasonably acceptable to Lender in each state in which any Mortgaged Property is located its legal opinion, as to (i) the enforceability of the Mortgage, Assignment of Rents and Leases and any other Loan Documents governed by the law of such jurisdiction, (ii) perfection of Liens and security interests and (iii) other matters referred to therein with respect to the Mortgaged Property. The legal opinions will be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(t) Insurance . Lender shall have received certificates of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement. Such certificates shall indicate that Lender is a named additional insured and shall contain a loss payee endorsement in favor of Lender with respect to the property policies required to be maintained under this Agreement.

 

(u) Title Insurance Policy . Lender shall have received countersigned pro forma title policies or marked binders constituting the unconditional commitment (in form and substance reasonably satisfactory to Lender) to issue the Title Insurance Policy covering the Mortgaged Property with an aggregate amount at least equal to the Loan Amount.

 

(v) Lien Search Reports . Lender shall have received satisfactory reports of UCC (collectively, the “ UCC Searches ”), tax lien, judgment and litigation searches and title updates conducted by the companies issuing the Title Insurance Policy with respect to the Collateral, Guarantor and Borrower, such searches to be conducted in each of the locations required by Lender.

 

(w) Consents, Licenses, Approvals, etc . Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower and Guarantor and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect.

 

(x) Additional Real Estate Matters . Lender shall have received such other real estate related certificates and documentation relating to the Mortgaged Property as Lender may have reasonably requested. Such documentation shall include the following as requested by Lender and to the extent reasonably available:

 

(i) certificates of occupancy issued by the appropriate Governmental Authority of the jurisdiction in which the Mortgaged Property is located reflecting, and consistent with, the use of the Mortgaged Property as of the Closing Date;

 

(ii) letters from the appropriate local Governmental Authorities of the jurisdiction in which the Mortgaged Property is located, certifying that the Mortgaged Property is in compliance with all applicable zoning laws, rules and regulations, and a zoning endorsement to the applicable Title Insurance Policy with respect to the Mortgaged Property or an opinion of zoning counsel to such effect;

 

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(iii) copies of the Leases in effect at the Mortgaged Property as Lender may request (in addition to the copies delivered above); and

 

(iv) estoppel certificates in form and substance acceptable to Lender in respect of at least 75% of the rentable square footage rented to commercial tenants and every commercial tenant that rents more than 5% of the rentable square footage at the Mortgaged Property or such other percentages as shall be acceptable to Lender.

 

(y) Closing Statement . Lender and Borrower shall have agreed upon a detailed closing statement in a form reasonably acceptable to Lender, which includes a complete description of Borrower’s sources and uses of funds on the Closing Date.

 

(z) Crossed Loan Documents . The Crossed Loan Documents shall have been executed and delivered by the Crossed Borrower and other Persons party thereto.

 

Section 3.2. Execution and Delivery of Agreement . The execution and delivery of this Agreement by each party to this Agreement shall be deemed to constitute the satisfaction or waiver of the conditions set forth in Section 3.1 ; provided , that any such deemed satisfaction or waiver shall be solely for the purposes of Section 3.1 and shall not be deemed or construed to constitute a waiver of any other provision of this Agreement or of any provisions of any of the other Loan Documents, including, without limitation, any undelivered items undertaking or agreement or other post-closing agreement or undertaking entered into by Borrower and/or Guarantor.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.1. Representations and Warranties as to Borrower . Borrower represents and warrants that, as of the Closing Date:

 

(a) Organization . Borrower (i) is a duly organized and validly existing limited liability company or limited partnership, as applicable, in good standing under the laws of the State of Texas, (ii) has the requisite power and authority to own its properties (including, without limitation, the Mortgaged Property) and to carry on its business as now being conducted and is qualified to do business in the jurisdiction in which the Mortgaged Property is located, and (iii) has the requisite power to execute and deliver, and perform its obligations under, this Agreement, the Note and all of the other Loan Documents to which it is a party.

 

(b) Authorization; No Conflict; Consents and Approvals . The execution and delivery by Borrower of this Agreement, the Note and each of the other Loan Documents to which it is a party, Borrower’s performance of its obligations hereunder and under such other Loan Documents and the creation of the security interests and liens provided for in this Agreement and the other Loan Documents to which it is a party (i) have been duly authorized by all requisite action on the part of Borrower, (ii) will not violate any provision of any Legal Requirements, any order of any court or other Governmental Authority, the Organizational Agreement or any indenture or agreement or other instrument to which Borrower is a party or by which Borrower is bound, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition

 

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of any Lien of any nature whatsoever upon the Mortgaged Property pursuant to, any such indenture or agreement or material instrument other than the Loan Documents. Other than those obtained or filed on or prior to the Closing Date, Borrower is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the other Loan Documents executed and delivered by Borrower.

 

(c) Enforceability . This Agreement, the Note and each other Loan Document executed by Borrower in connection with the Loan (including, without limitation, any Collateral Security Instrument), is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles. This Agreement, the Note and such other Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower (including the defense of usury), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

 

(d) Litigation . There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending and served or, to the best knowledge of Borrower, threatened against Borrower, Guarantor or any Collateral, which actions, suits or proceedings, if determined against Borrower, Guarantor or such Collateral, are reasonably likely to result in a Material Adverse Effect.

 

(e) Agreements . Borrower is not in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any Collateral is bound which default is reasonably likely to have a Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor is a party to any agreement or instrument or subject to any restriction that is reasonably likely to have a Material Adverse Effect.

 

(f) No Bankruptcy Filing . Neither Borrower nor, to Borrower’s knowledge, Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a material portion of its assets or property. To the best knowledge of Borrower, no Person is contemplating the filing of any such petition against Borrower.

 

(g) Solvency . Giving effect to the transactions contemplated hereby, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities (including, without limitation, subordinated, unliquidated, disputed and contingent liabilities). The present fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities (including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured). Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including, without limitation, contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

 

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(h) Other Debt . Borrower has not borrowed or received other debt financing (whether unsecured or secured by the Mortgaged Property or any part thereof) which is outstanding as of the Closing Date. As of the Closing Date, Borrower has no Other Borrowings other than trade debt expressly permitted under Article VIII of this Agreement and the Crossed Loans.

 

(i) Full and Accurate Disclosure . No statement of fact made by or on behalf of Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. To the best knowledge of Borrower, there is no fact that has not been disclosed to Lender that is reasonably likely to result in a Material Adverse Effect.

 

(j) Financial Information . All financial statements and other data concerning Borrower, the Mortgaged Property and, to Borrower’s knowledge, Guarantor, that has been delivered by or on behalf of Borrower or Guarantor to Lender is true, complete and correct in all material respects and, except as disclosed on Schedule 4 attached hereto, has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Lender, there has been no change in the financial position of Borrower, the Mortgaged Property or, to Borrower’s knowledge, Guarantor, or in the results of operations of Borrower or, to Borrower’s knowledge, Guarantor, which change results or is reasonably likely to result in a Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor has incurred any obligation or liability, contingent or otherwise, not reflected in such financial data, which is likely to have a Material Adverse Effect upon its business operations or the Mortgaged Property.

 

(k) Investment Company Act; Public Utility Holding Company Act . Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money in accordance with this Agreement.

 

(l) Compliance . Borrower is in compliance with all applicable Legal Requirements, except for noncompliance that is not reasonably likely to have a Material Adverse Effect. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority except for defaults or violations which are not reasonably likely to have a Material Adverse Effect.

 

(m) Use of Proceeds; Margin Regulations . Borrower will use the proceeds of the Loan for the purposes described in Section 2.2 . No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of

 

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Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements.

 

(n) Organizational Chart . The organizational chart set forth as Schedule 2 accurately sets forth the direct and indirect ownership structure of Borrower as of the Closing Date.

 

(o) No Defaults . No Default or Event of Default exists under or with respect to any Loan Document.

 

(p) Plans and Welfare Plans . The assets of Borrower do not constitute “plan assets” under regulations currently promulgated under ERISA. Neither Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is required to contribute to any Plan or Multiemployer Plan nor has the Borrower or any ERISA Affiliate sponsored, maintained, contributed to or been required to contribute to any Plan or Multiemployer Plan within the past six years. There are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan that would reasonably be expected to result in a material liability to Borrower. There have been no violations of Section 4980B of the Code or Section 601, et seq. of ERISA by Borrower or any of its ERISA Affiliates that would reasonably be expected to result in a material liability to Borrower. No event has occurred, and there exists no condition or set of circumstances, in connection with any Plan or Welfare Plan under which Borrower or, to the best knowledge of Borrower, any ERISA Affiliate, directly or indirectly (through an indemnification agreement or otherwise), is reasonably likely to be subject to any material risk of material liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide any retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower, or, to the best knowledge of Borrower, any ERISA Affiliate other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by fully paid up insurance or (iii) severance benefits.

 

(q) Additional Borrower UCC Information . Borrower’s organizational identification number is 800328440 and the full legal name of Borrower is as set forth on the signature pages hereof and Borrower has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name).

 

(r) Not Foreign Person . Borrower is not a “foreign person” within the meaning of § 1445(f)(3) of the Code.

 

(s) Labor Matters . Borrower is not a party to any collective bargaining agreements.

 

(t) Pre-Closing Date Activities . Borrower has not conducted any business or other activity on or prior to the Closing Date, other than in connection with the acquisition, management and ownership of the Mortgaged Property.

 

(u) No Bankruptcies or Criminal Proceedings Involving Borrower or Related Parties . No bankruptcy, insolvency, reorganization or comparable proceedings have ever been

 

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instituted by or against Borrower, any Guarantor, any SPC Party, any other owner of any direct ownership interest in Borrower (each such Person being herein referred to as a “Principal”), and no such proceeding is now pending or contemplated. None of Borrower, any Principal, or to Borrower’s knowledge, any other individual or entity directly or indirectly owning or controlling, or the family members of which own or control, any direct or indirect beneficial ownership interest in Borrower or in the Manager or asset manager for the Mortgaged Property, have been charged, indicted or convicted, or are currently under the threat of charge, indictment or conviction, for any felony or crime punishable by imprisonment.

 

(v) No Prohibited Persons . Neither Borrower nor, to Borrower’s knowledge, any Guarantor or any other Principal or nor any of their respective officers, directors, shareholders, partners or members is or will be an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive` Order 13224 issued on September 24, 2001 (“ EO13224 ”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“ OFAC ”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf)(the “ OFAC List ”); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “ Prohibited Person ”).

 

Section 4.2. Representations and Warranties as to the Mortgaged Property . Borrower hereby represents and warrants to Lender that, as to the Mortgaged Property and the Mortgage, as of the Closing Date:

 

(a) Title to the Mortgaged Property . Borrower owns good, marketable and insurable fee simple title to the Mortgaged Property (other than Personalty), free and clear of all Liens, other than the Permitted Encumbrances. Borrower owns the Personalty free and clear of any and all Liens, other than Permitted Encumbrances. There are no outstanding options to purchase or rights of first refusal or restrictions on transferability affecting any Mortgaged Property or any portion thereof or interest therein.

 

(b) Utilities and Public Access . Except as disclosed on Schedule 4, (i) the Mortgaged Property has adequate rights of access to public ways and is served by public water, electric, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary to the continued use and enjoyment of the Mortgaged Property as presently used and enjoyed are located in the public right-of-way abutting the premises, and all such utilities are connected so as to serve the Mortgaged Property without passing over other property except for land or easement areas of or available to the utility company providing such utility service; and (iii) all roads necessary for the full utilization of the Mortgaged Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities or are the subject of access easements for the benefit of the Mortgaged Property.

 

(c) Condemnation . No Taking has been commenced or, to the best of Borrower’s knowledge, is contemplated with respect to all or any portion of any Mortgaged Property or for the relocation of roadways providing access to any Mortgaged Property.

 

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(d) Compliance . The Mortgaged Property and the current use thereof is in compliance with all applicable Legal Requirements (including, without limitation, building, parking, subdivision, land use, health, fire, safety and zoning ordinances and codes) and all applicable Insurance Requirements, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Mortgaged Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by Borrower with respect to the Mortgaged Property without Lender’s prior written consent.

 

(e) Environmental Compliance . Except for matters set forth in the Environmental Reports delivered to Lender in connection with the Loan (true, correct and complete copies of which have been provided to Lender by Borrower):

 

(i) Borrower and the Mortgaged Property are in full compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by Borrower or the Manager of all environmental, health and safety permits, licenses and other governmental authorizations required in connection with their ownership and operation of the Mortgaged Property under all Environmental Laws), except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

(ii) There is no Environmental Claim pending or, to the actual knowledge of Borrower, threatened, and no penalties arising under Environmental Laws have been assessed against Borrower, to Borrower’s knowledge, the Manager or any Mortgaged Property, or, to the actual knowledge of Borrower, against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law which is reasonably likely to result in a Material Adverse Effect.

 

(iii) No investigation or review is pending or, to the actual knowledge of Borrower, threatened by any Governmental Authority, citizens group, employee or other Person with respect to any alleged failure by Borrower or the Manager or any Mortgaged Property to have any environmental, health or safety permit, license or other authorization required under, or to otherwise comply with, any Environmental Law or with respect to any alleged liability of Borrower or the Manager for any Use or Release of any Hazardous Substances which is reasonably likely to result in a Material Adverse Effect.

 

(iv) There are no present and, to the best knowledge of the Borrower, there have been no past Releases of any Hazardous Substances that are reasonably likely to form the basis of any Environmental Claim against Borrower, the Manager, any Mortgaged Property or against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) and which are reasonably likely to result in a Material Adverse Effect.

 

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(v) Without limiting the generality of the foregoing, to the best knowledge of the Borrower, there is not present at, on, in or under any Mortgaged Property, any Hazardous Substances (including, without limitation, PCB-containing equipment, asbestos or asbestos containing materials, underground storage tanks or surface impoundments for Hazardous Substances, lead in drinking water or lead based paint) (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the respective tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) or any fungus, mold, mildew or biological agent the presence of which is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property.

 

(vi) No liens are presently recorded with the appropriate land records under or pursuant to any Environmental Law with respect to the Mortgaged Property and no Governmental Authority has been taking or, to the actual knowledge of Borrower, is in the process of taking any action that could subject the Mortgaged Property to Liens under any Environmental Law.

 

(vii) There have been no environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession of Borrower in relation to any Mortgaged Property which have not been made available to Lender.

 

(f) Mortgage and Other Liens . Each Mortgage creates a valid and enforceable first priority Lien on the applicable Mortgaged Property described therein, as security for the repayment of the Indebtedness, subject only to the Permitted Encumbrances applicable to such Mortgaged Property. This Agreement creates a valid and enforceable first priority Lien on all Account Collateral (subject to Permitted Encumbrances). Each Collateral Security Instrument establishes and creates a valid, subsisting and enforceable Lien on and a security interest in, or claim to, the rights and property described therein. All property covered by any Collateral Security Instrument in which a security interest can be perfected by the filing of a financing statement is subject to a UCC financing statement filed and/or recorded, as appropriate (or irrevocably delivered to an agent for such recordation or filing) in all places necessary to perfect a valid first priority (subject to Permitted Encumbrances) Lien with respect to the rights and property that are the subject of such Collateral Security Instrument to the extent governed by the UCC.

 

(g) Assessments . Except as disclosed on the Title Insurance Policy, there are no pending or, to the best knowledge of Borrower, proposed special or other assessments for public improvements or otherwise affecting any Mortgaged Property, nor are there any contemplated improvements to any Mortgaged Property that may result in such special or other assessments.

 

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(h) No Joint Assessment; Separate Lots . Borrower has not suffered, permitted or initiated the joint assessment of the Mortgaged Property (i) with any other real property constituting a separate tax lot, and (ii) with any portion of the Mortgaged Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Mortgaged Property as a single lien. The Mortgaged Property is comprised of one or more parcels, each of which constitutes a separate tax lot and none of which constitutes a portion of any other tax lot.

 

(i) No Prior Assignment . Lender is the collateral assignee of Borrower’s interest under the Leases. There are no prior assignments of the Leases or any portion of the Rent due and payable or to become due and payable which are presently effective.

 

(j) Permits; Certificate of Occupancy . Borrower has obtained all Permits necessary to the use and operation of the Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. The use being made of the Mortgaged Property is in conformity with the certificate of occupancy and/or such Permits for such Mortgaged Property and any other restrictions, covenants or conditions affecting such Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

(k) Flood Zone . Except as shown on the Survey, no Mortgaged Property or any portion thereof is located in a flood hazard area as defined by the Federal Insurance Administration.

 

(l) Physical Condition . Except as set forth in the Property Condition Assessment, to the best knowledge of Borrower, the Mortgaged Property is free of structural defects and all Improvements, including the building systems contained therein are in good working order subject to ordinary wear and tear.

 

(m) Security Deposits . Borrower and the Manager are in compliance with all Legal Requirements relating to all Security Deposits with respect to the Mortgaged Property except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

(n) Intellectual Property . All material Intellectual Property that Borrower owns or has pending, or under which it is licensed, is in good standing and, to Borrower’s knowledge, uncontested. There is no right under any Intellectual Property necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business. Borrower has not received notice of infringement with respect to asserted Intellectual Property of others. To Borrower’s knowledge, there is no infringement by others of material Intellectual Property of Borrower.

 

(o) No Encroachments . Except as shown on the Survey, to the best knowledge of Borrower, (i) all of the Improvements which were included in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, (ii) no improvements on adjoining properties

 

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encroach upon any Mortgaged Property, (iii) no Improvements encroach upon any easements or other encumbrances affecting the Mortgaged Property in a manner that is reasonably expected to materially and adversely affect the value or marketability of the Mortgaged Property, and (iv) all of the Improvements comply with all material requirements of any applicable zoning and subdivision laws and ordinances.

 

(p) Management Agreement . The Management Agreement is in full force and effect in accordance with its terms. There is no default, breach or violation existing thereunder by Borrower or, to the best knowledge of Borrower, any other party thereto and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation by Borrower or, to the best knowledge of Borrower, any other party thereunder or entitle Borrower or, to the best knowledge of Borrower, any other party thereto to terminate any such agreement.

 

(q) Leases . No Mortgaged Property is subject to any Leases other than the Leases described in the rent rolls delivered to Lender in connection with the making of the Loan. No person has any possessory interest in any Mortgaged Property or right to occupy the same except under and pursuant to the provisions of the Leases. The current Leases are in full force and effect in accordance with their respective terms and, except as disclosed on Schedule 4 , there are no monetary or other material defaults thereunder by either party and no conditions which with the passage of time and/or notice would constitute monetary or other material defaults thereunder. Except as disclosed on Schedule 4 , no portion of the Mortgaged Property is leased to or occupied by any Affiliate of Borrower.

 

Section 4.3. Survival of Representations . Borrower agrees that (i) all of the representations and warranties of Borrower set forth in Section 4.1 and 4.2 and in the other Loan Documents delivered on the Closing Date are made as of the Closing Date, and (ii) all representations and warranties made by Borrower shall survive the delivery of the Note and making of the Loan and continue for so long as any amount remains owing to Lender under this Agreement, the Note or any of the other Loan Documents; provided , however , that the representations set forth in Section 4.2(e) shall survive in perpetuity. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on Lender’s behalf.

 

ARTICLE V.

AFFIRMATIVE COVENANTS

 

Section 5.1. Affirmative Covenants . Borrower covenants and agrees that, from the date hereof and until payment in full of the Indebtedness:

 

(a) Existence; Compliance with Legal Requirements: Insurance . Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a limited liability company or limited partnership, as applicable, and any rights, licenses, Permits and franchises necessary for the conduct of its business and will comply with all Legal Requirements and Insurance Requirements applicable to it and to the Mortgaged Property in all material respects. Borrower shall at all times maintain, preserve and protect all

 

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franchises and trade names and preserve all the remainder of its property necessary for the continued conduct of its business and keep the Mortgaged Property in good repair, working order and condition, except for reasonable wear and use (and except for casualty losses as to which other provisions hereof shall govern), and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto.

 

(b) Basic Carrying Costs and Other Claims; Contest .

 

(i) Subject to Borrower’s contest rights set forth in Section 5.1(b)(ii) below, Borrower will pay prior to delinquency (A) all Basic Carrying Costs with respect to Borrower and the Mortgaged Property; (B) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of the Mortgaged Property or its other properties or assets (hereinafter referred to as the “ Lien Claims ”); and (C) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. Borrower’s obligation to pay Basic Carrying Costs pursuant to this Agreement shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes on the Mortgaged Property or other Impositions.

 

(ii) Borrower shall not be required to pay, discharge or remove any Imposition or Lien Claim so long as Borrower contests in good faith such Imposition or Lien Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Mortgaged Property or any portion thereof, so long as:

 

(A) the Indebtedness shall not have been accelerated, if an Event of Default shall have occurred and be continuing;

 

(B) prior to the date on which such Imposition or Lien Claim would otherwise have become delinquent, Borrower shall have given Lender prior written notice of its intent to contest said Imposition or Lien Claim deposited with Lender (or with a court of competent jurisdiction or other appropriate body approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount equal to at least one hundred twenty five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Lien Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon, together with such other security as may be required in the proceeding, or as may be reasonably required by Lender, to insure the payment of any such Imposition or Lien Claim and all interest and penalties thereon; provided , that notwithstanding the foregoing, with respect to Impositions or Lien Claims in an amount not in excess of $100,000, Borrower shall not be required to deposit such amounts with the Lender, so long as Borrower demonstrates to the reasonable satisfaction of the Lender that Borrower has otherwise reserved such funds or such funds are otherwise available to the Borrower;

 

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(C) no reasonable risk of sale, forfeiture or loss of any interest in the Mortgaged Property or any part thereof arises, in Lender’s reasonable judgment, during the pendency of such contest;

 

(D) such contest does not, in Lender’s determination, have a Material Adverse Effect;

 

(E) such contest is based on bona fide , material, and reasonable claims or defenses;

 

(F) such proceeding shall be permitted under and be conducted in accordance with the provisions of any documents evidencing any Permitted Encumbrances to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; and

 

(G) Borrower shall have obtained such endorsements to the Title Insurance Policy with respect to such Imposition or Lien Claim as Lender may require (or escrowed with a title insurance company funds sufficient to obtain such endorsements pursuant to escrow arrangements reasonably satisfactory to Lender).

 

Any such contest shall be prosecuted with due diligence, and Borrower shall promptly pay the amount (if any determined to be due) of such Imposition or Lien Claim as finally determined, together with all interest and penalties payable in connection therewith (if any). Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Lien Claim for which a deposit was made shall be promptly repaid to Borrower unless an Event of Default shall have occurred and be continuing, in which case said surplus may be retained by Lender to be applied in accordance with Section 2.8 .

 

(c) Litigation . Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower, any of the constituent members or partners of Borrower, any Guarantor or the Mortgaged Property (or any portion thereof) which is reasonably likely to have a Material Adverse Effect.

 

(d) Environmental Remediation .

 

(i) If Borrower is required to undertake any investigation, site monitoring, cleanup, removal, restoration or other remedial work of any kind or nature pursuant to an order or directive of any Governmental Authority or under any applicable Environmental Law, because of or in connection with the current or future presence, suspected presence, Release or suspected Release of a Hazardous Substance on, under or from any Mortgaged Property or any portion thereof (collectively, the “ Remedial Work ”), Borrower shall promptly commence and diligently prosecute to completion all such Remedial Work, and

 

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shall conduct such Remedial Work in accordance with all applicable Environmental Laws. If any fungus, mold, mildew or other biological agent is present at any Mortgaged Property in a manner or at a level that is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property or that poses a significant health risk, the Borrower shall promptly commence and diligently prosecute to completion the remediation of such condition to the reasonable satisfaction of the Lender or its servicer, which shall also constitute Remedial Work. In all events, such Remedial Work shall be commenced within such period of time as required under any applicable Environmental Law; provided , however , that Borrower shall not be required to commence such Remedial Work within the above specified time periods: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time periods would result in Borrower or such Remedial Work violating any Environmental Law or (z) if Borrower, at its expense and after prior notice to Lender, is contesting by appropriate legal, administrative or other proceedings conducted in good faith and with due diligence the need to perform Remedial Work, as long as (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Mortgaged Property nor any part thereof or interest therein shall be sold, forfeited or lost if Borrower does not perform the Remedial Work being contested, and Borrower would have the opportunity to do so, in the event of Borrower’s failure to prevail in the contest, (3) the Lenders would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Mortgaged Property nor any interest therein would be subject to the imposition of any lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to the Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower’s failure to prevail in such contest in such amount as may be reasonably requested by the Lender.

 

(ii) If requested by Lender, all Remedial Work under clause (i) above shall be performed by contractors, and under the supervision of a consulting Engineer, each approved in advance by Lender which approval shall not be unreasonably withheld or delayed. Borrower shall pay all costs and expenses reasonably incurred in connection with such Remedial Work. If Borrower does not timely commence and diligently prosecute to completion the Remedial Work, Lender may (but shall not be obligated to), upon 30 days prior written notice to Borrower of its intention to do so, cause such Remedial Work to be performed. Borrower shall pay or reimburse Lender on demand for all expenses (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to or incurred by Lender in connection with monitoring, reviewing or performing any Remedial Work in accordance herewith.

 

(iii) Borrower shall not commence any Remedial Work under clause (i) above, nor enter into any settlement agreement, consent decree or other compromise relating to any Hazardous Substances or Environmental Laws without providing notice to Lender as provided in Section 5.1(f) . Notwithstanding the foregoing, if the presence or threatened

 

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presence of Hazardous Substances on, under, about or emanating from the Mortgaged Property poses an immediate threat to the health, safety or welfare of any Person or the environment, or is of such a nature that an immediate response is necessary or required under applicable Environmental Law, Borrower may complete all necessary Remedial Work. In such events, Borrower shall notify Lender as soon as practicable and, in any event, within three (3) Business Days, of any action taken.

 

(iv) In the event the Environmental Report recommends the development of an operation and maintenance program for any recognized environmental condition at a Mortgaged Property (including, without limitation, underground storage tanks asbestos and asbestos containing materials, lead-based paints and lead in water supplies) (“O & M Program”), Borrower shall develop an O & M Program , as approved by Lender, in Lender’s reasonable discretion, and shall, during the term of the Loan, comply in all respects with the terms and conditions of the O & M Program.

 

(e) Environmental Matters: Inspection .

 

(i) Borrower shall not permit any Hazardous Substances to be present on or under or to emanate from the Mortgaged Property, or migrate from adjoining property onto or into the Mortgaged Property, except under conditions permitted by applicable Environmental Laws (such as cleaning materials and other items used at the Mortgaged Property by Borrower, Manager or tenants thereof in each case in the ordinary course of business and in each case in compliance with, and in amounts not in excess of that permitted under, Environmental Laws) and, in the event that such Hazardous Substances are present on, under or emanate from the Mortgaged Property, or migrate onto or into the Mortgaged Property, Borrower shall cause the removal or remediation of such Hazardous Substances as required by applicable Environmental Laws, either on its own behalf or by causing a tenant or other party legally responsible therefor to perform such removal and remediation.

 

(ii) Upon reasonable prior written notice, Lender shall have the right, except as otherwise provided under Leases, at all reasonable times during normal business hours to enter upon and inspect environmental conditions with respect to all or any portion of any Mortgaged Property, provided that such inspections shall not unreasonably interfere with the operation or the tenants, residents or occupants of any Mortgaged Property. If Lender has reasonable grounds to suspect that Remedial Work may be required, Lender shall notify Borrower and, thereafter, may select a consulting Engineer to conduct and prepare reports of such inspections (with notice to Borrower prior to the commencement of such inspection). Borrower shall be given a reasonable opportunity to review any reports, data and other documents or materials reviewed or prepared by the Engineer, and to submit comments and suggested revisions or rebuttals to same. The inspection rights granted to Lender in this Section 5.1(e) shall be in addition to, and not in limitation of, any other inspection rights granted to Lender in this Agreement, and shall expressly include the right (if Lender reasonably suspects that Remedial Work may be required) to conduct soil borings, establish ground water monitoring wells and conduct other customary environmental tests, assessments and audits.

 

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(iii) Borrower agrees to bear and shall pay or reimburse Lender on demand for all sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to, or incurred by Lender in connection with, the inspections and reports described in this Section 5.1(e) (to the extent such inspections and reports relate to any Mortgaged Property) in the following situations:

 

(x) If Lender has reasonable grounds to believe, at the time any such inspection is ordered, that there exists an occurrence or condition that could lead to a material Environmental Claim;

 

(y) If any such inspection reveals an occurrence or condition that is reasonably likely to lead to a material Environmental Claim with respect to such Mortgaged Property; or

 

(z) If an Event of Default with respect to such Mortgaged Property exists at the time any such inspection is ordered, and such Event of Default relates to any representation, covenant or other obligation pertaining to Hazardous Substances, Environmental Laws or any other environmental matter.

 

(f) Environmental Notices . Borrower shall promptly provide notice to Lender of:

 

(i) a material Environmental Claim asserted by any Governmental Authority with respect to any Hazardous Substance on, in, under or emanating from any Mortgaged Property;

 

(ii) any proceeding, investigation or inquiry commenced or threatened in writing by any Governmental Authority, against Borrower or with respect to any Mortgaged Property concerning the presence, suspected presence, Release or threatened Release of Hazardous Substances from or onto, in or under any property not owned by Borrower (including, without limitation, proceedings under CERCLA;

 

(iii) a material Environmental Claim asserted or threatened against any Mortgaged Property, against Borrower or against any other party occupying any Mortgaged Property or any portion thereof, in each case which becomes known to Borrower;

 

(iv) the discovery by Borrower of a material occurrence or condition giving rise to an obligation of the Borrower to the Lender hereunder on any Mortgaged Property or on any real property adjoining any Mortgaged Property;

 

(v) the commencement or completion of any Remedial Work; and

 

(vi) any of the foregoing clauses (i) – (v) as to which a tenant notifies Borrower under a Lease with respect to such tenant.

 

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(g) Copies of Notices . Borrower shall transmit to Lender copies of any citations, orders, notices or other written communications received from any Person and any notices, reports or other written communications submitted to any Governmental Authority with respect to the matters described in Section 5.1(f) .

 

(h) Environmental Claims . Lender may join and participate in, as a party if Lender so determines, any legal or administrative proceeding or action concerning the Mortgaged Property or any portion thereof under any Environmental Law, if, in Lender’s reasonable judgment, the interests of Lender shall not be adequately protected by Borrower; provided , however , that Lender shall not participate in day-to-day decision making with respect to environmental compliance. Borrower shall pay or reimburse Lender on demand for all reasonable sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) by Lender in connection with any such action or proceeding.

 

(i) Environmental Indemnification . Borrower shall indemnify, reimburse, defend, and hold harmless Lender, and each of its respective parents, subsidiaries, Affiliates, shareholders, directors, officers, employees, representatives, agents, successors, assigns and attorneys (collectively, the “ Indemnified Parties ”) for, from, and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses (including, without limitation, interest, penalties, reasonable attorneys’ fees, disbursements and expenses, and reasonable consultants’ fees, disbursements and expenses (but excluding internal overhead, administrative, lost opportunity and similar costs of Lender)), asserted against, resulting to, imposed on, or incurred by any Indemnified Party, directly or indirectly, in connection with any of the following (except to the extent same are directly and solely caused by the gross negligence or willful misconduct of any Indemnified Party, and excepting matters resulting from actions taken or events occurring with respect to the Mortgaged Property or any portion thereof after the Lender forecloses its Lien upon the Mortgaged Property or any portion thereof or accepts a deed in lieu of foreclosure or acquires possession of the Mortgage Property upon an Event of Default as a so-called “mortgagee-in-possession” in which Borrower relinquishes possession of the Mortgaged Property unless and to the extent such matters relate to any of the following which occurred prior thereto):

 

(i) events, circumstances, or conditions which form the reasonable basis for an Environmental Claim;

 

(ii) any pollution or threat to human health or the environment that is related in any way to Borrower’s or any previous owner’s or operator’s management, use, control, ownership or operation of any Mortgaged Property (including, without limitation, all on-site and off-site activities involving Hazardous Substances), and whether occurring, existing or arising prior to or from and after the date hereof, and whether or not the pollution or threat to human health or the environment is described in the Environmental Reports;

 

(iii) any Environmental Claim against any Person whose liability for such Environmental Claim Borrower has or may have assumed or retained either contractually or by operation of law; or

 

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(iv) the breach of any representation, warranty or covenant set forth in Section 4.2(e) and Sections 5.1(d) through 5.1(i) , inclusive.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(i) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(j) General Indemnity .

 

(i) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), administrative and judicial actions and proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, and litigation costs, of whatever kind or nature and whether or not incurred in connection with any judicial or administrative proceedings (including, but not limited to, reasonable attorneys’ fees and other reasonable costs of defense) (the “ Losses ”) imposed upon or incurred by or asserted against any Indemnified Parties (except as to any Indemnified Party to the extent same are directly and solely caused by the gross negligence or willful misconduct of such Indemnified Party) and directly or indirectly arising out of or in any way relating to any one or more of the following:

 

(A) ownership of the Note or any of the other Loan Documents or otherwise related to the Mortgaged Property or any interest therein or receipt of any Rents or Accounts;

 

(B) any untrue statement of any material fact provided by Borrower, its Affiliates or their respective officers, employees, representatives or agents and contained in any information concerning Borrower, the Mortgaged Property or the Loan or the omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information or in light of the circumstances under which they were made not misleading;

 

(C) any and all lawful action that may be taken and is taken by the Lender in connection with the enforcement of the provisions of this Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Borrower, any Guarantor, the SPC Party or any other holder of any direct ownership interest in Borrower becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding;

 

(D) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

(E) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

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(F) any failure on the part of Borrower to perform or be in compliance with any of the terms of this Agreement or any of the other Loan Documents;

 

(G) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof pursuant to provisions of this Agreement;

 

(H) the failure of Borrower to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement;

 

(I) any failure of the Mortgaged Property to be in compliance with any Legal Requirement;

 

(J) the enforcement by any Indemnified Party of the provisions of this Section 5.1(j) ; and

 

(K) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease.

 

Any amounts payable to an Indemnified Party by reason of the application of this Section 5.1(j)(i) shall become due and payable ten (10) Business Days after written demand and shall bear interest at the Default Rate from the tenth (10th) Business Day after demand until paid.

 

(ii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any of the Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Agreement, the Note or any of the other Loan Documents.

 

(iii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs) that the Indemnified Parties may incur, directly or indirectly, as a result of a default under Borrower’s covenants with respect to ERISA and employee benefits plans contained herein, including, without limitation, any costs or expenses incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in the Lender’s reasonable discretion).

 

(iv) Promptly after receipt by an Indemnified Party under this Section 5.1(j) of notice of the making of any claim or the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made by such Indemnified Party against Borrower under this Section 5.1(j) , notify Borrower in writing, but the omission so to notify Borrower will not relieve Borrower from any liability which it may have to any

 

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Indemnified Party under this Section 5.1(j) or otherwise unless and to the extent that Borrower did not otherwise possess knowledge of such claim or action and such failure resulted in the forfeiture by Borrower of substantial rights and defenses. In case any such claim is made or action is brought against any Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from Borrower, Borrower will be entitled to participate in, and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party; and, upon receipt of notice from Borrower to such Indemnified Party of its election so to assume the defense of such claim or action and only upon approval by the Indemnified Party of such counsel (such approval not to be unreasonably withheld or delayed), Borrower will not be liable to such Indemnified Party under this Section 5.1(j) for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof. Notwithstanding the preceding sentence, each Indemnified Party will be entitled to employ counsel separate from such counsel for Borrower and from any other party in such action if such Indemnified Party reasonably determines that a conflict of interest exists which makes representation by counsel chosen by Borrower not advisable. In such event, Borrower shall pay the reasonable fees and disbursements of such separate counsel. Borrower shall not, without the prior written consent of an Indemnified Party, which consent shall not be unreasonably withheld or delayed, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding. Each Indemnified Party shall not enter into a settlement of or consent to the entry of any judgment with respect to any action, claim, suit or proceeding as to which an Indemnified Party would be entitled to indemnification hereunder without the prior written consent of Borrower, which consent shall not be unreasonably withheld or delayed.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(j) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(k) Access to Mortgaged Property . Borrower shall permit agents, representatives and employees of Lender to inspect the Mortgaged Property or any part thereof at such reasonable times as may be requested by Lender upon reasonable advance written notice (except during an Event of Default, in which case advance notice shall not be required), subject, however, to the rights of Borrower and of the tenants of the Mortgaged Property.

 

(l) Notice of Default . Borrower shall promptly advise Lender in writing of any change in Borrower’s condition, financial or otherwise, that is reasonably likely to have a Material Adverse Effect, or of the occurrence of any Default or Event of Default.

 

(m) Cooperate in Legal Proceedings . Except with respect to any claim by Borrower or the Guarantor against Lender, Borrower shall reasonably cooperate with Lender with respect to any proceedings before any Governmental Authority that are reasonably likely to in any way materially affect the rights of Lender hereunder or any rights obtained by Lender under any of the Loan Documents and, in connection therewith, shall not prohibit Lender, at its election, from participating in any such proceedings.

 

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(n) Perform Loan Documents . Borrower shall observe, perform and satisfy in all material respects all of the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Loan Documents.

 

(o) Insurance Benefits . Borrower shall reasonably cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Borrower or Lender in connection with any Mortgaged Property. Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) out of such Insurance Proceeds, all as more specifically provided in this Agreement.

 

(p) Further Assurances . Borrower shall, at Borrower’s sole cost and expense:

 

(i) upon Lender’s reasonable request therefor given from time to time (but no more frequently than annually unless and Event of Default exists), pay for (a) reports of UCC, tax lien, judgment and litigation searches with respect to Borrower, and (b) searches of title to the Mortgaged Property, each such search to be conducted by search firms designated by Lender in each of the locations designated by Lender;

 

(ii) furnish to Lender all instruments, documents, certificates, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished pursuant to the terms of the Loan Documents;

 

(iii) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary, to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Note, as Lender may reasonably require (including, without limitation, tenant estoppel certificates, an amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments); and

 

(iv) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time.

 

(q) Management of Mortgaged Property .

 

(i) The Mortgaged Property shall be managed at all times by the current Manager or another manager reasonably satisfactory to Lender, pursuant to a Management Agreement. Any such Manager may be an Affiliate of Borrower, provided that: (a) the terms and conditions of such Manager’s engagement are at arm’s length, reasonable, competitive and customary in the applicable marketplace; and (b) Lender has approved such Manager and such terms, which approval shall not be unreasonably

 

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withheld or delayed. The Management Agreement, dated as of the date hereof, between the Borrower and the Manager is deemed approved by Lender in all respects. Borrower shall cause the Manager of the Mortgaged Property to agree that such Management Agreement is subject and subordinate in all respects to the Indebtedness and to the Lien of the Mortgage. A Management Agreement may be terminated or assigned by the Manager (1) by Borrower at any time in accordance with the provisions of such Management Agreement so long as a successor or assignee Manager as specified below shall have been appointed and approved and such successor Manager has (i) entered into (or assumed) a Management Agreement in form and substance approved by Lender, which approval shall not be unreasonably denied, conditioned or delayed, and (ii) has executed and delivered a Manager’s Subordination to Lender, and (2) by Lender upon thirty (30) days’ prior written notice to Borrower and the Manager (a) upon the occurrence and continuation of an Event of Default or (b) if the Manager commits any act which would permit termination under the Management Agreement (subject to any applicable notice, grace and cure periods provided in the Management Agreement). Notwithstanding the foregoing, any successor manager selected hereunder by Lender or Borrower to manage the Mortgaged Property shall be a reputable management company having substantial experience in the management of real property of a similar type, size and quality in the state in which the Mortgaged Property is located. Borrower may from time to time appoint a successor manager to manage the Mortgaged Property with Lender’s prior written consent, such consent not to be unreasonably withheld. Borrower acknowledges and agrees that any consent or approval requested of Lender under this Section may (if a Securitization has occurred) be conditioned by Lender, at Lender’s discretion, upon Borrower first obtaining a Rating Confirmation with respect to such change in management, and Lender shall not be deemed to be acting unreasonably in requiring such a Rating Confirmation. Borrower further covenants and agrees that any manager of Mortgaged Property shall at all times while any Indebtedness is outstanding maintain worker’s compensation insurance as required by Governmental Authorities.

 

(ii) Borrower further covenants and agrees that the Mortgaged Property shall be operated pursuant to the Management Agreement and that Borrower shall: (w) promptly perform and/or observe all of the material covenants and agreements required to be performed and observed by it under the Management Agreement and do all things reasonably necessary to preserve and to keep unimpaired its material rights thereunder; (x) promptly notify Lender of any material default under the Management Agreement of which it is aware; (y) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice and report received by it under the Management Agreement, including, but not limited to, financial statements; and (z) promptly enforce the performance and observance of the covenants and agreements required to be performed and/or observed by the Manager under the Management Agreement.

 

(r) Financial Reporting .

 

(i) Borrower shall keep and maintain or shall cause to be kept and maintained on a Fiscal Year basis in accordance with GAAP consistently applied, books, records and accounts reflecting in reasonable detail all of the financial affairs of Borrower and all

 

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items of income and expense in connection with the operation of the Mortgaged Property and ownership of the Mortgaged Property and in connection with any services, equipment or furnishings provided in connection with the operation of the Mortgaged Property, whether such income or expense may be realized by Borrower or by any other Person whatsoever. Lender shall have the right from time to time at all times during normal business hours upon reasonable prior written notice to Borrower to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. During the continuation of an Event of Default (including, without limitation, an Event of Default resulting from the failure of Borrower to deliver any of the financial information required to be delivered pursuant to this Section 5.1(r) ), Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower’s accounting records, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lender’s interest.

 

(ii) Borrower shall furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year, a complete copy of Borrower’s and Guarantor’s financial statements, each audited by a “Big Four” accounting firm or such other Independent certified public accountant acceptable to Lender, in accordance with GAAP consistently applied, covering Borrower’s and Guarantor’s respective financial position and results of operations, for such Fiscal Year and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s or Guarantor’s (as applicable) equity, all of which shall be in form and substance reasonably acceptable to Lender. Lender shall have the right from time to time to review and consult with respect to the auditing procedures used in the preparation of such annual financial statements. Together with Borrower’s and Guarantors’ annual financial statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender an Officer’s Certificate certifying as of the date thereof (x) that the annual financial statements present fairly in all material respects the results of operations and financial condition of Borrower or Guarantor, as applicable, all in accordance with GAAP consistently applied, and (y) whether there exists an Event of Default or Default, and if such Event of Default or Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy same.

 

(iii) Borrower shall furnish to Lender, within forty-five (45) days following the end of each Fiscal Year quarter, quarterly unaudited financial statements (including statements of cash flow) prepared in accordance with GAAP consistently applied, with respect to Borrower and Guarantor for the portion of the Fiscal Year then ended.

 

(iv) No later than forty-five (45) days following the end of each of the months of December, March, June, and September, Borrower shall prepare and deliver to Lender a statement (each a “ Quarterly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property,

 

(A) a rent roll dated as of the last day of such quarter identifying the name of each tenant and the associated premises, Security Deposit, amount due at the beginning of the month, charges in the current month, payments made during the month, amount due at the end of the month, and the occupancy level expressed as a percentage;

 

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(B) quarterly and year-to-date operating statements, each of which shall include an itemization of budgeted and actual (not pro forma) capital expenditures during the applicable period; and

 

(C) a quarterly and year-to-date comparison of the budgeted income and expenses with the actual income and expenses for such quarter and year to date, together with, if requested by Lender, a detailed explanation of any variances between budgeted and actual amounts that are in excess of five percent (5%) for each line item therein.

 

(v) Within thirty (30) days after the end of each calendar month (and as to rent rolls requested by Lender on an interim basis, within thirty (30) days after Lender’s request therefor), Borrower shall provide to Lender and its servicer a statement (each a “ Monthly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property

 

(A) a certified rent roll for the Mortgaged Property containing the information referred to in Section 5.1(r)(iv)(A) , and

 

(B) monthly operating financial statements for the last twelve (12) months, including a comparison on a year-to-date basis to budget and prior year, for the Mortgaged Property and Borrower.

 

(vi) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information with respect to the operation of the Mortgaged Property and the financial affairs of Borrower as may be reasonably requested by Lender, including all business plans prepared for Borrower.

 

(vii) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information regarding any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA as may be reasonably requested by Lender in writing.

 

(viii) At least thirty (30) days prior to the end of each of Borrower’s Fiscal Years, Borrower shall submit or cause to be submitted to Lender for its approval, such approval not to be unreasonably withheld or delayed, an Operating Budget for Gross Revenues, Property Expenses, Capital Improvement Costs, Leasing Commissions, and replacement reserve costs for the next Fiscal Year for the Mortgaged Property. Such Operating Budget may allow for a five percent (5%) line item variance. Until so approved by Lender for the subsequent Fiscal Year in accordance with the procedure set forth in Section 5.1(r)(ix) below, the Operating Budget approved by Lender for the preceding Fiscal Year shall remain in effect for purposes of Section 2.12 ; provided , that for so long as such prior Operating Budget remains in effect, amounts set forth in the prior Operating Budget with respect to Property Expenses shall be deemed increased on a percentage basis by an amount equal to the greater of (x) actual increases then known to Borrower and (y) the increase in the Consumer Price Index (expressed as a percentage) as measured over the calendar year that the prior Operating Budget was in effect.

 

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(ix) Together with the financial statements, rent rolls, operating statements and other documents and information provided to Lender by or on behalf of Borrower under this Section 5.1(r) , Borrower also shall deliver to Lender a certification in form and substance reasonably satisfactory to Lender, executed on behalf of Borrower by its chief executive officer or chief financial officer stating that, to such officer’s or individual’s knowledge, such financial statements, rent rolls, operating statements and other documents and information delivered on behalf of Borrower are true and complete in all material respects.

 

(s) Operation of Mortgaged Property . Borrower shall cause the operation of the Mortgaged Property to be conducted at all times in a manner consistent with at least the level of operation of such Mortgaged Property as of the Closing Date, including, without limitation, the following:

 

(i) to maintain or cause to be maintained the standard of the Mortgaged Property at all times at a level not lower than that maintained by prudent managers of similar facilities or land in the region where the Mortgaged Property is located;

 

(ii) to operate or cause to be operated the Mortgaged Property in a prudent manner in compliance in all material respects with applicable Legal Requirements and Insurance Requirements relating thereto and maintain or cause to be maintained all material licenses, Permits and any other agreements necessary for the continued use and operation of the Mortgaged Property; and

 

(iii) to maintain or cause to be maintained sufficient Inventory and Equipment of types and quantities at the Mortgaged Property to enable Borrower to operate the Mortgaged Property and to comply in all material respects with all Leases affecting the Mortgaged Property.

 

(t) Material Agreements . Except for (i) Leases and any Management Agreement complying with the Loan Documents, (ii) agreements evidencing financing leases and purchase money debt expressly permitted under Section 8.1(e)(iii) , and (iii) extensions, renewals or replacements (on then-current market terms) of the existing operating and maintenance agreements relating to the elevators and HVAC system at the Mortgaged Property, Borrower shall not enter into or become obligated under any material agreement pertaining to the Mortgaged Property, including without limitation brokerage agreements, unless the same may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days’ prior written notice. Borrower will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, (B) maintain all material licenses and permits now held or hereafter acquired by Borrower, and (C) perform, observe, comply and fulfill all of its obligations, covenants and conditions contained in any material agreement pertaining to the Mortgaged Property.

 

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(u) ERISA . Borrower shall deliver to Lender as soon as possible, and in any event within ten days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to such event or condition):

 

(i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan;

 

(ii) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

 

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

 

(iv) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate of Borrower that results in material liability to Borrower or such ERISA Affiliate under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

 

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

 

(vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate of Borrower fails to timely provide security to the Plan in accordance with the provisions of said Sections; and

 

(vii) the imposition of a lien or a security interest in connection with a Plan.

 

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(v) Intentionally Omitted .

 

(w) Secondary Market Transaction . Borrower acknowledges that Lender and its successors and assigns may (i) sell the Loan to one or more investors as a whole loan, (ii) participate the Loan to one or more investors, (iii) deposit the Loan with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interests therein to investors (the transactions referred to in clauses (i) through (iv) above are hereinafter each referred to as a “ Secondary Market Transaction ”). Borrower shall cooperate with Lender in attempting to effect or effecting any such Secondary Market Transaction and shall cooperate in attempting to implement or implementing all requirements imposed by any Rating Agency involved in any Secondary Market Transaction, including but not limited to,

 

(i) providing Lender an estoppel certificate and such information, legal opinions and documents (including updated non-consolidation opinions) relating to Borrower, the Guarantor, the Mortgaged Property and any tenants of the Mortgaged Property as Lender or the Rating Agencies, may reasonably request in connection with such Secondary Market Transaction, including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I’s and, if appropriate, Phase II’s), Mortgaged Property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants, as of the closing date of the Secondary Market Transaction,

 

(ii) amending the Loan Documents and Organizational Agreement of Borrower and any SPC Party, updating and/or restating officer’s certificates, title insurance and other closing items, and providing updated representations and warranties in Loan Documents and such additional representations and warranties, as may be required by the Rating Agencies,

 

(iii) participating during reasonable hours upon reasonable advance written notice in bank, investors and Rating Agencies’ meetings if requested by Lender,

 

(iv) upon Lender’s request, amending the Loan Documents (and updating and/or restating officer’s certificates, title insurance and other closing items in connection therewith) to divide the Loan into first and a second mortgage loan, or into one or more loans secured by mortgages and by ownership interests in Borrower in whatever proportion Lender determines, or into two or more notes in such order of priority and secured by such mortgages as Lender determines, which separated loans and/or notes may have different principal amounts, interest rates, amortization schedules and other financial terms (but with aggregated financial terms which are equivalent to that of the Loan prior to such separation) and thereafter to engage in separate Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation, and

 

(v) reviewing the offering documents relating to any Secondary Market Transaction to ensure that all information concerning Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct in all material respects, and certifying to the accuracy thereof.

 

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Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, purchasers, transferees, assignees, participants, servicers and actual or potential investors involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction (collectively, “ Interested Parties ”). Lender and all of the aforesaid Interested Parties who become parties to the Secondary Market Transaction shall be entitled to rely on the information supplied by, or on behalf of, Borrower. Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development. Borrower shall provide such reasonable access, upon reasonable advance written notice, to the Mortgaged Property and personnel of the Manager and of Borrower’s constituent members and the business and operations of all of the foregoing as Lender or other Interested Parties may request in connection with any such Secondary Market Transaction, subject to the rights of tenants. Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Without limiting the foregoing, after having a reasonable opportunity to review the same, Borrower and Guarantor shall provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the “ Disclosure Documents ”), an agreement certifying that Borrower and Guarantor have examined such Disclosure Documents specified by Lender and that each such Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the Mortgaged Property and Manager, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (a “ Disclosure Certificate ”). Borrower and Guarantor shall indemnify, defend, protect and hold harmless Lender, its Affiliates, directors, employees, agents and each Person, if any, who controls Lender or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, from and against any losses, claims, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) that arise out of or are based upon any untrue statement of any material fact contained in any Disclosure Certificate or other information or documents furnished by Borrower, Guarantor or their Affiliates or in any representation or warranty of any Borrower contained herein or in the other Loan Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Indebtedness), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a “Lender” hereunder. The holders from time to time of the Loan and/or any other interest of the “Lender” under this Loan Agreement and the other Loan Documents may from time to time enter into one or more co-lender or similar agreements in their discretion. Borrower acknowledges and agrees that such agreements, as the same may from time to time be amended, modified or restated, may govern the exercise of the powers and discretionary

 

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authority of the Lender hereunder and under the other Loan Documents, but Borrower shall be entitled to rely upon any actions taken by Lender or the designated servicer(s) or agent(s) for Lender, whether or not within the scope of its power and authority under such other agreements.

 

Borrower shall not be obligated to pay Lender’s costs and expenses incurred in connection with any Secondary Market Transaction; Borrower shall, however, pay the costs and expenses of Borrower’s counsel in the event Borrower engages counsel in connection with any Secondary Market Transaction or in responding to Lender’s requests for cooperation hereunder.

 

(x) Insurance .

 

(i) Borrower, at its sole cost and expense, shall keep the Improvements and Equipment insured (including, but not limited to, any period of renovation, alteration and/or construction) during the term of the Loan with the coverage and in the amounts required under this Agreement for the mutual benefit of Borrower and Lender against loss or damage by fire, lightning, wind and such other perils as are customarily included in a standard “all-risk” or “special cause of loss” form and against loss or damage by other risks and hazards covered by a standard extended coverage insurance policy (including, without limitation, fire, lightning, hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism, riot and civil commotion, vandalism, malicious mischief, strike, water damage, sprinkler leakage, collapse, burglary, theft, mold and microbial matter coverage arising as a result of covered perils under the standard “all risk” policy and such other coverages as may be reasonably required by Lender on the special form (formerly known as an all risk form)). Such insurance shall be in an amount (i) equal to then full replacement cost of the Improvements and Equipment (exclusive of the cost of foundations and footings), without deduction for physical depreciation, and (ii) such that the insurer would not deem Borrower a co-insurer under said policies. The policies of insurance carried in accordance with this Section 5.1(x) shall be paid not less than ten (10) days in advance of the due date thereof and shall contain the “Replacement Cost Endorsement” with a waiver of depreciation. If terrorism coverage is excluded on an “all-risk” basis, then Borrower shall obtain coverage for terrorism and similar acts in the stand alone terrorism market. Notwithstanding the foregoing, Lender shall not unreasonably withhold its consent to reductions in the stated amounts and types of coverage required to be maintained by Borrower hereunder if such levels of coverage or types of insurance, as determined by Lender in its sole discretion, (A) are not available at commercially reasonable rates and (B) are not at the time commonly maintained for properties similar to the Mortgaged Property and located in or around the region in which the Mortgaged Property is located.

 

(ii) Borrower, at its sole cost and expense, for the mutual benefit of Borrower and Lender, shall also obtain and maintain or cause to be obtained and maintained during the entire term of the Loan the following policies of insurance:

 

(A) flood insurance, if any part of the Improvements on any part of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of

 

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1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (and any amendment or successor act thereto) in an amount at least equal to the maximum limit of coverage available with respect to the Improvements and Equipment under said Act;

 

(B) Comprehensive General Liability or Commercial General Liability insurance, including a broad form comprehensive general liability endorsement and coverage for broad form property damage, contractual damages, personal injuries (including death resulting therefrom) and a liquor liability endorsement if liquor is sold on the Mortgaged Property, containing minimum limits of liability of $1 million for both injury to or death of a person and for property damage per occurrence and $2 million in the aggregate for the Mortgaged Property, and such other liability insurance reasonably requested by Lender; in addition, at least $25 million excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including all legal liability imposed upon Borrower and all court costs and attorneys’ fees incurred in connection with the ownership, operation and maintenance of the Mortgaged Property;

 

(C) business interruption insurance (including rental value) in an annual aggregate amount equal to the estimated gross revenues from the Leases of the Mortgaged Property (including, without limitation, the loss of all Rents and additional Rents payable by all of the lessees under the Leases (whether or not such Leases are terminable in the event of a fire or casualty)), such insurance to cover losses for a period of the longer of (x) eighteen (18) months after the date of the fire or casualty in question, or (y) the period from the time of loss until all repairs are fully completed with reasonable diligence and dispatch, plus an extended period of indemnity commencing at the time repairs are completed for a period of not less than 365 days and to be increased or decreased, as applicable, from time to time during the term of the Loan if, and when, the gross revenues from the Leases of the Mortgaged Property materially increase or decrease, as applicable (including, without limitation, increases from new Leases and renewal Leases entered into in accordance with the terms of this Agreement), to reflect all increased Rent and increased additional Rent payable by all of the lessees under such renewal Leases and all Rent and additional Rent payable by all of the lessees under such new Leases;

 

(D) insurance against loss or damage from (x) leakage of sprinkler systems and (y) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), covering all boilers or other pressure vessels, machinery and equipment located in, on, or about the Improvements; coverage is required in an amount at least equal to the full replacement cost of such equipment and the building or buildings housing same and shall extend to electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping;

 

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(E) to the extent required by an applicable Governmental Authority with jurisdiction thereover, worker’s compensation insurance coverage (covering, and in amounts not less than the statutory minimums for, all persons employed by Borrower at the Mortgaged Property and subject to worker’s compensation laws in the state where the Mortgaged Property is located and in compliance with all other requirements of applicable local, state and federal law) and “Employers Liability” insurance in amounts not less than required by statute;

 

(F) during any period of repair or restoration, builder’s “all risk” insurance in an amount equal to not less than the full insurable value of the Mortgaged Property against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may request, in form and substance acceptable to Lender;

 

(G) ordinance or law coverage to compensate for the cost of demolition, increased cost of construction, and loss to any undamaged portions of the Improvements, if the current use of the Mortgaged Property or the Improvements themselves are or become “nonconforming” pursuant to the applicable zoning regulations or full rebuildability following casualty is not otherwise permitted under such zoning regulations;

 

(H) if reasonably required by Lender as a result of any Mortgaged Property being located in an area with a high degree of seismic activity, earthquake damage insurance in an amount and form reasonably acceptable to Lender; and

 

(I) such other insurance as may from time to time be reasonably required by Lender in order to protect its interests with respect to the Loan and the Mortgaged Property and to conform such requirements to then current standards for a Securitization.

 

(iii) All policies of insurance (the “ Policies ”) required pursuant to this Section 5.1(x) :

 

(A) shall be issued by (1) an insurer approved by Lender which has a claims paying ability rating of not less than “A” (or the equivalent) by Rating Agencies satisfactory to Lender (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best, or (2) an insurer within the CB Richard Ellis Insurance Program which has a claims paying ability rating of not less than “BBB” or “BBB(pi)”(as applicable) (or the equivalent) by Rating Agencies satisfactory to Agent (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best; provided, however, if any of the Policies shall be delivered in accordance with this subsection 5.1(x)(iii)(A)(2) , then Lender shall have the right, to be exercised at anytime during the term of the Loan, at Lender’s sole and absolute discretion, to require Borrower to replace the Policies under this subsection 5.1(x)(iii)(A)(2) with Policies that conform with subsection 5.1(x)(iii)(A)(1) above.

 

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(B) shall name Lender as an additional insured under all liability policies and contain a standard noncontributory mortgagee clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender (and/or such other party as may be designated by Lender) as the party to which all payments made by such insurance company shall be paid (except general public liability and excess liability, as to which Lender shall be named as additional insured, but not as loss payee),

 

(C) shall be maintained throughout the term of the Loan without cost to Lender,

 

(D) shall contain such provisions as Lender deems reasonably necessary or desirable to protect its interest (including, without limitation, endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under said Policies and that Lender shall receive at least thirty (30) days prior written notice of any modification, reduction or cancellation),

 

(E) shall contain a waiver of subrogation against Lender,

 

(F) shall be for a term of not less than one year,

 

(G) shall provide for claims to be made on an occurrence basis,

 

(H) shall contain an agreed value clause updated annually (if the amount of coverage under such policy is based upon the replacement cost of the Mortgaged Property),

 

(I) shall be issued by an insurer licensed in the state in which the Mortgaged Property is located,

 

(J) shall provide that Lender may, but shall not be obligated to, make premium payments to prevent any cancellation, endorsement, alteration or reissuance, and such payments shall be accepted by the insurer to prevent same, and

 

(K) shall be reasonably satisfactory in form and substance to Lender and reasonably approved by Lender as to amounts, form, risk coverage, deductibles, loss payees and insureds to the extent not otherwise specified in this Section 5.1(x) . All property damage insurance policies (except for flood and earthquake policies) must automatically reinstate after each loss.

 

Copies of said Policies, certified as true and correct by Borrower, or insurance certificates thereof, shall be delivered to Lender. Not later than ten (10) days prior to the expiration date of each of the Policies, Borrower shall deliver to Lender satisfactory evidence of the renewal of each Policy. The insurance coverage required under this Section 5.1(x) may

 

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be effected under a blanket policy or policies covering the Mortgaged Property and other property and assets not constituting a part of the Collateral; provided that any such blanket policy shall provide at least the same amount and form of protection as would a separate policy insuring the Mortgaged Property individually, which amount shall not be less than the amount required pursuant to this Section 5.1(x) and which shall in any case comply in all other respects with the requirements of this Section 5.1(x) . Upon demand therefor, Borrower shall reimburse Lender for all of Lender’s or its designee’s reasonable costs and expenses incurred in obtaining any or all of the Policies or otherwise causing the compliance with the terms and provisions of this Section 5.1(x) , including (without limitation) obtaining updated flood hazard certificates and replacement of any so-called “forced placed” insurance coverages to the extent Borrower was required to obtain and maintain any such Policy or Policies hereunder and failed to do so. Borrower shall pay the premiums for such Policies (the “ Insurance Premiums ”) as the same become due and payable and shall furnish to Lender evidence of the renewal of each of the Policies with receipts for the payment of the Insurance Premiums or other evidence of such payment reasonably satisfactory to Lender (provided, however, that Borrower is not required to furnish such evidence of payment to Lender in the event that such Insurance Premiums have been paid by Lender). If Borrower does not furnish such evidence and receipts at least ten (10) days prior to the expiration of any expiring Policy, then Lender may procure, but shall not be obligated to procure, such insurance and pay the Insurance Premiums therefor, and Borrower agrees to reimburse Lender for the cost of such Insurance Premiums promptly on demand. Within thirty (30) days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, based on then industry-standard amounts of coverage then being obtained by prudent owners of properties similar to the Mortgaged Property in the same applicable market region as the Mortgaged Property. Borrower shall give Lender prompt written notice if Borrower (or any Affiliate) receives from any insurer any written notification or threat of any actions or proceedings regarding the non-compliance or non-conformity of the Mortgaged Property with any insurance requirements. In addition to the foregoing, Borrower shall monitor, in a commercially reasonable manner on a monthly basis, the status of, and the delivery of evidence to Borrower of, each tenant’s insurance coverage carried with respect to such tenant’s property, fixtures and equipment at the Mortgaged Property, and give Lender prompt written notice if Borrower (or, to Borrower’s knowledge, any Affiliate) receives from any insurance carrier which insures such property, any notice that such tenant’s coverage is being cancelled, terminated, has expired or is being materially modified. Borrower shall not agree or acquiesce to any such cancellation, termination, expiration or material modification of tenant insurance coverage without the prior consent of Lender (not to be unreasonably withheld or delayed). In the event of the cancellation, termination or expiration of such tenant’s insurance coverage, Borrower shall cause such tenant to promptly replace such lapsed coverage with comparable coverage, or, to the extent the same is available, purchase and “force-place” such coverage on such tenant’s behalf, at Borrower’s expense, within five (5) days following such lapse. Borrower’s covenants and obligations set forth in the previous two (2) sentences are hereinafter collectively referred to as the “ Force-Place Obligation .”

 

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(iv) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender.

 

(A) In case of loss covered by Policies, Lender may either (a) jointly with Borrower settle and adjust any claim and agree with the insurance company or companies on the amount to be paid on the loss or (b) allow Borrower to agree with the insurance company or companies on the amount to be paid upon the loss; provided , that Borrower may settle and adjust losses without participation by Lender with respect to a single loss aggregating not in excess of an amount equal to two percent (2%) of the Loan Amount, agree with the insurance company or companies on the amount to be paid upon the loss and collect and receive any such Insurance Proceeds; provided , further , that if (x) at the time of the settlement of such claim an Event of Default has occurred and is continuing or (y) Lender and Borrower are unable to agree upon a joint settlement (other than with respect to claims which Borrower may settle and adjust in accordance with the first proviso in this Section 5.1(x)(iv)(A) ) or (z) Lender disapproves of Borrower’s proposed settlement with the insurance company (other than with respect to claims which Borrower may settle and adjust in accordance with the first proviso in this Section 5.1(x)(iv)(A)), then Lender shall settle and adjust such claim without the consent of Borrower. In any such case Lender shall and is hereby authorized to collect and receipt for any such Insurance Proceeds subject to and to the extent provided for in this Agreement. The reasonable out-of-pocket expenses incurred by Lender in the adjustment and collection of Insurance Proceeds shall become part of the Indebtedness and be secured by the Mortgage and shall be reimbursed by Borrower to Lender upon demand therefor.

 

(B) In the event of any insured damage to or destruction of the Mortgaged Property or any part thereof (herein called an “ Insured Casualty ”) where (1) the aggregate amount of the loss, as reasonably determined by an Independent insurance adjuster, is less than thirty percent (30%) of the Lender’s reasonable estimate of the fair market value of the Mortgaged Property, (2) in the reasonable judgment of Lender, the Mortgaged Property can be restored, replaced and/or rebuilt (collectively, the “ Restoration ”) by not later than the first to occur of (a) twelve (12) months of settlement of the claim and (b) the expiration of the business interruption insurance and, in any case, not later than six (6) months prior to the Maturity Date to an economic unit not materially less valuable (including an assessment of the impact of the termination of any Leases due to such Insured Casualty) and not less useful than the same was prior to the Insured Casualty, (3) Lender reasonably determines that the rental income of the Mortgaged Property, after the Restoration thereof, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Loan and satisfy a debt service coverage ratio (as reasonably determined by Lender) of 1.30:1.00, and (4) tenant leases requiring payment of annual rent equal to at least seventy-five percent (75%) of the gross revenues from the Mortgaged Property during the twelve (12) month period immediately preceding the date of such fire or other casualty remain in full force and effect during and after the Restoration of the Property (subject to the rent abatement

 

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provisions thereof applicable as a result of the casualty, so long as such abatement will end, and full rental payments shall resume, upon completion of the Restoration in a manner such that the applicable tenant premises are habitable and available for occupancy by the applicable tenants for the conduct of their respective businesses therefrom), or if Lender otherwise elects to allow a Borrower to restore the Mortgaged Property, then, if no Event of Default shall have occurred and be continuing, the Insurance Proceeds (after reimbursement of any reasonable out-of-pocket expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds) shall be made available to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or part thereof subject to the Insured Casualty, as provided for below. Borrower hereby covenants and agrees to commence and diligently to prosecute such Restoration of the affected Mortgaged Property. Borrower shall pay all out-of-pocket costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Insurance Proceeds made available pursuant to the terms hereof.

 

(C) Except as provided above, the Insurance Proceeds collected upon any Insured Casualty shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing) or applied to the cost of Restoration of the affected Mortgaged Property or part thereof subject to the Insured Casualty, in the manner set forth below.

 

(D) In the event that Insurance Proceeds (after reimbursement of any reasonable expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds), if any, shall be made available to Borrower for the Restoration of any portion of the affected Mortgaged Property, Borrower covenants to complete such Restoration of the affected Mortgaged Property to be of at least comparable value as prior to such damage or destruction, all to be effected in accordance with Legal Requirements and plans and specifications approved in advance by Lender, such approval not to be unreasonably withheld or delayed.

 

(E) In the event Borrower is entitled to reimbursement out of Insurance Proceeds, such proceeds shall be held by Lender in the Loss Proceeds Account and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to the Insurance Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and

 

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performance of the foregoing Restoration as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review Borrower’s request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work). No funds other than Insurance Proceeds shall be disbursed prior to disbursement of such proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds remaining in the Loss Proceeds Account, together with funds deposited therein to pay the costs of the Restoration by or on behalf of Borrower, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration free and clear of all liens or claims for lien, except for Permitted Encumbrances. Any surplus which may remain out of Insurance Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

(F) Notwithstanding the foregoing, if: (1) an Insured Casualty occurs as to which Borrower is required pursuant to the terms of this Section 5.1(x) to pay the Insurance Proceeds to the Lenders for application to the Indebtedness; and (2) the amount of such Insurance Proceeds is less than 125% of the Indebtedness as to which such Insured Casualty occurred (such deficiency being the “ Insurance Gap ”), then Borrower and Guarantor shall be fully liable to the Lender (for application to the remaining Indebtedness and Crossed Indebtedness) in an amount equal to such Insurance Gap.

 

(v) Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement that would be considered “co-insurance” or adversely affect the ability to collect under a policy of insurance required hereunder.

 

(y) Condemnation .

 

(i) Borrower shall promptly give Lender written notice of the actual or threatened commencement of any proceeding for a Taking and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Condemnation Proceeds for said Taking. With respect to any compromise or settlement in connection with such proceeding, Lender shall jointly with Borrower compromise and reach settlement unless at the time of such Taking an Event of Default has occurred and is continuing and the Indebtedness has been accelerated, in which event Lender shall compromise and reach

 

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settlement without the consent of Borrower. Notwithstanding the foregoing provisions of this Section 5.1(y) , Borrower is authorized to negotiate, compromise and settle, without participation by Lender, Condemnation Proceeds of up to $100,000 in connection with any Taking. Notwithstanding any Taking, Borrower shall continue to pay the Indebtedness at the time and in the manner provided for in this Agreement and the other Loan Documents and the Indebtedness shall not be reduced except in accordance herewith.

 

(ii) Borrower shall cause the Condemnation Proceeds to be paid directly to Lender. Lender may, in its sole discretion, apply any such Condemnation Proceeds to the reduction or discharge of the Indebtedness (whether or not then due and payable) (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing).

 

(iii) With respect to a Taking in part, which shall mean any Taking which does not render the affected Mortgaged Property physically or economically unsuitable in the reasonable judgment of Lender for the use to which it was devoted prior to the Taking, Borrower shall cause the Condemnation Proceeds to be paid to Lender as described above, and if Lender does not elect to apply the same to the Indebtedness as provided in Section 5.1(y)(ii) above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds Account and the same shall be made available for application to the cost of Restoration of the affected Mortgaged Property and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to Lender that such funds are available and sufficient in addition to the Condemnation Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing repair, restoration, replacement or rebuilding as Lender may reasonably require and approve.

 

(iv) Provided that Condemnation Proceeds shall be made available to Borrower for Restoration of the affected Mortgaged Property, Borrower hereby covenants to complete the Restoration of the affected Mortgaged Property to be of at least comparable value and, to the extent commercially practicable, of substantially the same character as prior to the Taking, all to be effected in accordance with applicable law and plans and specifications reasonably approved in advance by Lender. Borrower shall pay all costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Condemnation Proceeds made available pursuant to the terms hereof. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review any request by Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such

 

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consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the construction work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work); funds other than Condemnation Proceeds shall be disbursed prior to disbursement of such proceeds; and at all times, the undisbursed balance of such proceeds remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the repayment of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens or claims for lien. Any surplus which may remain out of Condemnation Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness or be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

(v) If the affected Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of any such Condemnation Proceeds to which it is entitled hereunder, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to have reserved in any foreclosure decree a right to receive said award or payment, or a portion thereof sufficient to pay the Indebtedness. In no case shall any such application reduce or postpone any payments otherwise required pursuant to this Agreement, other than the final payment on the Note.

 

(z) Leases and Rents .

 

(i) Borrower absolutely and unconditionally assigns to Lender, Borrower’s right, title and interest in all current and future Leases and Rents as collateral for the Loan, it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Lender shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon Lender. Borrower shall execute and deliver to Lender such additional instruments, in form and substance reasonably satisfactory to Lender, as may hereafter be reasonably requested in writing by Lender to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section 5.1(z) , Lender grants to Borrower a license to lease, maintain, operate and manage the Mortgaged Property and to collect, use and apply the Rents in accordance with the terms hereof and otherwise act as the landlord under the Leases. Any portion of the Rents held by Borrower shall be held in trust for the benefit of Lender for use in the payment of the Indebtedness. Upon the occurrence of an Event of Default and during the continuance thereof, the license granted to Borrower herein shall automatically be revoked, and Lender shall immediately be entitled to possession of all Rents, whether or not Lender enters upon or takes control of the Mortgaged Property. Lender is hereby granted and assigned by Borrower the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Any Rents collected after the revocation of the license shall be applied toward payment of the Indebtedness as set forth in Section 2.8 hereof.

 

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(ii) All Leases entered into by Borrower shall provide for rental rates comparable to (or more favorable to Borrower than) then-existing local market rates and terms and conditions commercially reasonable and consistent with (or more favorable to Borrower than) then-prevailing local market terms and conditions for similar type properties. With respect to any Lease for more than 15% of the rentable square footage of the Mortgaged Property, Borrower shall not enter into such Lease without the prior written consent of Lender. Borrower shall furnish Lender with (1) detailed term sheets in advance in the case of any Leases, modifications, amendments or renewals for which Lender’s consent is required and (2) in the case of any other Leases, executed copies of such Leases upon written request. All renewals or amendments or modifications of Leases that do not satisfy the requirements of the first sentence of this Section 5.1(z)(ii) shall be subject to the prior approval of Lender. All Leases shall be written on the standard lease form previously approved by Lender which form shall not be materially changed without Lender’s prior written consent which consent shall not be unreasonably withheld. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage, and that the lessee agrees to attorn to Lender upon Lender’s non-disturbance of such tenant so long as such tenant is not in default under its Lease. Borrower,

 

(A) shall observe and perform all of the material obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Indebtedness;

 

(B) shall promptly send copies to Lender of all written notices of default which Borrower shall send or receive thereunder;

 

(C) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed and shall effect a termination or diminution of the obligations of tenants under leases, only in a manner that a prudent owner of a similar property to the Mortgaged Property would enforce such terms covenants and conditions or effect such termination or diminution in the ordinary course of business;

 

(D) shall not collect any of the Rents more than one (1) month in advance;

 

(E) shall not execute any other assignment of lessor’s interest in Leases or Rents; and

 

(F) shall not convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder.

 

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Borrower shall submit any Lease, modification, amendment or renewal for which Lender’s consent is required (together with all applicable information and documents, if any, relating thereto as Lender may reasonably require in connection with its determination) to Lender in writing sent by recognized overnight delivery service or by registered or certified mail (and simultaneously shall contact the Lender by telephone and by electronic mail) in accordance with the terms of this Agreement (the “ First Notice ”), requesting Lender’s approval of such Lease, modification, amendment or renewal. Lender shall use reasonable efforts to deliver to Borrower its written approval or disapproval of the proposed Lease, modification, amendment or renewal within ten (10) Business Days after Lender shall have received the First Notice. Unless Lender shall have approved the Lease, modification, amendment or renewal contained in the First Notice, Lender’s approval shall be deemed to be withheld. If Borrower does not receive Lender’s response by the end of such ten (10) Business Days period, Borrower may resubmit its written request to Lender (the “Second Notice”). The Second Notice shall make reference to the First Notice and shall bear the following legend in capital letters: “LENDER’S FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN FIVE (5) BUSINESS DAYS FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE [LEASE] [MODIFICATION] [AMENDMENT] [RENEWAL] DESCRIBED HEREIN.” If Lender does not approve or disapprove the proposed Lease, modification, amendment or renewal within five (5) Business Days after Lender shall have received Borrower’s Second Notice, Lender shall be deemed to have approved the proposed Lease, modification, amendment or renewal.

 

(iii) Borrower shall within five Business Days of receipt deposit cash Security Deposits of lessees which are turned over to or for the benefit of Borrower or otherwise collected by or on behalf of Borrower, into the Security Deposit Account and shall not commingle such funds with any other funds of Borrower, and shall deliver all instruments evidencing non-cash Security Deposits and all related documents to Lender. Any bond or other instrument which Borrower is permitted to hold in lieu of cash Security Deposits under any applicable Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall, if permitted pursuant to Legal Requirements, name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender) and shall, in all respects, comply with any applicable Legal Requirements and otherwise be reasonably satisfactory to Lender; provided, however, that so long as no Event of Default exists and Borrower delivers such bond or other instrument to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as payee thereunder, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to cause Lender or to be named as payee thereunder and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender, during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing Lender to be named as payee thereunder. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance with the foregoing. Upon the occurrence and during the continuance of any Event of Default, to the extent

 

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permitted by applicable Legal Requirements, Borrower shall, upon Lender’s request, turn over to Lender any Security Deposits (and any interest theretofore earned thereon) not yet deposited into the Security Deposit Account or delivered to Lender with respect to all or any portion of the Mortgaged Property, to be held by Lender subject to the terms of the Leases.

 

(aa) Maintenance of Mortgaged Property . Borrower shall cause the Mortgaged Property to be maintained in a good and safe condition and repair, subject to wear and tear and damage caused by casualty or condemnation. The Improvements and the Equipment shall not be removed, demolished or altered (except for (1) normal replacement of the Equipment, (2) Improvements contemplated in an approved Operating Budget or pursuant to Leases in effect from time to time, or (3) removals, demolition or alterations that do not cost more than $100,000) without the consent of Lender which consent shall not be unreasonably withheld or delayed. Except with respect to an Insured Casualty which shall be governed by the terms and conditions provided herein, Borrower shall, or shall cause any tenants obligated under their respective Leases to, promptly repair, replace or rebuild any part of the Mortgaged Property that becomes damaged, worn or dilapidated. Borrower shall complete and pay for any structure at any time in the process of construction or repair on the Land. Borrower shall not initiate, join in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of any Mortgaged Property or any part thereof without the written consent of Lender. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Borrower will not cause or permit such nonconforming use to be discontinued or abandoned if such discontinuance of abandonment would cause such nonconforming use to no longer be permitted without the express written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall not (i) change the use of any of the Land or Improvements in any material respect, (ii) permit or suffer to occur any waste on or to any Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever to convert any Mortgaged Property, or any portion thereof, to a condominium or cooperative form of management.

 

(bb) Taxes on Security . Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Lien created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law (1) deducting the Loan from the value of the Collateral for the purpose of taxation, (2) affecting Lender’s Lien on the Collateral or (3) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by realty, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof; provided , however , if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable.

 

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ARTICLE VI.

NEGATIVE COVENANTS

 

Section 6.1. Negative Covenants . Borrower covenants and agrees that, until payment in full of the Indebtedness, it will not do, directly or indirectly, any of the following unless Lender consents thereto in writing:

 

(a) Liens on the Mortgaged Property . Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, except as permitted by Section 5.1(b) above, any Lien with respect to any Mortgaged Property or any portion thereof, except: (i) Liens in favor of Lender and (ii) the Permitted Encumbrances.

 

(b) Ownership . Except as expressly permitted by or pursuant to this Agreement or the other Loan Documents, own any property of any kind other than the Mortgaged Property.

 

(c) Other Borrowings . Incur, create, assume, become or be liable in any manner with respect to Other Borrowings, other than the Crossed Loans.

 

(d) Dissolution; Merger or Consolidation . Dissolve, terminate, liquidate, merge with or consolidate into another Person.

 

(e) Change In Business . Make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.

 

(f) Debt Cancellation . Cancel or otherwise forgive or release any material claim or debt owed to Borrower by any Person, except for adequate consideration or in the ordinary course of Borrower’s business.

 

(g) Affiliate Transactions . (i) Enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Borrower or with any director, officer or employee of any Affiliate of Borrower, except transactions in the ordinary course of business of Borrower and upon terms which are no less favorable to Borrower than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate of Borrower, or (ii) make any payment or permit any payment to be made to any Affiliate of Borrower (other than the Independent Director’s fees for acting such capacity) when or as to any time when any Event of Default shall exist, provided , however , that Borrower shall be able to make distributions to its owner(s) as reasonably necessary for Digital Realty Trust to meet the REIT Distribution Requirement in any taxable year, but in no event shall such distributions, in the aggregate, exceed Borrower’s taxable income, as determined under Section 703(a) of the Code, for such taxable year.

 

(h) Creation of Easements . Except as expressly permitted by or pursuant to the Mortgage or this Agreement, create, or permit any Mortgaged Property or any part thereof to become subject to, any easement, license or restrictive covenant, other than a Permitted Encumbrance, provided , that the consent of Lender shall not be unreasonably withheld or delayed to the extent that any such easement, license or restrictive covenant is reasonably necessary for the continued use, enjoyment, access to or operation of the applicable Mortgaged Property.

 

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(i) Misapplication of Funds . Distribute any Rents or Moneys received from Accounts in violation of the provisions of Section 2.12 , or fail to deposit into the Security Deposit Account or deliver to Lender and pledge to Lender any Security Deposit, or misappropriate any Security Deposit or portion thereof.

 

(j) Certain Restrictions . Enter into any agreement that expressly restricts the ability of Borrower to enter into amendments, modifications or waivers of any of the Loan Documents.

 

(k) Assignment of Licenses and Permits . Assign or transfer any of its interest in any Permits pertaining to any Mortgaged Property, or assign, transfer or remove or permit any other Person to assign any records pertaining to any Mortgaged Property.

 

(l) Place of Organization . Change its jurisdiction of organization, creation or formation, as applicable, without giving Lender at least fifteen (15) days’ prior written notice thereof and promptly providing Lender such information as Lender may reasonably request in connection therewith.

 

(m) Leases . Enter into, amend or cancel (or permit the same to occur) Leases, except as permitted by or pursuant to or would not result in a violation of this Agreement.

 

(n) Management Agreement . Except in accordance with this Agreement, (i) terminate or cancel the Management Agreement, (ii) consent to either the reduction of the term of or the assignment of the Management Agreement, (iii) increase or consent to the increase of the amount of any charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.

 

(o) Plans and Welfare Plans . Knowingly engage in or permit any transaction in connection with which Borrower or any subsidiary could be subject to either a material civil penalty or material tax assessed pursuant to Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (iii) severance benefits (unless such coverage is provided after notification of and with the reasonable approval of Lender), permit the assets of Borrower to become “plan assets”, whether by operation of law or under regulations promulgated under ERISA or adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, or permit any subsidiary to adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, any Plan, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower or any subsidiary.

 

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(p) Transfer of Ownership Interests . Permit any Transfer to occur, other than a Permitted Transfer. Notwithstanding the foregoing, in the event that Borrower desires to transfer all of the Mortgaged Property to another party (the “ Transferee Borrower ”) and have the Transferee Borrower assume all of the Borrower’s obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of Guarantor under the Loan Documents from and after such transfer (collectively, a “ Transfer and Assumption ”), the Borrower may make a written application to Lender for Lender’s consent to the Transfer and Assumption, subject to the conditions set forth below in this Section; provided that no more than one Transfer and Assumption shall be permitted during the term of the Loan. Together with such written application, Borrower shall pay to Lender the reasonable review fee then required by Lender. Borrower also shall pay on demand all of the reasonable costs and expenses incurred by Lender, including reasonable attorneys’ fees and expenses, and including the fees and expenses of Rating Agencies and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs. Lender may grant or withhold its consent to a Transfer and Assumption in its reasonable discretion. Completion of any Transfer and Assumption shall be subject, in addition to such other conditions as Lender reasonably may determine to impose, to satisfaction of the following conditions:

 

(i) No Default or Event of Default shall have occurred and be continuing at the time of the proposed Transfer and Assumption;

 

(ii) Borrower shall have submitted to Lender true, correct and complete copies of information and documents reasonably requested by Lender concerning the Mortgaged Property, the Transferee Borrower and any replacement guarantors and indemnitors;

 

(iii) Evidence satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall be designated by Lender comply with Article VIII, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates;

 

(iv) If a Securitization has occurred, Borrower shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Transfer and Assumption and all related transactions;

 

(v) The identity, experience, and financial condition of the Transferee Borrower and the replacement guarantors and indemnitors shall be acceptable to Lender in its sole and absolute discretion;

 

(vi) Borrower shall deliver to Lender at the closing of the Transfer and Assumption an assumption fee in the amount of one percent (1%) of the then unpaid principal balance of the Loan;

 

(vii) Borrower, Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver such documents as Lender may require, in form and substance satisfactory to Lender, to evidence the Transfer and Assumption, including replacement guaranties and indemnities and Loan Document modifications;

 

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(viii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance satisfactory to Lender as to substantially the same matters for which opinions were required in connection with the origination of the Loan (and as to such additional matters as the Lender and (if a Securitization has occurred) Rating Agencies may require), including, without limitation, a bankruptcy non-consolidation opinion;

 

(ix) Borrower shall cause to be delivered to Lender an endorsement to Lender’s policy of title insurance in form and substance acceptable to Lender, in Lender’s reasonable discretion, relating to, among other things, the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents and the continuing priority of the Mortgage and the continuing effect of the title insurance and all endorsements thereto (in each case subject to Permitted Encumbrances);

 

(x) under no circumstance shall any Transfer and Assumption be permitted hereunder unless after giving effect to such Transfer and Assumption the Transferee Borrower and each Crossed Borrower (or each “Borrower Transferee” as defined in each Crossed Loan Agreement, pursuant to a “Transfer and Assumption”, as defined in each Crossed Loan Agreement, occurring simultaneously with the Transfer and Assumption hereunder) is under 100% common ownership (direct and indirect) and control; and

 

(xi) Borrower or Borrower Transferee shall deliver to Lender a payment in the amount of all reasonable costs and expenses incurred by Lender in connection with the Transfer and Assumption, including but not limited to, Lender’s reasonable attorneys’ fees and expenses, all recording fees, Rating Agency fees and expenses, and all fees payable to the title company in connection with the Transfer and Assumption.

 

(q) Equipment and Inventory . Except pursuant to the Management Agreement, permit any Equipment owned by Borrower or any of its Affiliates to be removed at any time from any Mortgaged Property unless the removed item is consumed or sold in the usual and customary course of business, removed temporarily for maintenance and repair or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any Lien (other than Permitted Encumbrances).

 

(r) Management Fees . Pay Borrower or any Affiliate of Borrower any management fees with respect to the Mortgaged Property except for management fees paid to Manager under the Management Agreement.

 

(s) Prohibited Persons . With respect to Borrower, Guarantor and any of their respective officers, directors, partners, members or majority-owned Affiliates: (i) conduct any business, or engage in any transaction or dealing, with any known Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a known Prohibited Person; or (ii) knowingly and intentionally engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224.

 

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ARTICLE VII.

EVENT OF DEFAULT

 

Section 7.1. Event of Default . The occurrence of one or more of the following events shall be an “ Event of Default ” hereunder:

 

(a) if on any Payment Date Borrower fails to pay any Monthly Debt Service Payment due and payable on such Payment Date, or if Borrower fails to make any scheduled deposits into the Reserve Accounts when due and payable in accordance with the provisions hereof;

 

(b) if Borrower fails to pay the outstanding Indebtedness on the Maturity Date;

 

(c) if Borrower fails to pay or deposit any other amount payable or required to be deposited pursuant to this Agreement or any other Loan Document when due and payable in accordance with the provisions hereof or thereof, as the case may be, and such failure continues for ten (10) Business Days after Lender delivers written notice thereof to Borrower;

 

(d) if any representation or warranty made herein or in any other Loan Document, or in any report, certificate, financial statement or other Instrument, agreement or document furnished by Borrower or Guarantor in connection with this Agreement, the Note or any other Loan Document executed and delivered by Borrower or Guarantor shall be false or misleading in any material respect as of the date such representation or warranty was made (or if such representation or warranty relates to an earlier date, then as of such earlier date);

 

(e) if Borrower, any SPC Party or the Guarantor makes a general assignment for the benefit of creditors;

 

(f) if a receiver, liquidator or trustee shall be appointed for Borrower, any SPC Party or the Guarantor or if Borrower, any SPC Party or the Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, any SPC Party or the Guarantor, or if any proceeding for the dissolution or liquidation of Borrower or the Guarantor shall be instituted; provided , however , that if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, any SPC Party or the Guarantor, upon the same not being discharged, stayed or dismissed within ninety (90) days, or if Borrower, any SPC Party or the Guarantor shall generally not be paying its debts as they become due;

 

(g) if Borrower attempts to delegate its obligations or assign its rights under this Agreement, any of the other Loan Documents or any interest herein or therein, or if any Transfer occurs, other than in accordance with or as permitted under this Agreement;

 

(h) if any breach or failure to perform any of the covenants in Article VI hereof shall occur, which breach or failure to perform, in the case of Section 6.1(o) or (q) only, shall remain uncured for a period of thirty (30) days after the occurrence of such breach or failure to perform, or if any material breach or failure to perform any of the covenants in Article VIII hereof shall occur;

 

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(i) if an Event of Default as defined or described in the Note or any other Loan Document occurs, whether as to Borrower or the Mortgaged Property or any portion thereof;

 

(j) if Borrower fails (i) to maintain any insurance required to be maintained pursuant to Section 5.1(x) hereof; or (ii) to satisfy the Force-Place Obligation;

 

(k) if any Crossed Loan Default shall occur under any of the Crossed Loan Documents; and

 

(l) if Borrower shall fail to perform any of the terms, covenants or conditions of this Agreement, the Note, the Mortgage or the other Loan Documents, other than as specifically otherwise referred to above in this definition of “Event of Default,” for ten (10) Business Days after notice to Borrower from Lender or its successors or assigns, in the case of any Default which can be cured by the payment of a sum of money (other than Events of Default pursuant to Sections 7.1(a) and 7.1(b) above, as to which the grace period, if any, set forth therein is applicable), or for thirty (30) days after notice from Lender or its successors or assigns, in the case of any other Default (unless a longer notice period is otherwise provided herein or in such other Loan Document); provided , however , that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and such Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) days;

 

then, upon the occurrence of any such Event of Default and at any time thereafter, Lender or its successors or assigns, may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents, or under the Crossed Loan Documents, or at law or in equity, take such action, without further notice or demand, as Lender or its successors or assigns, deems advisable to protect and enforce its rights against Borrower and in and to all or any portion of the Collateral and in and to the Crossed Properties, and may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and/or the Collateral (including, without limitation, all rights or remedies available at law or in equity), and any and all rights or remedies provided in the Crossed Loan Documents against the Crossed Borrowers and/or the Crossed Properties. In addition to and without limiting the foregoing, upon the occurrence of any Event of Default described in any of Sections 7.1(e) , (f) , or (g) , the unpaid principal amount of and accrued interest and fees on the Loan and all other Indebtedness shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Indebtedness shall immediately become due and payable.

 

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Section 7.2. Remedies .

 

(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed by or with respect to Borrower, or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any portion of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral, and under any of the Crossed Loan Documents with respect to all or any portion of the Crossed Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents or in the Crossed Loan Documents.

 

(b) In the event of the foreclosure or other action by Lender to enforce Lender’s remedies in connection with all or any portion of the Collateral, Lender shall apply all Net Proceeds received to repay the Indebtedness and Crossed Indebtedness in accordance with Section 2.8 , the Indebtedness or Crossed Indebtedness (as selected by Lender in its sole discretion) shall be reduced to the extent of such Net Proceeds and the remaining portion of the Indebtedness and Crossed Indebtedness shall remain outstanding and secured by the Loan Documents, it being understood and agreed by Borrower that Borrower is liable for the repayment of all the Indebtedness; provided , however , that the Loan shall be deemed to have been repaid only to the extent of the Net Proceeds actually received by Lender with respect to the Collateral and applied in reduction of the Indebtedness evidenced by the Note in accordance with the provisions of this Agreement (rather than application to the Crossed Indebtedness or other obligations other than the Loan), after payment by Borrower of all Transaction Costs and costs of enforcement.

 

(c) Upon and during the continuation of an Event of Default, Lender shall have the right, but not the obligation, with respect to any and all bankruptcy proceedings that are now or hereafter commenced in connection with the Mortgaged Property, to (i) vote to accept or reject any plans of reorganization, (ii) vote in any election of a trustee, (iii) elect the treatment of secured claims as specified in Section 1111(b) of the Bankruptcy Code, and (iv) make any other decisions requested of holders of claims or interests that Borrower would have had the right to do in such bankruptcy proceedings in the absence of an Event of Default.

 

Section 7.3. Remedies Cumulative . The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents executed by or with respect to Borrower, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of any Default or Event of Default shall not be construed to be a waiver of any

 

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subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in connection with the foreclosure of any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on other parts of the Collateral.

 

Section 7.4. Intentionally Omitted .

 

Section 7.5. Curative Advances . If any Event of Default occurs and is not cured by Borrower after notice from Lender, then Lender may expend such sums as either shall reasonably deem appropriate to cure or attempt to cure such Event of Default. Borrower shall immediately repay all such sums so advanced, which sums shall immediately become part of the Indebtedness, bear interest at the Default Rate from the date advanced until the date repaid, and be secured by all Collateral.

 

ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS

 

Section 8.1. Applicable to Borrower and any SPC Party . Borrower hereby acknowledges that, as a condition of Lender’s agreements and performance of its obligations hereunder, Lender is relying on the status of Borrower and any SPC Party as a legal entity separate and apart from any Affiliate or other entity and has required that Borrower and any SPC Party maintain such status, and Lender hereby acknowledges such reliance and requirement. Accordingly, Borrower hereby represents, warrants and covenants as of the Closing Date, at all times prior to the Closing Date and until such time as the Loan is paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender’s sole discretion, Borrower and each SPC Party (if applicable):

 

(a) was and will be organized solely for purpose of owning and operating the Mortgaged Property, or in the case of any SPC Party, owning the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(b) has not owned, does not own and will not own any assets other than the Mortgaged Property (including incidental personal property necessary for the operation thereof and proceeds therefrom) or, in the case of any SPC Party, its general partnership interest (if Borrower is a limited partnership) sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(c) was not engaged, is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Mortgaged Property;

 

(d) has not entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of Borrower or any SPC Party except in the ordinary course of its business pursuant to written agreements upon terms and conditions that are no less favorable than those that would be available on an arm’s-length basis with third parties other than such Affiliate;

 

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(e) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (in each case in the case of Borrower only): (i) the Loan and the Crossed Loans, (ii) trade payables not evidenced by a promissory note incurred in the ordinary course of business with trade creditors in connection with owning, operating and maintaining the Mortgaged Property, and customarily paid by Borrower within 60 days of incurrence and in fact not more than 60 days outstanding (other than those being disputed or contested in good faith by the Borrower in the same manner and with the same deposits as Lien Claims set forth in Section 5.1(b)(ii) of this Agreement), and (iii) equipment financing leases and purchase money debt for equipment, in each case incurred in the ordinary course of business in connection with the financing or purchase of equipment used on the Mortgaged Property, the payments upon which are made currently and in any event prior to delinquency, provided, (A) that the aggregate capitalized amount of all such permitted financing leases plus the aggregate amount of all such permitted purchase money debt shall not at any time be in excess of one percent (1%) of the Loan Amount or require payments aggregating in excess of $100,000 in any one calendar year, and (b) the aggregate outstanding amount of (1) all trade payables described in clause (ii) above, plus (2) the aggregate capitalized amount of all permitted financing leases plus the aggregate amount of all permitted purchase money debt described in clause (iii) above, shall not at any time be in excess of two percent (2%) of the Loan Amount.

 

(f) (i) has not made and will not make any loan or advance to any Person (including any of its Affiliates), (ii) has not pledged and will not pledge its assets for the benefit of any other Person (other than to Lender for the indirect benefit of the Crossed Borrowers to secure the Crossed Loans), (iii) has not sought or obtained and will not seek or obtain credit, and has not incurred and will not incur any obligation to any third party, based upon the assets of any other Person, and (iv) has not induced and will not induce any third party to rely on the creditworthiness of any other Person in extending benefits to Borrower;

 

(g) has remained and as of the Closing Date reasonably expects to remain, solvent, and has maintained, and as of the Closing Date reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

 

(h) has not acquired and will not acquire obligations or securities of any Person;

 

(i) has not failed and will not fail to correct any known misunderstanding or misrepresentation regarding its separate identity;

 

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(j) has done or caused to be done and will do all things necessary to preserve its existence;

 

(k) has continuously maintained and shall continuously maintain its existence and good standing and has been and will be qualified to do business in all states necessary to carry on its business, including the state in which the Mortgaged Property is located;

 

(l) has conducted and operated and will conduct and operate its business solely in its own name, with all oral and written communications from Borrower or SPC Party, as applicable, including, without limitation, correspondence, invoices, purchase orders, billing statements, applications and business forms, made solely in the name of Borrower or SPC Party, as applicable;

 

(m) has accurately maintained and will continue to accurately maintain books, records, bank accounts, accounting records, financial statements and other entity documents separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person, with such accounting records and financial statements having been prepared and kept in accordance with reasonable accounting practices applied on a consistent basis, and such financial statements of Borrower (and any SPC Party, if applicable) have been and shall be prepared in a manner that indicates (through appropriate footnotes if necessary) the existence of Borrower (and any SPC Party, if applicable) and its assets and liabilities separate and apart from any other Person; moreover, Borrower (and any SPC Party, if applicable) has indicated and shall indicate in its financial statements that the assets of Borrower are not available to satisfy the claims of creditors of any Affiliate of Borrower (or any SPC Party, if applicable) and that the assets of any Affiliate of Borrower (or any SPC Party, if applicable) have not been and are not available to satisfy the claims of creditors of Borrower (or any SPC Party, if applicable) and, except with appropriate designation as set forth above, Borrower has not authorized and shall not authorize its assets or liabilities to be listed on the financial statement of any other Person;

 

(n) has been and will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person;

 

(o) has filed and will file such tax returns with respect to itself as may be required under applicable law and has prepared and will prepare separate tax returns and financial statements, or if part of a consolidated group, has been shown and will be shown as a separate member of such group;

 

(p) has paid and shall pay its own liabilities, indebtedness, and obligations of any kind, as the same shall become due, from its own separate assets, rather than from those of other Persons, and Borrower has not consented and shall not consent to any Person operating the Mortgaged Property to incur expenses as agent or on behalf of Borrower, unless such Person agreed or agrees, prior to incurring such expense, to clearly indicate that such expenses were or are the sole responsibility of, and any payment will come from, Borrower;

 

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(q) has not entered into and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person;

 

(r) has not commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; and has held and will hold title to all of its real and personal property in its own name and not in the name of any other Person;

 

(s) has maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(t) has not, does not and will not hold itself out to be responsible for the debts or obligations of any other Person (other than the Crossed Loans) and, except for the Loan Documents to which other Persons are party, shall not consent to any other Person holding itself out as being responsible for the debts or obligations of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(u) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) assumed, guaranteed or otherwise become liable on, and will not assume, guarantee or otherwise become liable on, or in connection with any obligation of any other Person (other than the Crossed Borrowers under the Crossed Loans) and, except for the Loan Documents to which other Persons are party, has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) consented and shall not consent to any other Person guaranteeing, assuming or otherwise becoming liable for any obligation of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(v) except for funds deposited into the Local Collection Account, the Collection Account or the Reserve Accounts in accordance with the Loan Documents, has not and shall not hold title to its assets other than in its name;

 

(w) has complied, complies and shall at all times hereafter comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto;

 

(x) has paid and will pay its own liabilities and expenses, out of its own funds and has not consented and shall not consent to any other Person paying Borrower’s (or any SPC Party’s, if applicable) obligations except to the extent that timely reimbursement is made for the same;

 

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(y) has held and will hold regular meetings, as appropriate to conduct its business and has observed at all times and will observe all limited liability company (if a limited liability company) or limited partnership (if a limited partnership) or corporate (if a corporation) formalities and record keeping;

 

(z) has allocated and will allocate to Borrower (and any SPC Party, if applicable) reasonably and on the basis of fair market value determined on an arm’s-length basis all general overhead and administrative expenses, including all costs associated with common employees and shared office space, any such allocation has been and shall be specifically and reasonably documented and substantiated, any such allocation of expenses to Borrower (or any SPC Party, if applicable) has been and shall be paid solely by Borrower (or such SPC Party, if applicable) from Borrower’s (or such SPC Party’s, if applicable) own funds, and Borrower (and any SPC Party, if applicable) has used and shall at all times use separate stationary, letterhead, invoices and checks;

 

(aa) has not identified and will not identify its members or partners, Independent Director (as defined below) or any other member or partner of any Affiliate of Borrower, or any other Person, as a division or part of it;

 

(bb) has paid and will pay the salaries of its own employees and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations;

 

(cc) has maintained, currently maintains, and will continue to maintain, its own cash, cash positions and bank accounts separate from any other Person;

 

(dd) (i) has not (A) liquidated or dissolved, in whole or in part; (B) consolidated, merged or entered into any form of consolidation with or into any other Person, nor conveyed, transferred or leased its assets substantially as an entirety to any Person nor permitted any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor conveyed, transferred or leased its assets substantially as an entirety to any Person; (C) engaged in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower); or (D) amended any provisions of its organizational documents containing provisions similar to those contained in this Article VIII; and (ii) shall not (A) to the extent permitted by law, liquidate or dissolve, in whole or in part; (B) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor convey, transfer or lease its assets substantially as an entirety to any Person; (C) engage in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest in Borrower); or (D) amend any provisions of its organizational documents containing provisions similar to those contained in this Article VIII;

 

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(ee) If Borrower is a limited partnership or a non-Delaware limited liability company:

 

(A) each general partner or managing member (each, an “ SPC Party ”) shall be either a corporation or a Delaware single member limited liability company, in either case, whose sole asset is its interest in Borrower and each such SPC Party will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Article VIII as if such representation, warranty or covenant was made directly by such SPC Party. The SPC Party’s Organizational Documents shall incorporate the provisions of this Article VIII and require that the directors, managers or members, as applicable, of such SPC Party consider the interests of the creditors of such SPC Party in connection with any Material Action (as defined below). As used herein, “ Material Action ” shall mean to institute proceedings to have Borrower or SPC Party adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against Borrower or SPC Party or file a petition seeking or consent to, reorganization or relief with respect to Borrower or SPC Party under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Borrower or SPC Party or a substantial part of Borrower’s or SPC Party’s property, or make any assignment for the benefit of creditors of Borrower or SPC Party, or admit in writing Borrower’s or SPC Party’s inability to pay its debts generally as they become due, or any similar action, or take action in furtherance of any of the foregoing actions.

 

(B) If the SPC Party is a corporation, Borrower shall at all times cause there to be at least one (1) duly appointed member of the board of directors of the SPC Party who is an Independent Director.

 

(C) If the SPC Party is a limited liability company, Borrower shall at all times cause there to be at least one (1) duly appointed independent manager of the SPC Party who is also a non-economic member of SPC Party, who is an Independent Director.

 

(D) The Borrower’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of Borrower’s Organizational Documents and the SPC Party’s Organizational Documents) will be required in order for Borrower to take any Material Action.

 

(E) The SPC Party’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of the SPC Party’s Organizational Documents) will be required in order for the SPC Party to take any Material Action.

 

(F) The SPC Party shall not: (i) if the SPC Party is a corporation, cause or permit the board of directors of the SPC Party to take any action which, under

 

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the terms of any certificate of incorporation, by-laws or any voting trust agreement with respect to any common stock, requires the vote of the board of directors of the SPC Party unless at the time of such action there shall be at least one (1) member of such board of directors who is an Independent Director; and (ii) if the SPC Party is a limited liability company, cause or permit the members or managers of the SPC Party to take any action which, under the terms of any certificate of formation, operating agreement or other organizational document requires the vote of the members or managers of the SPC Party unless at the time of such action there shall be at least one (1) independent manager and non-economic member of such SPC Party who is an Independent Director.

 

(ff) If Borrower is a Delaware single member limited liability company:

 

(A) Borrower shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ Borrower Single Member ”), and Borrower’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

(B) Borrower’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require Borrower to at all times cause there to be at least one (1) duly appointed independent manager of Borrower who is also a non-economic member of Borrower and an Independent Director whose affirmative vote will be required in order for Borrower to take any Material Action. Borrower’s Organizational Documents shall further require that upon the occurrence of any event that causes the Borrower Single Member to cease to be a member in Borrower, the Independent Director shall, without action of any person and simultaneously with the Borrower Single Member ceasing to be a member of Borrower, automatically be admitted to Borrower as a member and shall continue Borrower without dissolution.

 

(C) Borrower shall cause reputable Delaware counsel reasonably acceptable to Lender (the “ Delaware Law Firm ”) to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of Borrower Single Member and the Independent Director is required in order for Borrower to file a voluntary bankruptcy petition; (2) the provision in Borrower’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against Borrower Single Member; (3) the bankruptcy of Borrower Single Member will not cause Borrower to be dissolved; (4) no creditor of Borrower Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, Borrower’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

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(D) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

(gg) If the SPC Party is a Delaware single member limited liability company:

 

(A) SPC Party shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ SPC Single Member ”), and SPC Party’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

(B) SPC Party’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require SPC Party to at all times cause there to be at least one (1) duly appointed independent manager of SPC Party who is also a non-economic member of SPC Party and an Independent Director whose affirmative vote will be required in order for SPC Party to take any Material Action. SPC Party’s Organizational Documents shall further require that upon the occurrence of any event that causes the SPC Single Member to cease to be a member in SPC Party, the Independent Director shall, without action of any person and simultaneously with the SPC Single Member ceasing to be a member of SPC Party, automatically be admitted to SPC Party as a member and shall continue SPC Party without dissolution.

 

(C) Borrower shall cause the Delaware Law Firm to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of SPC Single Member and the Independent Director is required in order for SPC Party to file a voluntary bankruptcy petition; (2) the provision in SPC Party’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against SPC Single Member; (3) the bankruptcy of SPC Single Member will not cause SPC Party to be dissolved; (4) no creditor of SPC Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, SPC Party’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

(hh) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

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(ii) has complied and will comply with the separateness provisions of the Borrower’s Organizational Documents since such Borrower’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to limited liability companies or limited partnerships, as applicable, and each SPC Party, if applicable, has complied and will comply with the separateness provisions of the SPC Party’s Organizational Documents since such SPC Party’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to corporations;

 

(jj) the Borrower’s Organizational Documents and, if applicable, the SPC Party’s Organizational Documents provide and shall at all times continue to provide that Borrower (and the SPC Party, if applicable) shall not cause, permit, or empower any Person to consolidate or merge Borrower or the SPC Party into any other entity; and

 

(kk) has not funded and will not fund any other Person’s operations and has not paid and will not pay any other Person’s expenses.

 

Notwithstanding any other provision of the Borrower’s Organizational Documents, any SPC Party’s Organizational Documents or any provision of law that otherwise so empowers the Borrower, any SPC Party or any other Person, neither the Borrower, any SPC Party nor any other Person shall be authorized or empowered, nor shall they permit the Borrower, without the prior unanimous written consent of the Borrower and any SPC Party (including, in each case, all Independent Directors), to take any Material Action, provided, however, that neither the Borrower nor any SPC Party may vote on, or authorize the taking of, any Material Action, unless there is at least one (1) Independent Director then serving in such capacity.

 

Borrower hereby further represents, warrants and certifies to and for the benefit and reliance of Lender that: (i) upon closing of the Loan, the Mortgaged Property, Borrower and the SPC Party each shall have been fully released from the Prior Loans, neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, for the Prior Loans, and no recourse whatsoever against any portion of the Mortgaged Property shall be available to satisfy the Prior Loans under any circumstances; (ii) Borrower has provided Lender with true, correct and complete copies of (A) Borrower’s current (and since the date of its inception) financial statements, (B) Borrower’s current (and since the date of its inception) Borrower’s Organizational Documents, and (C) the Prior Loan Documents; (iii) Borrower has prior to the Closing Date (and at all times since the date of its inception) conducted its affairs as a special purpose bankruptcy remote entity in substantial accordance with (A) the provisions of this Section 8.1 , (B) the provisions of Borrower’s Organizational Documents (as in effect now and as in effect at all times since the date of its inception), and (C) the Prior Loan Documents; and (iv) the Borrower’s certifications and statements set forth in the certificate attached hereto as Schedule 8.1(a) are true and correct.

 

ARTICLE IX.

MISCELLANEOUS

 

Section 9.1. Survival . This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement, the making the Loan hereunder and the

 

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execution and delivery by Borrower to Lender of the Loan Documents, and shall continue in full force and effect so long as any portion of the Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of the respective successors and assigns of Lender. Nothing in this Agreement or in any other Loan Document, express or implied, shall give to any Person other than the parties and the holder of the Note and the other Loan Documents, and their legal representatives, successors and assigns, any benefit or any legal or equitable right, remedy or claim hereunder.

 

Section 9.2. Lender’s Discretion . Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

 

Section 9.3. Governing Law .

 

This Agreement was negotiated in New York and made by Lender and accepted by Borrower in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity, performance, and maximum permissible rates of interest), this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

(a) Borrower hereby consents to the jurisdiction of any federal court or state court in New York, New York or within the county and state in which any Mortgaged Property is located and irrevocably agrees that, subject to Lender’s election, any legal suit, action or proceeding against Lender or Borrower arising out of or relating to this Agreement or the other Loan Documents may be instituted and litigated in such courts. Borrower hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. Borrower does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by Borrower from time to time in accordance with the terms hereof) with a copy to Borrower and written notice of said service of Borrower mailed or delivered to Borrower in the manner provided herein shall be deemed in every respect effective service of process upon Borrower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to Lender of any change in address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent

 

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with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

Section 9.4. Modification, Waiver in Writing . No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or any other Loan Document, or consent or waiver referred to in any Loan Document or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

 

Section 9.5. Delay Not a Waiver . Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 9.6. Notices . All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if delivered or sent by: (a) hand delivery, (b) certified or registered United States mail, postage prepaid, (c) nationally recognized overnight delivery service, (d) by facsimile transmission, addressed if to Lender or to Borrower at its applicable address set forth on Schedule 5 hereto, or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 8.6 , or (e) other than with respect to an amendment or modification, an electronic medium. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or three Business Days after mailing; in the case of overnight delivery and facsimile transmission, on the Business Day after the same was sent; or in the case of electronic medium, when confirmed by e-mail. A party receiving a notice which does not comply with the technical requirements for notice under this Section 9.6 may elect to waive any deficiencies and treat the notice as having been properly given. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

 

Section 9.7. TRIAL BY JURY . BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

 

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Section 9.8. Headings . The Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

Section 9.9. Assignment .

 

(a) Borrower may not sell, assign or transfer any interest in the Loan Documents, or any portion of the foregoing (including, without limitation, Borrower’s rights, title, interests, remedies, powers and duties hereunder and thereunder) without Lender’s prior written consent. Lender shall have the right to assign or participate this Agreement and/or its interest in any of the other Loan Documents and the obligations hereunder to any Person. In the event of an assignment by Lender, (a) the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would have if it were an original “Lender” hereunder; (b) the assignee shall be deemed for all purposes to be a “Lender” hereunder; and (c) upon any such substitution of Lender, a replacement or addition “Lender signature page” shall be executed by the new Lender and attached to this Agreement and thereupon become a part of this Agreement. After the effectiveness of any assignment, the new Lender shall provide notice to Borrower of the identity, address and other pertinent information pertaining to the new Lender. Borrower shall maintain a copy of each assignment and notice delivered to it and a register (the “ Register ”) for the recordation of the names and addresses of the Lenders and the principal amount of the assigned loans owing to each Lender from time to time. The entries on the Register shall be conclusive, in the absence of manifest error, and the Borrower and the Lenders shall treat each person whose name is recorded in the Register as the owner of the assigned loans recorded therein for all purposes of this Agreement. Any assignment or transfer of all or a part of a loan evidenced by a note shall be registered on the Register only upon surrender for registration of assignment or transfer of the note evidencing such loan, accompanied by a duly executed assignment and notice, and thereupon one or more new notes shall be issued to the designated assignee. Notwithstanding anything in this Agreement to the contrary, after an assignment by Lender, the “Lender” (prior to such assignment) shall continue to have the benefits of any rights or indemnifications and shall continue to have the obligations contained herein which Lender had during the period such party was a “Lender” hereunder.

 

(b) Lender may from time to time elect to enter into a servicing agreement with a servicer, pursuant to which the servicer shall be appointed to service and administer the Loan and the Account Collateral in accordance with the terms hereof and to exercise any and all other rights of Lender with respect to the Loan as set forth in such servicing agreement. Lender shall promptly notify Borrower if Lender shall elect to appoint or change the servicer, and all notices and other communications from Borrower to Lender shall be delivered to the servicer with a copy concurrently delivered to the Lender, and any notice, direction or other communication from the servicer to Borrower shall have the same force and effect as a notice, direction or communication from Lender. The servicer shall be entitled to be reimbursed for any cost, expense or liability which is incurred by the servicer pursuant to such servicing and administrative duties and which would otherwise be reimbursable to Lender under this Agreement or any other Loan Document in the same manner and to the same extent as if Lender

 

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incurred such cost, expense or liability in the first place. The parties hereto acknowledge and agree that the servicer shall be a third party beneficiary to this Agreement and the other Loan Documents.

 

Section 9.10. Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

Section 9.11. Preferences . Lender shall have no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the obligations of Borrower pursuant to this Agreement, the Note or any other Loan Document. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder, provided that such application or reapplication is performed by Lender in accordance with the terms of this Agreement or any other applicable Loan Document. To the extent Borrower makes a payment or payments to Lender for Borrower’s benefit, which payment or proceeds 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 under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

 

Section 9.12. Waiver of Notice . Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or another Loan Document specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents does not specifically and expressly provide for the giving of notice by Lender to Borrower.

 

Section 9.13. Failure to Consent . If Borrower shall seek the approval by or consent of Lender hereunder or under the Note, or any of the other Loan Documents, and Lender shall fail or refuse to give such consent or approval, then Borrower shall not be entitled to any damages for any withholding or delay of such approval or consent by Lender, it being intended that Borrower’s sole remedy shall be to bring an action for an injunction or specific performance.

 

Section 9.14. Schedules Incorporated . The information set forth on the cover, heading and recitals hereof, and the Schedules attached hereto, are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

 

Section 9.15. Offsets, Counterclaims and Defenses . Any assignee of any of Lender’s interest in and to this Agreement and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to this Agreement and

 

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the other Loan Documents which Borrower may otherwise have against any assignor or this Agreement and the other Loan Documents. No such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement or upon any other Loan Document. Any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

 

Section 9.16. No Joint Venture or Partnership . Borrower and Lender intend that the relationship created hereunder be solely that of borrower and lender. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower (or any Affiliate of Borrower) and Lender nor to grant Lender any interest in the Collateral other than that of secured party, mortgagee or lender.

 

Section 9.17. Waiver of Marshalling of Assets Defense . To the fullest extent Borrower may legally do so, Borrower waives all rights to a marshalling of the assets of Borrower, and others with interests in Borrower, and of the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of any Collateral for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender to the payment of the Indebtedness out of the Net Proceeds of the Collateral in preference to every other claimant whatsoever.

 

Section 9.18. Waiver of Counterclaim . To the extent permitted by applicable law, Borrower hereby waives the right to assert a counterclaim, other than compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

 

Section 9.19. Conflict; Construction of Documents . In the event of any conflict between the provisions of this Agreement and the provisions of any of the other Loan Documents, the provisions of this Agreement shall prevail. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same.

 

Section 9.20. Brokers and Financial Advisors . Borrower and the Lender hereby represent that they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower and Lender hereby agree to indemnify and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of the indemnifying party in connection with the transactions contemplated herein. The provisions of this Section 9.20 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness.

 

Section 9.21. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

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Section 9.22. Estoppel Certificates . Borrower and Lender hereby agree at any time and from time to time upon not less than fifteen (15) days prior written notice by Borrower or Lender to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the knowledge of such certifying party, any Default or Event of Default has occurred and is then continuing, and, if so, specifying each such Default or Event of Default; provided , however , that it shall be a condition precedent to Lender’s obligation to deliver the statement pursuant to this Section 9.22 , that Lender shall have received, together with Borrower’s request for such statement, an Officer’s Certificate stating that, to the knowledge of Borrower, no Default or Event of Default exists as of the date of such certificate (or specifying such Default or Event of Default).

 

Section 9.23. Payment of Expenses . Borrower shall pay all Transaction Costs, which shall include, without limitation, (a) reasonable out-of-pocket costs and expenses of Lender in connection with (i) the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein; (ii) the creation, perfection or protection of Lender’s Liens in the Collateral (including, without limitation, fees and expenses for title and lien searches or amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments, title insurance premiums and filing and recording fees, third party due diligence expenses for the Mortgaged Property plus travel expenses, accounting firm fees, costs of the Appraisals, Environmental Reports (and an environmental consultant), and the Property Condition Assessments and earthquake “maximum probable loss” report and costs and fees incurred in connection with arranging, setting up, servicing and maintaining the Account Collateral); (iii) response to any requests by Borrower (or its Affiliates) for Lender consent or approval of any matter relating to the Loan, the Loan Documents or the Mortgaged Property; (iv) the negotiation, preparation, execution and delivery of any amendment, waiver, restructuring or consent relating to any of the Loan Documents, and (v) the preservation of rights under and enforcement of the Loan Documents and the documents and instruments referred to therein, including any communications or discussions relating to any action that Borrower shall from time to time request Lender to take, as well as any restructuring or rescheduling of the Indebtedness, (b) the reasonable fees, expenses and other charges of counsel to Lender in connection with all of the foregoing, and (c) Lender’s reasonable out-of-pocket travel expenses in connection with site visits to the Mortgaged Property.

 

Section 9.24. Non-Recourse . Anything contained herein, in the Note or in any other Loan Document to the contrary notwithstanding, but subject in all respects to the provisions set forth below, Lender shall not enforce the liability and obligation of the Borrower to perform and observe any of its obligations that may be contained in the Note, this Agreement, the Mortgage or any other Loan Document by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Mortgaged Property, the Rents and other Receivables, or any other Collateral pursuant to the Loan Documents; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Mortgaged Property, in the

 

122


Rents and other Receivables and in any other Collateral. NOTWITHSTANDING ANYTHING TO THE CONTRARY ABOVE OR ELSEWHERE IN THIS AGREEMENT, THE MORTGAGE OR ANY OF THE LOAN DOCUMENTS, however,

 

(a) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not: (i) constitute a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Indebtedness or to require that all Collateral and all Crossed Properties shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents; (ii) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (iii) impair the right of Lender to name Borrower (or any Crossed Borrowers) as a party defendant in any action or suit for foreclosure and sale under the Mortgage or other Loan Documents (or Crossed Loan Documents); (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Rents and Leases (or any Assignment of Rents and Leases (as defined in the Crossed Loan Agreements)); (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Mortgage, any other Mortgages (as defined in the Crossed Loan Agreements), the other Loan Documents and the Crossed Loan Documents, or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Mortgaged Property, any other Collateral or any Crossed Properties; (vii) have any applicability whatsoever to or limit the liability of the Borrower, Guarantor or other parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement or any other guaranty or indemnity made in connection with the Loan, the Crossed Loans or any of the rights and remedies of Lender thereunder; or (viii) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or this Agreement or secured by the Loan Documents or evidenced or secured by the Crossed Loan Documents, and the same shall continue until paid or discharged in full, and

 

(b) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not

 

(A) prevent recourse to the assets of Borrower or any Crossed Borrower, the Mortgaged Property, any Crossed Property or any other instrument or document which is pledged by Borrower or Crossed Borrower to Lender pursuant to the Loan Documents or Crossed Loan Documents, including all Collateral;

 

(B) have any applicability whatsoever to or limit the liability of the parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement (or any “Environmental Indemnity Agreement” as defined and referred to or included among any Crossed Loan Documents) or any Crossed Guaranty;

 

(C) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or secured by the Loan Documents (or evidenced and/or secured by any Crossed Loan Documents), and the same shall continue until paid or discharged in full; or

 

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(D) prevent recourse to Borrower, any Crossed Borrowers and Guarantor, jointly and severally, and their respective assets for repayment of the Indebtedness, and Lender’s agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force or effect, and the Indebtedness shall be fully recourse not only to Borrower but also to any Crossed Borrowers and Guarantor, in the event:

 

  (1) Borrower shall file or commence any voluntary bankruptcy, insolvency or similar proceeding, including any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, or Borrower shall make a general assignment for the benefit of creditors or institute receivership proceedings or similar proceedings with respect to the Mortgaged Property, Borrower or Borrower’s assets, or (A) any such proceedings or petition shall be filed or commenced against Borrower by Guarantor, or its Affiliates or agents acting under the control or direction of Guarantor, or (B) if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor (or if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor cause Borrower to, by exercise of their rights as equity owners or officers or directors of Borrower or otherwise) aid, solicit or otherwise cooperate or collude to bring about the filing or commencement of any such proceedings or petition;

 

  (2) any Transfer or removal of material Equipment occurs in violation of the terms of the Loan Documents; or

 

  (3) any material breach of the provisions of Article VIII of this Agreement occurs; or

 

(E) prevent recourse to Borrower, any Crossed Borrower and Guarantor, jointly and severally, and their respective assets, and Borrower, any Crossed Borrowers and Guarantor shall be fully and personally liable, for (x) any obligation to pay Lender any Insurance Gap and (y) any loss, costs, liability, damage or expense (including, without limitation, attorneys’ fees and disbursements) suffered or incurred by Lender or any Indemnified Party, in each case, to the extent related to or arising from any of the following acts committed by or on behalf of Borrower, any Crossed Borrowers, Guarantor or any of their respective Affiliates:

 

  (1) any fraud on the part of Borrower, Guarantor or their respective Affiliates in connection with the Loan;

 

  (2) any willful misrepresentation contained in any Loan Documents or report furnished pursuant to any Loan Document;

 

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  (3) any misappropriation or misapplication of funds (including Loss Proceeds or Rents) in contravention of the Loan Documents;

 

  (4) additional financing obtained by Borrower (whether secured or unsecured) in violation of the terms of the Loan Documents;

 

  (5) actual material physical waste to the Mortgaged Property or material damage to the Mortgaged Property resulting from gross negligence or willful misconduct;

 

  (6) any breach of any representation, warranty or covenant in this Agreement or the Environmental Indemnity Agreement, concerning Environmental Laws and Hazardous Substances;

 

  (7) any Security Deposits received by Borrower or Manager from tenants not being properly applied, returned to tenants when due or delivered to Lender, a receiver or a purchaser of the Mortgaged Property in the event of a foreclosure sale upon such Person taking possession of the Mortgaged Property;

 

  (8) all costs and expenses, including reasonable attorneys’ fees and expenses, incurred in enforcing any obligation or liability or in collecting any amount due under this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, which, as to Borrower, is a recourse obligation of Borrower as described in this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the Environmental Indemnity;

 

  (9) the failure to pay Impositions assessed against the Mortgaged Property to the extent there were sufficient funds available to pay and Lender allows Borrower to apply the same, or the failure to pay and discharge any mechanic’s or materialman’s Liens against the Mortgaged Property to the extent there was sufficient funds available to pay and discharge and Lender allows Borrower to apply the same, except, in the case of each of the foregoing, to the extent the same were or are being contested in accordance with the terms of the Loan Documents;

 

  (10) any Rents or Proceeds received or collected by Borrower, any Affiliate of Borrower or Manager and not deposited into the Local Collection Account or the Collection Account in accordance with Section 2.12 or otherwise endorsed, delivered or turned over to Lender; or

 

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  (11) If the Indebtedness is not paid in full by the Maturity Date or is accelerated or if any monetary Event of Default has occurred, and Borrower or any Affiliate contests or in any way interferes with, directly or indirectly (collectively, a “ Contest ”), any foreclosure action or sale commenced by Lender or with any other enforcement of Lender’s rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to any of the Collateral (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise) (except this clause (11) shall not prohibit a good faith defense on the basis that no Event of Default exists, and such a good faith defense shall not give rise to recourse liability under this clause (11)).

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

 

LENDER:

CITIGROUP GLOBAL MARKETS REALTY CORP.,

a New York corporation
By:  

/s/    D ONALD D REWITZ


Name:   Donald Drewitz
Title:   Authorized Agent

 

127


 

BORROWER:

Global Webb, L.P.,

a Texas limited partnership

 

By:

  Global Webb, LLC,
    a Delaware limited liability company,
    its General Partner

 

    By:    Digital Realty Trust, L.P.,
        a Maryland limited partnership,
        its Member and Manager

 

        By:    Digital Realty Trust, Inc.,
            a Maryland corporation its General Partner

 

            By:  

/s/    M ICHAEL F. F OUST


            Print Name:  

Michael F. Foust


            Title:  

Chief Executive Officer


 

128

Exhibit 10.39

 

PROMISSORY NOTE

 

$34,500,000

 

New York, New York

November 3, 2004

 

FOR VALUE RECEIVED, the undersigned, GLOBAL WEBB, L.P., a Texas limited partnership (the “ Maker ”), promises to pay to the order of CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation (collectively, with any subsequent holder of this Note, the “ Holder ”) at its offices located at 388 Greenwich Street, 11th Floor, New York, New York 10013 or at such other address as the Holder may from time to time designate in writing, the principal sum of THIRTY-FOUR MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($34,500,000), together with interest thereon, and all other amounts payable under the Loan Documents, such principal, interest and other amounts to be payable as provided in the Loan Agreement.

 

This Note is the Note referred to in that certain Loan Agreement, dated as of November 3, 2004, among the Maker and the Holder (as modified and supplemented and in effect from time to time, the “ Loan Agreement ”). Reference to the Loan Agreement is hereby made for a statement of the rights of the Holder and the duties and obligations of the Maker, but neither this reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Maker to pay the principal, interest and other amounts, if any, payable with respect to this Note when due. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement. The outstanding principal amount shall bear interest at the rates provided for in the Loan Agreement.

 

This Note is secured by the Mortgage and certain other Loan Documents and (subject to Section 2.11(g) of the Loan Agreement) Crossed Loan Documents.

 

The principal sum evidenced by this Note, together with accrued interest and other sums or amounts due hereunder, shall become immediately due and payable at the option of the Holder upon the occurrence of any Event of Default in accordance with the provisions of the Loan Agreement.

 

With respect to the amounts due pursuant to this Note, the Maker waives the following: (1) all rights of exemption of property from levy or sale under execution or other process for the collection of debts under the Constitution or laws of the United States or any state thereof; (2) demand, presentment, protest, notice of dishonor, notice of nonpayment, suit against any party, diligence in collection of this Note, and all other requirements necessary to enforce this Note, except for notices required by Governmental Authorities and notices required by the Loan Agreement and any of the other Loan Documents; and (3) any further receipt by or acknowledgment of any Collateral now or hereafter deposited as security for the Loan.

 

In no event shall the amount of interest (and any other sums or amounts that are deemed to constitute interest under applicable Legal Requirements) due or payable hereunder (including interest calculated at the Default Rate) exceed the maximum rate of interest designated by applicable Legal Requirements (the “ Maximum Amount ”), and in the event such payment is inadvertently paid by the Maker or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal (without prepayment penalty), and if in excess of such balance, shall be immediately returned to the Maker upon such determination. It is the express intent hereof that the Maker not pay and the Holder not receive, directly or indirectly, interest in excess of the Maximum Amount.


The Holder shall not by any act, delay, omission or otherwise be deemed to have modified, amended, waived, extended, discharged or terminated any of its rights or remedies, and no modification, amendment, waiver, extension, discharge or termination of any kind shall be valid unless in writing and signed by the Holder. All rights and remedies of the Holder under the terms of this Note and applicable statutes or rules of law shall be cumulative, and may be exercised successively or concurrently.

 

Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements, but if any provision of this Note shall be prohibited by or invalid under applicable Legal Requirements, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

 

The Holder may, at its option, release any Collateral given to secure the indebtedness evidenced hereby, and no such release shall impair the obligations of the Maker to the Holder.

 

This Note was negotiated in New York, and made by the Maker and accepted by the Holder in the State of New York, and the proceeds of this Note were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity and performance), this Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

Any legal suit, action or proceeding against the Maker by the Holder arising out of or relating to this Note shall be instituted in any federal or state court in New York, New York or in the state where the Mortgaged Property is located. The Maker hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. The Maker does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by such agent in accordance with the terms hereof) with a copy to the Maker, together with written notice of said service of the Maker, mailed or delivered to the Maker in the manner provided in the Loan Agreement shall be deemed in every respect effective service of process upon the Maker, in any such suit, action or proceeding in the State of New York or the state where the Mortgaged Property is located (as applicable). The Maker (i) shall give prompt notice to the Holder of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

The provisions of this Note shall be subject to the provisions of Section 9.24 of the Loan Agreement, which provisions are incorporated by reference as if herein set forth in full.

 

THE MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS NOTE OR THE OTHER LOAN DOCUMENTS. THE MAKER AGREES THAT THE HOLDER

 

2


MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF THE MAKER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THE MAKER AND THE HOLDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Upon the transfer of this Note, Holder may deliver all Collateral granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights and obligations herein or under applicable law given to Holder with respect thereto, and Holder shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter, but Holder shall retain all rights and obligations hereby given to it with respect to any liabilities and the Collateral not so transferred.

 

3


IN WITNESS WHEREOF, the Maker has caused this Note to be properly executed on the date first above written, and has authorized this Note to be dated as of the day and year first above written.

 

MAKER:

GLOBAL WEBB, L.P.,

a Texas limited partnership

By:

 

Global Webb, LLC,

   

a Delaware limited liability company,

   

its General Partner

   

By:

 

Digital Realty Trust, L.P.,

       

a Maryland limited partnership,

       

its Member and Manager

       

By:

 

Digital Realty Trust, Inc.,

           

a Maryland corporation

           

its General Partner

            By:  

/s/ S COTT P ETERSON


            Name:  

Scott Peterson


            Title:  

Senior Vice President


Exhibit 10.40

 

EXECUTION COPY

 

LOAN AGREEMENT

 

Dated as of November 3, 2004

 

by and among

 

GLOBAL WEEHAWKEN ACQUISITION COMPANY, LLC

 

as Borrower,

 

and

 

CITIGROUP GLOBAL MARKETS REALTY CORP.


EXECUTION COPY

 

Table of Contents

 

              Page

ARTICLE I. CERTAIN DEFINITIONS    1
     Section 1.1.   Definitions    1
ARTICLE II. GENERAL TERMS    28
     Section 2.1.   The Loan.    28
     Section 2.2.   Use of Proceeds    28
     Section 2.3.   Security for the Loan    28
     Section 2.4.   Borrower’s Note    29
     Section 2.5.   Principal and Interest.    29
     Section 2.6.   Prepayment.    30
     Section 2.7.   Defeasance.    34
     Section 2.8.   Application of Payments During Event of Default    38
     Section 2.9.   Method and Place of Payment    39
     Section 2.10.   Taxes.    39
     Section 2.11.   Cross-Collateralization; Contribution; Release of Cross-Collateralization.    40
     Section 2.12.   Central Cash Management.    45
     Section 2.13.   Reserve Accounts.    49
     Section 2.14.   Additional Provisions Relating to the Pledged Accounts.    54
     Section 2.15.   Security Agreement.    55
     Section 2.16.   Mortgage Recording Taxes    57
ARTICLE III. CONDITIONS PRECEDENT    57
     Section 3.1.   Conditions Precedent to Closing    57
     Section 3.2.   Execution and Delivery of Agreement    61
ARTICLE IV. REPRESENTATIONS AND WARRANTIES    62
     Section 4.1.   Representations and Warranties as to Borrower    62
     Section 4.2.   Representations and Warranties as to the Mortgaged Property    66
     Section 4.3.   Survival of Representations    70
ARTICLE V. AFFIRMATIVE COVENANTS    70
     Section 5.1.   Affirmative Covenants    70
ARTICLE VI. NEGATIVE COVENANTS    100
     Section 6.1.   Negative Covenants    100
     Section 6.2.   Transfer of Ownership Interests    102
ARTICLE VII. EVENT OF DEFAULT    104
     Section 7.1.   Event of Default    104
     Section 7.2.   Remedies.    106
     Section 7.3.   Remedies Cumulative    107

 

i


              Page

     Section 7.4.   Intentionally Omitted.    107
     Section 7.5.   Curative Advances    107
ARTICLE VIII. SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND
    COVENANTS
   108
     Section 8.1.   Applicable to Borrower and any SPC Party    108
ARTICLE IX. MISCELLANEOUS    116
     Section 9.1.   Survival    116
     Section 9.2.   Lender’s Discretion    116
     Section 9.3.   Governing Law.    117
     Section 9.4.   Modification, Waiver in Writing    117
     Section 9.5.   Delay Not a Waiver    117
     Section 9.6.   Notices    118
     Section 9.7.   TRIAL BY JURY    118
     Section 9.8.   Headings    118
     Section 9.9.   Assignment.    118
     Section 9.10.   Severability    119
     Section 9.11.   Preferences    119
     Section 9.12.   Waiver of Notice    120
     Section 9.13.   Failure to Consent    120
     Section 9.14.   Schedules Incorporated    120
     Section 9.15.   Offsets, Counterclaims and Defenses    120
     Section 9.16.   No Joint Venture or Partnership    120
     Section 9.17.   Waiver of Marshalling of Assets Defense    120
     Section 9.18.   Waiver of Counterclaim    121
     Section 9.19.   Conflict; Construction of Documents    121
     Section 9.20.   Brokers and Financial Advisors    121
     Section 9.21.   Counterparts    121
     Section 9.22.   Estoppel Certificates    121
     Section 9.23.   Payment of Expenses    121
     Section 9.24.   Non-Recourse    122

 

SCHEDULES

         

1

      Immediate Repairs Reserved for in Deferred Maintenance Escrow Account

2

      Organizational Chart

3

      Crossed Borrowers and Crossed Loans

4

      Exceptions to Representations and Warranties

5

      Addresses for Notices

6

      Work Reserve Funding Conditions

7

      DSCR Calculations

8.1(a)

      Certificate of Executive Officer

8.1(b)

      List of Prior Loan Documents

 

ii


LOAN AGREEMENT

 

THIS LOAN AGREEMENT, made as of November 3, 2004, is by and among GLOBAL WEEHAWKEN ACQUISITION COMPANY, LLC, a Delaware limited liability company, having an address at c/o Digital Realty Trust, L.P., 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (“ Borrower ”), and CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an address at 388 Greenwich Street, 11th Floor, New York, New York 10013 (together with its successors and assigns, whether one or more, “ Lender ”).

 

RECITALS

 

WHEREAS, Borrower desires to obtain from Lender the Loan in an amount equal to the Loan Amount (each as hereinafter defined) to, with respect to the Mortgaged Property (as hereinafter defined), finance a portion of the acquisition cost thereof, and/or refinance existing debt at such Mortgaged Property and to pay certain other fees and expenses;

 

WHEREAS, Lender is unwilling to make the Loan unless Borrower executes and delivers this Agreement, the Note and the Loan Documents (each as hereinafter defined) to which it is a party which shall establish the terms and conditions of, and provide security for, the Loan; and

 

WHEREAS, Borrower has agreed to establish certain accounts and to grant to Lender a security interest therein upon the terms and conditions of the security agreement set forth in Section 2.15 .

 

NOW, THEREFORE, in consideration of the making of the Loan by Lender and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereby covenant, agree, represent and warrant as follows:

 

ARTICLE I.

CERTAIN DEFINITIONS

 

Section 1.1. Definitions . For all purposes of this Agreement: (1) the capitalized terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; (2) all accounting terms have the meanings assigned to them in accordance with GAAP (as hereinafter defined) unless otherwise explicitly set forth herein; (3) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision; (4) the words “include,” “includes” or “including” shall be deemed to be followed by the phrase “without limitation,” if not already so drafted; and (5) the following terms have the following meanings:

 

Account Collateral ” has the meaning set forth in Section 2.15(a) hereof.


Accounts ” means all accounts (as defined in the relevant UCC), now owned or hereafter acquired by Borrower, and arising out of or in connection with, the operation of the Mortgaged Property and all other accounts described in the Management Agreement and all present and future accounts receivable, inventory accounts, chattel paper, notes, insurance policies, Instruments, Documents or other rights to payment and all forms of obligations owing at any time to Borrower thereunder, whether now existing or hereafter created or otherwise acquired by or on behalf of Borrower, and all Proceeds thereof and all liens, security interests, guaranties, remedies, privileges and other rights pertaining thereto, and all rights and remedies of any kind forming the subject matter of any of the foregoing.

 

Affiliate ” of any specified Person means any other Person (i) controlling or controlled by or under common control with such specified Person; (ii) directly or indirectly owning or holding twenty percent (20%) or more of any equity interest in the first Person; or (iii) twenty percent (20%) or more of whose equity interests are directly or indirectly owned or held by the first Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Agreement ” means this Loan Agreement, together with the Schedules and Exhibits hereto, as the same may from time to time hereafter be modified, supplemented or amended.

 

Aggregate Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Allocated Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Applicable Crossed Loan Partial Defeasance Amount ” means, with respect to a Crossed Loan Total Defeasance, the portion of the “Aggregate Amount”, as defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance, which is equal to the “Allocated Amount” for the Loan (as a “Crossed Loan” as defined in such Crossed Loan Agreement), as such “Allocated Amount” is defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance.

 

Appraisal ” means each appraisal with respect to the Mortgaged Property prepared by an Appraiser in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches.

 

Appraiser ” means a nationally recognized MAI appraiser selected by Borrower and reasonably approved by Lender.

 

Approved Capital Expenditures ” has the meaning set forth in Section 2.13(a)(iii) hereof.

 

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Approved Leasing Costs ” has the meaning set forth in Section 2.13(a)(iv) hereof.

 

Assignment of Rents and Leases ” means the Assignment of Rents and Leases, dated as of the Closing Date, granted by the Borrower to Lender with respect to the Leases, as same may thereafter from time to time be supplemented, amended, modified or extended.

 

Basic Carrying Costs ” means the following costs with respect to the Mortgaged Property: (i) Impositions and (ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents.

 

Borrower ” has the meaning provided in the first paragraph of this Agreement.

 

Borrower Single Member ” has the meaning set forth in Section 8.1(ff)(A) .

 

Borrower’s Organizational Documents ” shall mean: (i) Borrower’s limited partnership agreement, if Borrower is a limited partnership, and (ii) Borrower’s limited liability company operating agreement, if Borrower is a limited liability company.

 

Business Day ” means any day other than a Saturday, a Sunday or a day on which commercial banks in the State of New York or the State of Illinois are authorized or obligated by law, governmental decree or executive order to be closed.

 

Capital Improvement Costs ” means costs incurred or to be incurred in connection with replacements and capital repairs made to the Mortgaged Property which would be capitalized in accordance with GAAP (including without limitation, TI Costs and Leasing Commissions).

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended, and as it may be further amended from time to time and any successor statutes thereto.

 

Chattel Paper ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “chattel paper” as defined in the UCC (whether tangible chattel paper or electronic chattel paper).

 

Closing Date ” means the date of the funding of the Loan.

 

Code ” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

Collateral ” means, collectively, the Land, Improvements, Leases, Rents, Personalty, and all Proceeds, and (to the full extent assignable) Permits, which is or hereafter may become subject to a Lien in favor Lender as security for the Loan (whether pursuant to the Mortgage, any other Loan Document or otherwise), all whether now owned or hereafter acquired and all other property which is or hereafter may become subject to a Lien in favor Lender as security for the Loan and including all property of any kind described as part of the Mortgaged Property under the Mortgage.

 

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Collateral Security Instrument ” means any right, document or instrument, other than the Mortgage, given as security for the Loan, including, without limitation, and the Contract Assignment.

 

Collection Account ” has the meaning set forth in Section 2.12(a)(i) hereof.

 

Collection Account Agreement ” means the Collection Account Agreement, dated as of the applicable date and executed by Borrower, Lender and the Collection Account Bank, relating to the Collection Account and the Reserve Accounts and any other accounts maintained with the Collection Account Bank.

 

Collection Account Bank ” means LaSalle Bank, National Association, or any successor financial institution appointed by Lender.

 

Condemnation Proceeds ” means, in the event of a Taking with respect to the Mortgaged Property, the proceeds in respect of such Taking less any reasonable third party out-of-pocket expenses incurred in prosecuting the claim for and otherwise collecting such proceeds.

 

Consumer Price Index ” means the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, in the area where the Mortgaged Property is located; All Items (1982-84 = 100), or any successor index thereto, appropriately adjusted and if the Consumer Price Index ceases to be published and there is no successor thereto, such other index as Agent and Borrower shall mutually agree upon.

 

Contest ” has the meaning set forth in Section 9.24(E)(11) hereof.

 

Contingent Obligation ” means, as used in the definition of Other Borrowings, without duplication, any obligation of Borrower guaranteeing any indebtedness, leases, dividends or other obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly. Without limiting the generality of the foregoing, the term “ Contingent Obligation ” shall include any obligation of Borrower:

 

(i) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

 

(ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor;

 

(iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or

 

(iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof.

 

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The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming Borrower is required to perform thereunder).

 

Contract Assignment ” means, with respect to the Mortgaged Property, the Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the Closing Date and executed by the Borrower in favor of Lender.

 

Contracts ” means the Management Agreement and all other agreements to which Borrower is a party or which are assigned to Borrower by the Manager in the Management Agreement and which are executed in connection with the construction, operation and management of the Mortgaged Property (including, without limitation, agreements for the sale, lease or exchange of goods or other property and/or the performance of services by it, in each case whether now in existence or hereafter arising or acquired), as any such agreements have been or may be from time to time amended, supplemented or otherwise modified.

 

Crossed Borrowers ” shall mean the mortgage loan borrowers (other than Borrower) listed on Schedule 3 attached hereto and made a part hereof, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Indebtedness ” shall mean the Crossed Loans and all other “Indebtedness” as defined in each Crossed Loan Agreement.

 

Crossed Loan Agreements ” shall mean each Loan Agreement, each dated as of the date hereof, between Lender and each Crossed Borrower (i.e., a separate Loan Agreement for each Crossed Loan and Crossed Borrower), each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Default ” shall mean any “Event of Default” as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Documents ” shall mean the “Loan Documents” as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), mortgage(s) and/or deed(s) of trust and Crossed Loan Agreement evidencing and/or securing each Crossed Loan and each of the Crossed Guaranties of the Crossed Loans, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Partial Defeasance Conditions ” shall have the meaning set forth in Section 2.7(b) hereof.

 

Crossed Loans ” shall mean each of the mortgage loans (other than the Loan) listed on Schedule 3 attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loans Collection ” has the meaning set forth in Section 2.11(e) .

 

5


Crossed Loan Total Defeasance ” with respect to a Crossed Loan shall mean a “Total Defeasance” (as defined in the Crossed Loan Agreement for such Crossed Loan) of such Crossed Loan.

 

Crossed Loan Total Defeasance Date ” with respect to a Crossed Loan subject to a Crossed Loan Total Defeasance, shall mean the “Total Defeasance Date” (as defined in the Crossed Loan Agreement for such Crossed Loan) for such Crossed Loan Total Defeasance of such Crossed Loan.

 

Crossed Obligor Insolvency Event ” has the meaning set forth in Section 2.11(d) .

 

Crossed Obligors ” has the meaning set forth in Section 2.11(c) .

 

Crossed Party Obligations ” has the meaning set forth in Section 2.11(c) .

 

Crossed Properties ” shall mean the “Mortgaged Property” securing each Crossed Loan, as defined in each Crossed Loan Agreement for each Crossed Loan, subject to modification pursuant to Section 2.11(g) hereof.

 

Cross Guaranties ” shall mean (i) each Guaranty of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) each Guaranty, each dated as of the date hereof, of each of the Crossed Loans, each executed by the Borrower.

 

Cross Release Notice ” has the meaning set forth in Section 2.11(g) .

 

Debt Service Reserve Account ” has the meaning set forth in Section 2.13(c) .

 

Deed of Trust Trustee ” means the trustee under any Mortgage that constitutes a “deed of trust” under applicable law.

 

Default ” means the occurrence of any event which, but for the giving of notice or the passage of time, or both, would be an Event of Default.

 

Default Rate ” means the per annum interest rate equal to the lesser of (a) 5.0% per annum in excess of the rate otherwise applicable hereunder and (b) the maximum rate allowable by applicable law.

 

Defeasance ” means any of a Total Defeasance or a Partial Defeasance.

 

Defeasance Collateral ” shall mean Partial Defeasance Collateral or Total Defeasance Collateral, as applicable.

 

Defeasance Collateral Account ” has the meaning set forth in Section 2.7(d) .

 

Defeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Deferred Maintenance Escrow Account ” has the meaning set forth in Section 2.13(a) .

 

6


Delaware Law Firm ” has the meaning set forth in Section 8.1(ff)(C) hereof.

 

Deposit Account ” means all “deposit accounts” as defined in the UCC.

 

Digital Realty Trust ” means Digital Realty Trust, Inc., a Maryland corporation.

 

Disclosure Certificate ” has the meaning set forth in Section 5.1(w) hereof.

 

Disclosure Documents ” has the meaning set forth in Section 5.1(w) hereof.

 

Documents ” means all “documents” as defined in the UCC (whether negotiable or non-negotiable) or other receipts covering, evidencing or representing goods.

 

DRT Operating Partnership ” means Digital Realty Trust, L.P., a Maryland limited partnership.

 

EO13224 ” has the meaning set forth in Section 4.1(v) hereof.

 

Eligible Account ” means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with a federal or state chartered depository institution or trust company that satisfies the Rating Criteria, or (ii) a segregated trust account maintained with the corporate trust department of a federal or state chartered depository institution or trust company subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either case, has corporate trust powers, acting in its fiduciary capacity and in either case having combined capital and surplus of at least $100,000,000 or otherwise acceptable to the Rating Agencies. An Eligible Account shall not be evidenced by a certificate of deposit, passbook, other instrument or any other physical indicia of ownership. Following a downgrade below the Rating Criteria, or a withdrawal, qualification or suspension of such institution’s rating, each account must at Lender’s request promptly (and in any case within not more than thirty (30) calendar days) be moved to a qualifying institution or to one or more segregated trust accounts in the trust department of such institution, if permitted.

 

Eligible Bank ” shall mean a bank that (i) satisfies the Rating Criteria and (ii) insures the deposits hereunder through the Federal Deposit Insurance Corporation.

 

Engineer ” means an Independent engineer selected by Borrower and reasonably approved by Lender.

 

Environmental Auditor ” means an Independent environmental auditor selected by Borrower and reasonably approved by Lender.

 

Environmental Claim ” means any notice, notification, request for information, claim, administrative, regulatory or judicial action, suit, judgment, demand or other written communication by any Person or Governmental Authority alleging or asserting liability with respect to Borrower or any Mortgaged Property (whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, response, remedial or cleanup costs, damages to natural resources, personal injuries, fines or penalties) arising out

 

7


of, based on or resulting from (i) the presence, Use or Release into the environment of any Hazardous Substance at any location (whether or not owned, managed or operated by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law or (iii) any alleged injury or threat of injury to human health, safety or the environment.

 

Environmental Indemnity Agreement ” means the Environmental Indemnity Agreement dated as of the Closing Date, from Borrower and the Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as the same may be amended, modified or supplemented from time to time.

 

Environmental Laws ” means any and all present and future federal, state or local laws, statutes, ordinances, rules or regulations, or any judicial interpretation thereof, any judicial or administrative orders, decrees or judgments thereunder issued by a Governmental Authority, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to the environment, the effect of the environment on human health or safety, or the Release or threatened Release of Hazardous Substances or otherwise relating to the Use of Hazardous Substances.

 

Environmental Reports ” means each and every “Phase I Environmental Site Assessment” (and, if applicable, “Phase II Environment Site Assessment”) as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-2000, and an asbestos survey, in each case with respect to the Mortgaged Property, prepared by one or more Environmental Auditors and delivered to Lender and any amendments or supplements thereto delivered to Lender.

 

Equipment ” means all (i) all “equipment” as defined in the UCC, and (ii) all of the following (regardless of how classified under the UCC): all personal property constituting furniture, fittings, appliances, apparatus, leasehold improvements, machinery, devices, interior improvements, appurtenances, equipment, plant, furnishings, fixtures, computers, electronic data processing equipment, telecommunications equipment and other fixed assets now owned or hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all additions to, substitutions for, replacements of or accessions to any of the items recited as aforesaid and all attachments, components, parts (including spare parts) and accessories, whether installed thereon or affixed thereto, all regardless of whether the same are located on any Mortgaged Property or are located elsewhere (including, without limitation, in warehouses or other storage facilities or in the possession of or on the premises of a bailee, vendor or manufacturer) for purposes of manufacture, storage, fabrication or transportation and all extensions and replacements to, and proceeds of, any of the foregoing.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

8


ERISA Affiliate ” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower is a member.

 

Event of Default ” has the meaning set forth in Section 7.1 hereof.

 

Excluded Borrower ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Guaranties ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan(s) ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Agreement ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Documents ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Property ” has the meaning set forth in Section 2.11(g) hereof.

 

First Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

First Open Defeasance Date ” shall mean the earlier of (i) the Payment Date in December, 2008, or (ii) the date that is two (2) years from the “start up day” (within the meaning of Section 860G(a)(9) of the IRC) of the REMIC Trust established in connection with the final Securitization involving the Loan.

 

First Open Prepayment Date ” is the Payment Date which is in the second month preceding the month in which the Scheduled Maturity Date occurs. For example, if the Scheduled Maturity Date is November 11, 2014, the First Open Prepayment Date is the Payment Date in the month of September, 2014.

 

First Payment Date ” has the meaning set forth in Section 2.5 hereof.

 

Fiscal Year ” means the 12-month period ending on December 31st of each year (or, in the case of the fiscal year in which the Closing Date occurs, such shorter period from the Closing Date through such date) or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender.

 

Fitch ” means Fitch, Inc. and its successors.

 

Foreign Lender ” has the meaning set forth in Section 2.10(b) hereof.

 

Fund ” has the meaning set forth in the definition of “Permitted Investments”.

 

GAAP ” means generally accepted accounting principles in the United States of America as of the date of the applicable financial report, consistently applied.

 

9


General Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “general intangibles” as defined in the relevant UCC, now owned or hereafter acquired by Borrower and (ii) all of the following (regardless of how characterized): all agreements, covenants, restrictions or encumbrances affecting the Mortgaged Property or any part thereof.

 

Governmental Authority ” means any national or federal government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality of any of the foregoing (including, without limitation, any court or tribunal) lawfully exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

Gross Revenue ” means, for any period, the total dollar amount of all income and receipts received by, or for the account of, Borrower in the ordinary course of business with respect to the Mortgaged Property, but excluding Loss Proceeds (other than the proceeds of business interruption insurance or the proceeds of a temporary Taking in lieu of Rents which shall be included in Gross Revenue).

 

Guarantor ” means Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, on a joint and several basis.

 

Guaranty of Nonrecourse Obligations ” means, with respect to the Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse provisions of the Loan Documents for which liability is retained as described in Section 9.24 hereof from the Guarantor to Lender.

 

Hazardous Substance ” means, collectively, (i) any petroleum or petroleum products or waste oils, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls (“ PCBs ”), lead in drinking water, lead-based paint and radon, (ii) any chemicals or other materials or substances which are now or hereafter become defined as or included in the definitions of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import under any Environmental Law, and (iii) any other chemical or any other hazardous material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law.

 

Immediate Repairs ” has the meaning set forth in Section 2.13(a)(ii) hereof.

 

Impositions ” means all real estate and personal property taxes and assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed within the term of the Loan), ground rents, water, sewer or other rents and charges, excises, levies, governmental fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, in respect of the Mortgaged Property (including all interest and penalties thereon), accruing during or in

 

10


respect of the term hereof and which may be assessed against or imposed on or in respect of or be a Lien upon any Mortgaged Property, or any other collateral delivered or pledged to Lender in connection with the Loan, or any part thereof or any Rents therefrom or any estate, right, title or interest therein.

 

Improvements ” means all buildings, structures, fixtures and improvements now or hereafter owned by Borrower of every nature whatsoever situated on any Land constituting part of the Mortgaged Property (including, without limitation, all gas and electric fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, carpeting and other floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus which are or shall be affixed to the Land or said buildings, structures or improvements and including any additions, enlargements, extensions, modifications, repairs or replacements thereto).

 

Indebtedness ” means the Principal Indebtedness, together with all other obligations and liabilities due or to become due to Lender pursuant hereto, under the Note or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses paid by or payable to Lender hereunder or pursuant to the Note or any of the other Loan Documents.

 

Indemnified Parties ” has the meaning set forth in Section 5.1(i) .

 

Independent ” means, when used with respect to any Person, a Person that (i) does not have any direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower (other than any such Affiliate of Borrower that is an Affiliate of Borrower solely as a result of such Affiliate’s ownership of a less than twenty percent (20%) ownership interest in Digital Realty Trust), (ii) is not connected with Borrower or any Affiliate of Borrower as an officer, employee, trustee, partner, director or person performing similar functions, and (iii) is not a member of the immediate family of any Person described in clauses (i) or (ii).

 

Independent Director ” means, (a) with respect to the SPC Party if the SPC Party is a corporation, one (1) duly appointed member of the board of directors of the SPC Party who is reasonably satisfactory to Lender who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a shareholder of, or an officer, director, partner, paid consultant or employee of, Borrower or any of its shareholders, subsidiaries or affiliates, a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or affiliates, or a person or other entity controlling or under common control with any such shareholder, partner, supplier or customer, or a member of the immediate family of any such shareholder, officer, director, partner, employee, supplier or customer of Borrower, and (b) with respect to the SPC Party if the SPC Party is a limited liability company, and with respect to the Borrower if the Borrower is a limited liability company, one (1) duly appointed independent manager of the SPC Party or Borrower (as applicable) who is also a non-economic member of SPC Party or Borrower (as applicable), who is reasonably satisfactory to Lender and who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a member or manager of, or an officer,

 

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director, partner, paid consultant or employee of, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), a customer of, or supplier to, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), or a person or other entity controlling or under common control with any such member, partner, supplier or customer, or a member of the immediate family of any such member, officer, director, partner, employee, supplier or customer of SPC Party or Borrower (as applicable). As used herein, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract or otherwise.

 

Instruments ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “instruments” as defined in the UCC.

 

Insurance Gap ” has the meaning set forth in Section 5.1(x)(iv)(F) hereof.

 

Insurance Escrow Account ” has the meaning set forth in Section 2.13(b) .

 

Insurance Premiums ” has the meaning set forth in Section 5.1(x)(iii) .

 

Insurance Proceeds ” means, in the event of a casualty with respect to the Mortgaged Property, the proceeds received under any insurance policy applicable thereto.

 

Insurance Requirements ” means all material terms of any insurance policy required pursuant to this Agreement or the Mortgage and all material regulations, rules and other requirements of the National Board of Fire Underwriters or such other body exercising similar functions applicable to or affecting the Mortgaged Property or any part thereof or any use or condition thereof.

 

Insured Casualty ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Intellectual Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under the trademark licenses, trademarks, rights in intellectual property, trade names, service marks and copyrights, copyright licenses, patents, patent licenses or the license to use intellectual property such as computer software owned or licensed by Borrower or other proprietary business information relating to Borrower’s policies, procedures, manuals and trade secrets with respect to the Mortgaged Property.

 

Interested Parties ” has the meaning set forth in Section 5.1(w) hereof.

 

Inventory ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “inventory” as defined in the UCC and shall include all Documents representing the same.

 

Investment Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “investment property” as defined in the UCC.

 

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Land ” means the parcels of real estate described on Exhibit A attached to the Mortgage and made a part hereof.

 

Leases ” means all leases, subleases, lettings, occupancy agreements, tenancies and licenses by Borrower as landlord of the Mortgaged Property or any part thereof now or hereafter entered into, and all amendments, extensions, renewals and guarantees thereof, and all security therefor.

 

Leasing Commissions ” means leasing commissions incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located at the Mortgaged Property.

 

Leasing Costs/TI Costs Account ” has the meaning set forth in Section 2.13(a) .

 

Legal Requirements ” means all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, any of the foregoing relating to zoning, parking or land use, any and all Environmental Laws and the Americans with Disabilities Act) affecting Borrower or any Mortgaged Property or any part thereof or the construction, use, alteration or operation thereof, or any part thereof (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto, at any time in force affecting Borrower or the Mortgaged Property or any part thereof (including, without limitation, any which may require repairs, modifications or alterations in or to the Mortgaged Property or any part thereof).

 

Lender ” has the meaning provided in the first paragraph of this Agreement.

 

Letter of Credit Rights ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “letter of credit rights” as defined in the UCC.

 

Lien ” means any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, assignment, security interest, or any other encumbrance or charge on Borrower or any Mortgaged Property or any portion thereof, or any interest therein (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and mechanic’s, materialmen’s and other similar liens and encumbrances).

 

Loan ” means the loan made by Lender to Borrower pursuant to the terms of this Agreement.

 

Loan Amount ” means an amount equal to $46,800,000.

 

Loan Documents ” means this Agreement, the Note, the Contract Assignment, the Management Agreement, the Manager’s Subordination, the Mortgage, the Assignment of Rents and Leases, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse Obligations, the Crossed Guaranties of the Loan (subject to modification pursuant to Section 2.11(g) hereof) and all other agreements, instruments, certificates and documents delivered by or on behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan, as the same may be amended or modified from time to time.

 

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Local Collection Account ” and “ Local Collection Account Bank ” have the meanings set forth in Section 2.12(a)(i) .

 

Local Collection Account Agreement ” means with respect to the Local Collection Account, the lockbox agreement, dated as of the applicable date and executed by Borrower, Lender and the Local Collection Account Bank.

 

Loss Proceeds ” means Condemnation Proceeds and/or Insurance Proceeds.

 

Loss Proceeds Account ” has the meaning set forth in Section 2.12(e) hereof.

 

Losses ” has the meaning set forth in Section 5.1(j)(i) .

 

Management Agreement ” means with respect to any Mortgaged Property, the property management agreement entered into between the Borrower and the Manager, in such form as may be reasonably approved by Lender, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time, and any management agreement which may hereafter be entered into with respect to any Mortgaged Property in accordance with the terms and conditions hereof, as the same may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time.

 

Manager ” means CB Richard Ellis, Inc., a Delaware corporation, the current manager of the Mortgaged Property under the current Management Agreement, or such other Person as may hereafter be charged with management of any Mortgaged Property pursuant to a Management Agreement entered into in accordance with the terms and conditions hereof.

 

Manager’s Subordination ” means, with respect to the Mortgaged Property, initially each Manager’s Consent and Subordination of Management Agreement, each executed by the Manager, Borrower and Lender, dated as of the Closing Date, and in the event a successor or assignee Manager is engaged at any Mortgaged Property, a subordination agreement executed by Manager, Borrower and Lender in form and substance satisfactory to Lender, whereby, among other things, the Management Agreement is subordinated to the Indebtedness and to the Lien of the Mortgage so long as the Loan remains outstanding.

 

Material Adverse Effect ” means a material adverse effect upon (i) the business operations, properties, assets or condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or (iii) the aggregate value of the Mortgaged Property.

 

Material Action ” has the meaning set forth in Section 8.1(ee)(A) .

 

Maturity Date ” means the earlier of (a) the Scheduled Maturity Date or (b) such earlier date on which the entire Loan is required to be paid in full, by acceleration or otherwise under this Agreement or any of the other Loan Documents.

 

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Maximum Rate ” has the meaning set forth in Section 2.5(e) hereof.

 

Moody’s ” means Moody’s Investors Services, Inc. and its successors.

 

Money ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “money” as defined in the UCC and (ii) all moneys, cash, or other items of legal tender generated from the use or operation of the Mortgaged Property.

 

Monthly Debt Service Payment ” has the meaning set forth in Section 2.5(a) hereof.

 

Monthly Debt Service Payment Amount ” has the meaning set forth in Section 2.5(a) hereof.

 

Mortgage ” means, with respect to the Mortgaged Property, a first priority (subject to Permitted Encumbrances) Mortgage or Deed of Trust (as applicable), Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date (and, if there are more than one, each and every one of them), granted by the Borrower to or for the benefit of Lender or Deed of Trust Trustee for the benefit of Lender, respectively, with respect to the Mortgaged Property as security for the Loan, as same may thereafter from time to time be supplemented, amended, modified or extended by one or more agreements supplemental thereto.

 

Mortgaged Property ” means, at any time, individually or collectively, as applicable, the Land, the Improvements, the Personalty, the Leases and the Rents, and all rights, titles, interests and estates appurtenant thereto, encumbered by, and more particularly described in, the Mortgage.

 

Multiemployer Plan ” means a multiemployer plan defined as such in Section 3(37) of ERISA and which is covered by Title IV of ERISA (i) to which contributions have been, or were required to have been made by Borrower or any ERISA Affiliate within the past six years or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

Net Proceeds ” means either (x) the purchase price (at foreclosure or otherwise) actually received by Lender from a third party purchaser with respect to any Mortgaged Property, as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default or (y) in the event that Lender (or its nominee) is the purchaser at foreclosure of any Mortgaged Property, the higher of (i) the amount of Lender’s credit bid or (ii) such amount as shall be determined in accordance with applicable law, and in either case minus all reasonable third party, out of pocket costs and expenses (including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable) incurred by Lender (and its nominee, if applicable) in connection with the exercise of such remedies; provided , however , that such costs and expenses shall not be deducted to the extent such amounts previously have been added to the Indebtedness in accordance with the terms of the Loan Documents or applicable law.

 

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Note ” means one or more promissory notes made by Borrower to Lender pursuant to this Agreement, as such note may be modified, amended, supplemented, restated or extended, and any replacement notes therefor.

 

Noteholder ” has the meaning set forth in Section 2.10(b) hereof.

 

O&M Program ” has the meaning set forth in Section 5.1(d)(iv) hereof.

 

OFAC ” has the meaning set forth in Section 4.1(v) hereof.

 

Officer’s Certificate ” means a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower.

 

Operating Budget ” means, with respect to any Fiscal Year, the operating budget for the Mortgaged Property reflecting Borrower’s projections of Gross Revenues and Property Expenses for the Mortgaged Property for such Fiscal Year, prepared on an annual and monthly basis, and submitted by Borrower to Lender in accordance with the provisions of Section 5.1(r)(viii) .

 

Operating Expense Account ” has the meaning provided in Section 2.13(c) .

 

Operating Expenses ” means, for any period of calculation, all expenditures incurred and required to be expensed under GAAP during such period in connection with the ownership, operation, maintenance, repair and/or leasing of the Mortgaged Property, including without limitation (or duplication) Property Expenses. Notwithstanding the foregoing, Operating Expenses shall not include (a) Capital Improvement Costs, (b) any extraordinary items (unless Lender and Borrower approve of the inclusion of such items as Operating Expenses), (c) depreciation, amortization and other non-cash charges or (d) any payments of principal or interest on the Indebtedness or otherwise payable to the holder of the Indebtedness. Operating Expenses shall be calculated on the accrual basis of accounting.

 

Organizational Agreements ” means, with respect to a particular Person, individually or collectively, as applicable: the operating agreements and certificates of organization of any such Person that is a limited liability company, the limited partnership agreement and certificate of limited partnership of any such Person that is a limited partnership, or the bylaws and articles of organization of any such Person that is a corporation, each as in effect on the Closing Date, each as amended or restated from time to time.

 

Other Borrowings ” means, with respect to Borrower, without duplication (but not including the Indebtedness or any interest rate protection agreement entered into pursuant hereto) (i) all indebtedness of Borrower for borrowed money or for the deferred purchase price of property or services, (ii) all indebtedness of Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the face amount of all letters of credit issued for the account of Borrower and, without duplication, all unreimbursed amounts drawn thereunder, and obligations evidenced by bankers’ acceptances, (iv) all indebtedness of Borrower secured by a Lien on any property owned by Borrower (whether or not such indebtedness has been assumed), (v) all Contingent Obligations of Borrower, (vi) liabilities and obligations for the payment of money relating to a capitalized lease obligation or sale/leaseback obligation, (vii) liabilities and obligations

 

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representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of Borrower’s business that would constitute ordinarily a trade payable to trade creditors, and (viii) all payment obligations of Borrower, if any, under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars or similar agreements) and similar agreements.

 

Partial Defeasance ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Amount ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Defeased Note after the Partial Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

Partial Defeasance Date ” has the meaning set forth in Section 2.7(c) .

 

Payment Date ” has the meaning provided in Section 2.5(a) .

 

Payment Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “payment intangibles” as defined in the UCC.

 

PBGC ” means the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.

 

Permits ” means all licenses, permits, variances and certificates required by Legal Requirements to be obtained by Borrower and used in connection with the ownership, operation, use or occupancy of the Mortgaged Property (including, without limitation, certificates of occupancy, building permits, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority or private Person concerning ownership, operation, use or occupancy of the Mortgaged Property).

 

Permitted Encumbrances ” means, with respect to the Mortgaged Property, collectively, (i) the Lien created by the Mortgage, or any other Loan Documents of record encumbering the Mortgaged Property, (ii) all Liens and other matters disclosed on the Title Insurance Policy concerning the Mortgaged Property, (iii) Liens, if any, for Impositions imposed by any Governmental Authority not yet delinquent or being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, (iv) mechanic’s or materialmen’s Liens, if any, being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, provided that no foreclosure has been commenced by the lien claimant, (v) rights of existing and future tenants and residents as tenants only pursuant to Leases, (vi) Liens for public utilities, (vii) Liens, if any, for charges or fees relating to the maintenance of any of the Pledged Accounts, in favor of the depository institution at which such Pledged Accounts are maintained, and (viii) Liens, if any, relating to financing leases and purchase money debt permitted under Section 8.1(e)(iii) , in each

 

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case only on the applicable equipment or other personal property which is the subject of such financing lease or purchase money debt), which Liens and encumbrances referred to in clauses (i)-(viii) above do not materially and adversely affect (1) the ability of Borrower to pay in full the Principal Indebtedness and interest thereon in a timely manner, (2) the use of any Mortgaged Property for the use currently being made thereof, or (3) the operation of any Mortgaged Property as currently being operated.

 

Permitted Investments ” means any one or more of the following obligations or securities acquired at a purchase price of not greater than par:

 

(i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and provided that such obligations are one or more of the following: (A) U.S. Treasury obligations (all direct or fully guaranteed obligations), (B) General Services Administration participation certificates, and (C) Small Business Administration guaranteed participation certificates and guaranteed pool certificates;

 

(ii) the following obligations of the following United States of America government sponsored agencies: (A) Federal Home Loan Mortgage Corp. debt obligations, (B) Farm Credit System consolidated systemwide bonds and notes, (C) Federal Home Loan Banks consolidated debt obligations, and (D) Federal National Mortgage Association debt obligations;

 

(iii) unsecured certificates of deposit and time deposits with maturities of not more than 365 days of any bank, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies;

 

(iv) certificates of deposit, time deposits and demand deposits issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies, which investments are fully insured by the Federal Deposit Insurance Corp.; and

 

(v) any other demand, money market or time deposit, demand obligation or any other obligation, security or investment, which Lender shall have approved in writing and for which Borrower shall have delivered a Rating Confirmation;

 

provided , however , that (A) the investments described in clauses (i) through (vii) above must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (C) such investments must not be subject to liquidation prior to their maturity or have an “r” suffix affixed to its rating by S&P; and provided , further , that, in the judgment of Lender, such instrument continues to qualify as a “cash flow investment” pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no instrument or security shall be a

 

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Permitted Investment if such instrument or security evidences (x) a right to receive only interest payments or (y) the right to receive principal and interest payments derived from an underlying investment at a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.

 

Permitted Transfer ” means (i) so long as Digital Realty Trust remains a publicly traded company, any Transfer of stock in Digital Realty Trust, (ii) any Transfer of any limited partnership interests in DRT Operating Partnership, or (iii) any creation or sale or other conveyance (but not a mortgage, encumbrance, pledge, hypothecation, or grant of a security interest) of other limited partnership interests in DRT Operating Partnership; provided , in the case of each of the foregoing clauses (i), (ii) and (iii), that after giving effect to any such Transfer, (A) DRT Operating Partnership continues to directly or indirectly (through ownership of the SPC Party and each “SPC Party” (as defined in each Crossed Loan Agreement (a “Crossed SPC Party”)) own 100% of the direct or indirect ownership interests in the SPC Party and Borrower, and each Crossed SPC Party and Crossed Borrower, and control the operations and management of each SPC Party and Borrower and each Crossed SPC Party and Crossed Borrower, and (B) Digital Realty Trust continues to be the sole general partner in DRT Operating Partnership, to own directly not less than 30% of the voting and beneficial ownership interests in DRT Operating Partnership, and to control the operations and management of DRT Operating Partnership, and provided further, that under no circumstance shall any Transfer of any direct ownership interest in Borrower constitute a Permitted Transfer hereunder.

 

Person ” means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

Personalty ” means all Equipment, Inventory, Accounts, General Intangibles, Instruments, Investment Property, Receivables, Pledged Accounts, Deposit Accounts, Contracts and Intellectual Property and all other personal property as defined in the relevant UCC, now owned or hereafter acquired by Borrower and now or hereafter affixed to, placed upon, used in connection with, arising from or otherwise related to the Mortgaged Property or which may be used in or relating to the planning, development, financing or operation of such Mortgaged Property, including, without limitation, furniture, furnishings, equipment, machinery, money, insurance proceeds, accounts, contract rights, trademarks, goodwill, chattel paper, documents, trade names, licenses and/or franchise agreements, rights of Borrower under leases of fixtures or other personal property or equipment, inventory, all refundable, returnable or reimbursable fees, deposits or other funds or evidences of credit or indebtedness deposited by or on behalf of Borrower with any governmental authorities, boards, corporations, providers of utility services, public or private, including specifically, but without limitation, all refundable, returnable or reimbursable tap fees, utility deposits, commitment fees and development costs.

 

Plan ” means an employee benefit plan (as defined in Section 3(3) of ERISA), other than a Multiemployer Plan, that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, and (i) was established or maintained by Borrower or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Borrower or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

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Pledged Accounts ” means the Local Collection Account, the Collection Account, the Reserve Accounts, the Loss Proceeds Account, the Security Deposit Account, any additional accounts now or hereafter maintained by or on behalf of Borrower hereunder and pledged to Lender pursuant to the Loan Documents and any sub-accounts of any of the foregoing and any successor accounts to any of the foregoing.

 

Policies ” has the meaning provided in Section 5.1(x)(iii) .

 

Pre-existing Condition ” has the meaning set forth in Section 5.1(x)(iii)(B) hereof.

 

“Prepayment Consideration ” has the meaning set forth in Section 2.6(c) hereof.

 

Principal Indebtedness ” means the principal amount of the Loan outstanding as adjusted by each increase (including advances made by Lender to protect the Collateral), or decrease in such principal amount of the Loan outstanding, whether as a result of prepayment or otherwise, from time to time.

 

Prior Loans ” means the, collectively, the loan or loans made pursuant to the Prior Loan Documents.

 

Prior Loan Documents ” shall mean those documents listed on Schedule 8.1(b) .

 

Proceeds ” shall have the meaning given in the UCC and, in any event, shall include, without limitation, all of Borrower’s right, title and interest in and to proceeds, product, offspring, rents, profits or receipts, in whatever form, arising from the Collateral.

 

Prohibited Person ” has the meaning set forth in Section 4.1(v) hereof.

 

Property Expenses ” means, with respect to the Mortgaged Property (and without duplication), the following costs and expenses but only, in the case of costs and expenses in respect of goods and services, to the extent that they (x) are paid to Persons who are generally in the business of providing such goods and services, (y) are customary for the types of goods or services provided in the geographical area in which such goods or services are provided and (z) do not constitute Capital Improvement Costs:

 

(i) Impositions (other than in the nature of income taxes);

 

(ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents or otherwise maintained by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary course of business with respect to the Mortgaged Property;

 

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(iii) the cost of all electricity, oil, gas, water, steam, heat, ventilation, air conditioning and any other energy, utility or similar item and overtime services with respect to the Mortgaged Property;

 

(iv) payments required under service contracts for any services or items used at the Mortgaged Property or otherwise used in the operation of the Mortgaged Property (including, without limitation, service contracts for heating, ventilation and air conditioning systems, elevators, landscape maintenance, pest extermination, security, furniture, trash removal, answering service and credit checks);

 

(v) wages, benefits, payroll taxes, uniforms, the cost of cleaning supplies and all related expenses for on-site personnel directly involved in the day-to-day operation of the Mortgaged Property (including, without limitation, housekeeping employees, porters and general repair, maintenance and security employees), whether hired by Borrower, Manager or any other Person, except that if such amounts are paid by the Manager using the Manager’s funds, such amounts shall constitute “Property Expenses” only to the extent the Manager is entitled to be reimbursed for such amounts by Borrower or otherwise from revenues of the Mortgaged Property (but without duplication of amounts described in clause (xv) below);

 

(vi) costs required in connection with the enforcement of any Lease (including, without limitation, reasonable attorneys’ fees, charges for lock changes and storage and moving expenses for furniture, fixtures and equipment);

 

(vii) advertising and rent-up expenses (including, without limitation, leasing services, tenant rent concessions, promotions for existing and prospective tenants, banners and signs);

 

(viii) out-of-pocket cleaning, maintenance and repair expenses;

 

(ix) any expense the total cost of which is passed through to tenants pursuant to executed Leases;

 

(x) legal, accounting, auditing and other professional fees and expenses incurred in connection with the ownership, leasing and operation of the Mortgaged Property (including, without limitation, collection costs and expenses), but excluding any such fees and expenses incurred in connection with the closing of the Loan;

 

(xi) permits, licenses and registration fees and costs;

 

(xii) any expense necessary in order to prevent a breach under a Lease;

 

(xiii) any expense necessary in order to prevent or cure a violation of any Legal Requirement (including Environmental Law), regulation, code or ordinance;

 

(xiv) costs and expenses of security and security systems provided to and/or installed and maintained with respect to the Mortgaged Property;

 

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(xv) without duplication of any other expenses enumerated hereunder, fees and expenses of property managers contracted with by Borrower to perform management, administrative, payroll or other services in connection with the operation of the Mortgaged Property (including, without limitation, the fees and expenses owed to Manager under any Management Agreement which the Lender has approved in accordance with this Agreement);

 

(xviii) any other costs and expenses contemplated by the Operating Budget and customarily incurred in connection with operating properties similar in type and character to the Mortgaged Property;

 

(xix) any other category of property expense that is customary for a property of the type and size as the Mortgaged Property and is reasonably approved by Lender; and

 

(xx) any other property expense reasonably approved by Lender.

 

Quarterly Statement ” has the meaning provided in Section 5.1(r)(iv) .

 

Rating Agencies ” means at least two of Fitch, Moody’s and S&P (or, if a Secondary Market Transaction has occurred in which Securities have been issued, each of the foregoing that rated such Securities).

 

Rating Criteria ” with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1” by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by Fitch, if deposits are held by such Person for a period of one month or more.

 

Rating Confirmation ” with respect to any transaction, matter or action in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, the written confirmation of the Rating Agencies that such transaction, matter or action shall not, in and of itself, result in the downgrading, withdrawal or qualification of the then-current ratings assigned to any of the Securities issued in connection with a Securitization; and (ii) if any portion of the Loan has not been the subject of a Securitization, Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which any portion of the Loan reasonably be expected to be securitized) that no rating for any Securities that would be issued in connection with a Securitization involving any of such portion of the Loan would be downgraded, qualified, or withheld by reason of such transaction, matter or action.

 

Real Estate Taxes Escrow Account ” has the meaning provided in Section 2.13(b) .

 

Receivables ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) any Accounts, Chattel Paper, Instruments, Payment Intangibles, Letter of Credit Rights, Documents, insurance policies, drafts, bills of

 

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exchange, trade acceptances, notes or other indebtedness owing to Borrower with respect to the Mortgaged Property, from whatever source arising, (ii) to the extent not otherwise included above, (a) all income, Rents, issues, profits, revenues, deposits and other benefits from the Mortgaged Property and (b) all receivables and other obligations now existing or hereafter arising, or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the Mortgaged Property or other commercial space located at the Mortgaged Property or acquired from others (including, without limiting the generality of the foregoing, from rental of space, halls, stores, and offices, and deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, wholesale and retail sales of food and beverages, merchandise, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance), (iii) all of the books and records (whether in tangible, electronic or other form) now or hereafter maintained by or on behalf of Borrower in connection with the operation of the Mortgaged Property or in connection with any of the foregoing and (iv) all Supporting Obligations and all liens and security interests securing any of the foregoing and all other rights, privileges and remedies relating to any of the foregoing.

 

Register ” has the meaning set forth in Section 9.9(a) .

 

Release ” means any active or passive release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata).

 

REIT ” means a real estate investment trust under Sections 856-860 of the Code.

 

REIT Distribution Requirement ” means distributions reasonably necessary for a Person to maintain its status as a REIT and not be subject to corporate-level tax based on income or to excise tax under Section 4981 of the Code.

 

Remedial Work ” has the meaning set forth in Section 5.1(d)(i) .

 

Rents ” means all income, rents (including base rent), issues, profits, revenues (including all oil and gas or other mineral royalties and bonuses), deposits (other than utility and security deposits) and other benefits from the Mortgaged Property.

 

Replacement Reserve Account ” has the meaning set forth in Section 2.13(a)(i) .

 

Reserve Account(s) ” means the Deferred Maintenance Escrow Account, the Replacement Reserve Account, the Leasing Costs/TI Costs Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account and the Debt Service Reserve Account, collectively, and any successor accounts to any of the foregoing.

 

Restoration ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Scheduled Defeasance Payments ” shall mean scheduled payments of interest and principal under the Note in the case of a Total Defeasance and under the Defeased Note in the

 

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case of a Partial Defeasance for all Payment Dates occurring after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), and up to and including the Scheduled Maturity Date (including, in the case of a Total Defeasance, the outstanding principal balance of the Loan as of the Scheduled Maturity Date and, in the case of a Partial Defeasance, the outstanding principal balance of the Defeased Note as of the Scheduled Maturity Date), and all payments required after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), if any, under the Loan Documents for servicing fees, and other similar charges, which shall include (and Borrower shall be required hereby to include in the Defeasance Collateral Lender’s reasonable estimate of the cost and expenses of) reasonable fees and charges associated with the maintenance and administration of the Defeasance Collateral and any Successor Borrower.

 

Scheduled Maturity Date ” mean November 11, 2014.

 

S&P ” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc and its successors.

 

Secondary Market Transaction ” has the meaning set forth in Section 5.1(w) .

 

Second Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

Security Agreement ” shall mean a security agreement in form and substance that would be satisfactory to a prudent lender pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral.

 

Securities ” means mortgage pass-through certificates or other securities issued in a Secondary Market Transaction and evidencing a beneficial interest in or secured in whole or in part by the Loan in a rated or unrated public offering or private placement.

 

Securitization ” means a Secondary Market Transaction in which any Securities have been issued which have been rated by any Rating Agency.

 

Security Deposits ” shall mean all security (whether cash, letter of credit or otherwise) given to Borrower or any agent or Person acting on behalf of Borrower in connection with the Leases.

 

Security Deposit Account ” has the meaning set forth in Section 2.13(a)(i) .

 

SPC Party ” shall have the meaning set forth in Section 8.1(ee)(A) .

 

SPC Party’s Organizational Documents ” shall mean: (i) the SPC Party’s articles of incorporation, if the SPC Party is a corporation, and (ii) the SPC Party’s limited liability company operating agreement, if the SPC Party is a limited liability company.

 

SPC Single Member ” has the meaning set forth in Section 8.1(ee)(A) .

 

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Successor Borrower ” has the meaning set forth in Section 2.7(e) .

 

Supporting Obligations ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “supporting obligations” as defined in the UCC and (ii) any other guarantee, letter of credit, secondary obligation, right or privilege that supports or pertains to any of the Mortgaged Property.

 

Survey ” means a certified ALTA/ACSM survey of the Mortgaged Property prepared by a registered Independent surveyor, containing the form of survey or certification provided to Borrower by Lender and in form and content reasonably satisfactory to Lender and the company issuing the Title Insurance Policy for the Mortgaged Property.

 

Taking ” means a taking or voluntary conveyance during the term hereof of all or part of any Mortgaged Property, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority affecting the Mortgaged Property or any portion thereof whether or not the same shall have actually been commenced.

 

TI Costs ” means tenant improvement costs and allowances incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located in the Mortgaged Property.

 

Title Insurance Policy ” means a mortgagee’s title insurance policy or policies (i) issued by one or more title companies reasonably satisfactory to Lender which policy or policies shall (unless Lender otherwise requires or consents) be in form ALTA 1992, where available (with waiver of arbitration provisions), naming Lender as the insured party, (ii) insuring the Mortgage as being a first and prior lien (subject to Permitted Encumbrances) upon the Mortgaged Property constituting real property, (iii) showing no encumbrances against any Mortgaged Property constituting real property (whether junior or superior to the Mortgage) which are not reasonably acceptable to Lender (other than Permitted Encumbrances), (iv) in the amount of the Loan Amount, and (v) otherwise in form and content reasonably acceptable to Lender. Such Title Insurance Policy shall include the following endorsements or affirmative coverages in form and substance reasonably acceptable to Lender, to the extent available in the jurisdiction in which the Land is located: variable rate endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage; separate tax parcel coverage; contiguity (if applicable) coverage; and such other endorsements as Lender shall reasonably require with respect to a particular Mortgaged Property in order to provide insurance against specific risks identified by Lender in connection with the Mortgaged Property.

 

Total Defeasance ” shall have the meaning set forth in Section 2.7(a) .

 

Total Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note and this Agreement after the Total Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

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Total Defeasance Date ” has the meaning set forth in Section 2.7(a)(i) .

 

Transaction ” means the transactions contemplated by the Loan Documents.

 

Transaction Costs ” means all costs and expenses paid or payable by Borrower relating to the Transaction (including, without limitation, appraisal fees, reasonable legal fees and accounting fees and the costs and expenses described in Section 9.23) .

 

Transfer ” means the conveyance, assignment, sale, mortgaging, encumbrance (other than a Permitted Encumbrance), pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any direct or indirect (irrespective of the number of tiers of ownership) legal or beneficial interest (a) in all or any portion of the Mortgaged Property; or (b) any stock, partnership interests, membership interests, economic rights to distributions or dividends, or other ownership interests in Borrower or the constituent entities directly or indirectly (irrespective of the number of tiers of ownership) owning any such stock, partnership interests, membership interests or other ownership interests. A Transfer shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower (or any Affiliate of Borrower) agrees to sell the Mortgaged Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower (or any Affiliate of Borrower) leasing all or a substantial part of the Mortgaged Property to one or more Persons pursuant to a single or related transactions (but excluding any Leases permitted under the terms of this Agreement), or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Mortgaged Property to a condominium regime or transferring ownership to a cooperative corporation; and any change of control of Borrower or any SPC Party. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

 

Transfer and Assumption ” and “ Transferee Borrower ” have the respective meanings set forth in Section 6.1(p) .

 

Treasury Rate ” means, on the date on which such rate is calculated, the yield on the ten year “on the run” U.S. Treasury issue (primary issue) with such yield being based on the bid price for such issue as reasonably determined by Lender.

 

UCC ” means with respect to any Collateral, the Uniform Commercial Code as in effect from time to time in the State of New York; provided , that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority. Wherever this agreement refers to terms as defined in the UCC, if such term is defined in more than one Article of the UCC, the definition in Article 9 of the UCC shall control.

 

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UCC Searches ” has the meaning set forth in Section 3.1(v) hereof.

 

Undefeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Underwritten DSCR ” has the meaning set forth in Section 2.7(b) hereof.

 

U.S. Obligations ” shall mean securities that:

 

(i) constitute “government securities” (as defined in section 2(a)(16) of the Investment Company Act of 1940 as amended);

 

(ii) are either:

 

(a) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States of America or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and that are one or more of the following: (1) U.S. Treasury obligations (all direct or fully guaranteed obligations), (2) General Services Administration participation certificates, and (3) Small Business Administration guaranteed participation certificates and guaranteed pool certificates; or

 

(b) obligations of the following United States of America government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), or the Federal National Mortgage Association (debt obligations);

 

(iii) are rated at “AAA” by S&P, “Aaa” by Moody’s and “AAA” by Fitch, and do not have an “r” suffix affixed to their rating by S&P;

 

(iv) provide for interest at a fixed rate;

 

(v) provide for a predetermined fixed dollar amount of principal due at maturity that cannot vary or change;

 

(vi) are not subject to prepayment, call or early redemption; and

 

(vii) are not subject to liquidation prior to their maturity.

 

Use ” means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance in connection with or affecting Borrower or the Mortgaged Property.

 

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Welfare Plan ” means an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower or any of its subsidiaries or with respect to which Borrower or any of its subsidiaries has an obligation to make contributions and covers any current or former employee of Borrower or any of its subsidiaries.

 

Work Threshold Amount ” meant the lesser of (a) $1,000,000.00, or (b) three percent (3%) of the Loan Amount, provided, however, that in no event shall “Work Threshold Amount” be less than $500,000.00.

 

ARTICLE II.

GENERAL TERMS

 

Section 2.1. The Loan .

 

(a) Subject to the terms and conditions of this Agreement, Lender shall lend to Borrower on the Closing Date the Loan Amount. The proceeds of the Loan shall be used solely for the purposes identified in Section 2.2 hereof. Lender is hereby authorized to fund directly from the proceeds of the Loan advanced at Closing (net of any deposits or payments made by Borrower or its Affiliates prior to Closing) (i) the deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Leasing Costs/TI Costs Account and the Replacement Reserve Account required to be funded from Loan proceeds pursuant to Section 2.13 , (ii) the out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan and (iii) the reasonable fees and expenses of Lender’s and Borrower’s counsel.

 

(b) The Loan shall constitute one general obligation of Borrower to Lender and shall be secured by the security interest in and Liens granted upon all of the Collateral, and by all other security interests and Liens at any time or times hereafter granted by Borrower to Lender as security for the Loan, as well as by the Liens against the Crossed Property created under the Crossed Loan Documents.

 

Section 2.2. Use of Proceeds . Proceeds of the Loan shall be used only for the following purposes: (a) to, with respect to certain of the Mortgaged Property, finance a portion of the acquisition cost of, and, with respect to other of the Mortgaged Property, refinance existing mortgage debt at such Mortgaged Property, (b) to make the required deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Leasing Costs/TI Costs Account and the Replacement Reserve Account, (c) to pay Transaction Costs (including the reasonable out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan) and (d) to pay reasonable fees, expenses and disbursements of Lender’s and Borrower’s counsel. Any proceeds of the Loan in excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(d) may be used by the Borrower for its general purposes.

 

Section 2.3. Security for the Loan . The Note and Borrower’s obligations hereunder and under all other Loan Documents shall, together with the Crossed Indebtedness, be secured by (a) Liens upon the Mortgaged Property pursuant to the Mortgage, (b) the Contract Assignment, (c) the Manager’s Subordination, (d) the Assignment of Rents and Leases, and (e) all other security interests and Liens granted in this Agreement and in the other Loan Documents and under the Crossed Loan Documents.

 

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Section 2.4. Borrower’s Note . Borrower’s obligation to pay the principal of and interest on the Loan and all other amounts due under the Loan Documents shall be evidenced initially by the Note, duly executed and delivered by Borrower on the Closing Date. The Note shall be payable as to principal, interest and all other amounts due under the Loan Documents, as specified in this Agreement, with a final maturity on the Maturity Date. Lender shall have the right to have the Note subdivided, by exchange for promissory notes of lesser denominations in the form of the initial Note, upon written request to Borrower and, in such event, Borrower shall promptly execute additional or replacement Notes. At no time shall the aggregate original principal amount of the Note (or of such replacement Notes) exceed the Loan Amount.

 

Section 2.5. Principal and Interest .

 

(a) Interest on the Loan shall accrue at the rate set forth in Section 2.5(b) below commencing on the Closing Date. Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through the tenth (10 th ) day of November, 2004. Commencing on the eleventh (11 th ) day of December, 2004 (the “ First Payment Date ”) and on the eleventh (11 th ) day of each calendar month thereafter (each, with the First Payment Date, a “ Payment Date ”), Borrower shall make equal monthly payments (each, a “ Monthly Debt Service Payment ”) of principal and interest in the amount of $270,116.77 (the “ Monthly Debt Service Payment Amount ”). The entire outstanding Principal Indebtedness of the Loan and the Note, together with all accrued but unpaid interest thereon and all other amounts due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date. Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed during any month or other accrual period.

 

(b) The Principal Indebtedness shall bear interest at a rate per annum equal to 5.649%, increasing, however, to the Default Rate while an Event of Default has occurred and is continuing.

 

(c) While an Event of Default has occurred and is continuing, Borrower shall pay to Lender interest at the Default Rate on (i) the Principal Indebtedness and (ii) any amount owing to Lender not paid when due, in each case, until such amount is paid in full.

 

(d) If any payment of principal, interest or other sums shall not be made to Lender on the date the same is due hereunder or under any of the other Loan Documents, then Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder (other than the entire principal balance of the Loan due upon acceleration of the Loan or upon Maturity) or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender.

 

(e) Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of

 

29


interest permitted by law (“ Excess Interest ”). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this paragraph shall govern and control; (2) Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender’s option, (a) applied as a credit against either or both of the Principal Indebtedness of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law and without payment of any Prepayment Consideration with respect thereto), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the “ Maximum Rate ”), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Indebtedness is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Indebtedness shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Indebtedness had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Maximum Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater than the applicable interest rate, then the foregoing provisions of this paragraph shall apply.

 

Section 2.6. Prepayment .

 

(a) Limitation on Prepayment; Prepayment Consideration Due on Acceleration . Borrower shall have no right to prepay the Loan in whole or part at any time, except as expressly set forth in this Section 2.6(a) . Commencing on the First Open Prepayment Date, Borrower may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) Borrower shall provide to Lender not less than thirty (30) days’ prior written notice of such prepayment, (ii) together with such prepayment Borrower also shall pay all accrued and unpaid interest and all other Indebtedness, and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to (but excluding) the Payment Date following such date of prepayment. Borrower shall not be required to pay any Prepayment Consideration with respect to an application of insurance proceeds or condemnation awards by Lender pursuant to this Agreement or the Mortgage in the absence of an Event of Default.

 

(b) Prepayment Consideration Due . If the Maturity Date shall be accelerated to a date prior to the Scheduled Maturity Date, or if any prepayment of all or any portion of the Principal Indebtedness hereunder occurs, whether in connection with Lender’s acceleration of the unpaid Principal Indebtedness of the Loan or in any other circumstances whatsoever (other than (1) pursuant to and in accordance with Section 2.6(a) above, (2) as a result of an application by Lender of Loss Proceeds pursuant to this Agreement or the Mortgage in the absence of an

 

30


Event of Default, or (3) pursuant to and in accordance with Section 2.5(e)(3)(a) above), or if the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means, then the Prepayment Consideration shall become immediately due and owing and Borrower shall forthwith pay the Prepayment Consideration to Lender. The foregoing shall not create any right of prepayment. Borrower shall have no right whatsoever to prepay all or any portion of the Principal Indebtedness of the Note, except as set forth in Section 2.6(a) above.

 

(c) Definitions . The following terms shall have the meanings indicated:

 

The “ Prepayment Consideration ” shall be the amount equal to the sum of (i) an amount equal to the interest which would have accrued on the Principal Indebtedness for the period from and including (A) the date (the “ Event Date ”) which is the earlier of (x) the date of prepayment of the Loan or (y) such earlier date upon which the entire remaining Principal Indebtedness shall become due and payable, whether as a result of acceleration of the maturity of the Loan or otherwise, to but excluding (B) the next Payment Date following the Event Date, plus (ii) the sum of two percent of the Principal Indebtedness on the Event Date plus an amount equal to the “ Present Value Yield Differential ”, calculated as the excess, if any, of (A) the amount of the monthly interest which would otherwise be payable on the principal balance of the Loan from (1) the date (the “ Yield Determination Date ”) which is the Payment Date following the Event Date through and including (2) the Scheduled Maturity Date, over (B) the amount of the monthly interest Lender would earn if an amount equal to the Principal Indebtedness of the Loan as of the Event Date were invested for the period from the Yield Determination Date through the Scheduled Maturity Date at the Yield Rate (as hereinafter defined), such difference (the “ Yield Differential ”) to be discounted to present value at the Yield Rate using the following formula:

 

Present Value Yield Differential =

 

Yield Differential x [1-(1+r) -n ]


    
  r     

 

where:

  r= Yield Rate, and
  n= the remaining Weighted Average Life to Maturity (as defined below) from the Yield Determination Date.

 

The “ Yield Rate ” shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the then remaining Weighted Average Life to Maturity (as defined below) of the Loan as determined by Lender, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Yield Rate Determination Date (as defined below), converted to a monthly equivalent yield. If yields for such securities of such maturity are not shown in such publication, then the Yield Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities. If said Federal Reserve Statistical Release or any other information necessary for determination of the Yield Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Yield Rate shall be determined by Lender based on comparable data. The term “ Yield Rate Determination Date ” shall mean the date which is five (5) Business Days prior to the Yield

 

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Determination Date. The term “ Weighted Average Life to Maturity ” shall mean, at any date, the number of years (including fractional years, expressed as a decimal (e.g., three years and three months = 3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness on the Event Date into (y) the sum total of the Weighted Amortization Products (as defined below) for each Scheduled Principal Payment (as defined below). The “ Scheduled Principal Payment(s) ” shall mean each then remaining scheduled principal payment (assuming no prepayment or Loan acceleration), including payment of the outstanding principal balance of the Loan on the Scheduled Maturity Date, in respect of the Loan. The “ Weighted Amortization Product ” for each Scheduled Principal Payment shall mean the product of (A) the amount of such Scheduled Principal Payment multiplied by (B) the number of years (including fractional years, expressed as a decimal) which will elapse between the Yield Determination Date and the date on which such Scheduled Principal Payment is to be made under this Agreement.

 

Borrower agrees that the Prepayment Consideration required hereunder is reasonable. Borrower has given individual weight to the consideration in this transaction for this waiver and agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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Borrower hereby expressly waives the benefit of California Civil Code Section 2954.10 and all other statutes, principles, and rules of law of similar effect.

 

BORROWER:    

Global Weehawken Acquisition Company, LLC,

a Delaware limited liability company

By:

 

Global Weehawken Holding Company, LLC,

   

a Delaware limited liability company,

       

its Member and Manager

       

By:

 

Digital Realty Trust, L.P.,

           

a Maryland limited partnership,

           

its Member and Manager

           

By:

 

Digital Realty Trust, Inc.,

               

a Maryland corporation

               

its General Partner

               

By:

 

 


               

Print Name:

 

 


               

Title:

 

 


 

[Remainder of Page Intentionally Left Blank]

 

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Section 2.7. Defeasance .

 

(a) Total Defeasance . Borrower shall have the right at any time on or after the First Open Defeasance Date and prior to the First Open Prepayment Date to obtain a release of the Lien of the Mortgage encumbering the Mortgaged Property (a “ Total Defeasance ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Total Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(a) and on which it shall effect the Total Defeasance;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Total Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Total Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(a) and Sections 2.7(d) and (e) hereof;

 

(iv) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Total Defeasance Collateral;

 

(v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Total Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Total Defeasance pursuant to this Section 2.7(a) , and (y) if a Securitization has occurred, a Total Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vi) If a Securitization has occurred, if and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(vii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the release of the Mortgaged Property from the Lien of the Mortgage as contemplated by this Section 2.7(a) and the substitution of the Total Defeasance Collateral will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

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(viii) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(ix) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Total Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(x) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xi) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(b) If a Total Defeasance occurs and all of the requirements of this Section 2.7 have been satisfied, including those set forth in Section 2.7(f) below, and provided no undefeased Crossed Loans remain outstanding (or the Crossed Partial Defeasance Conditions, as defined below, shall have been satisfied with respect to such Crossed Loans), Lender shall execute any and all documents required to release the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases and the Defeasance Collateral, pledged pursuant to the Security Agreement, shall be the sole source of collateral securing the Loan. In connection with any such release of the Lien, Borrower shall submit to Lender, not less than fifteen (15) days prior to the Total Defeasance Date (or such shorter time as permitted by Lender in its sole discretion), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Mortgaged Property is located and contain standard provisions protecting the rights of a releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage and the Assignment of Rents and Leases, including Lender’s reasonable attorneys’ fees. In the event of a Total Defeasance of the Loan while any of the Crossed Loans remain outstanding, Borrower may obtain a release of the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases (and related Loan Documents) if the following conditions are satisfied at the time of the Total Defeasance (the “ Crossed Partial Defeasance Conditions ”):

 

(i) No Event of Default shall exist;

 

(ii) Immediately prior to the Total Defeasance of the Loan, the aggregate underwritten debt service coverage ratio (“ Underwritten DSCR ”) for the Crossed Loans, as reasonably determined by Lender based upon Lender’s underwritten net cash flow and assumed debt service calculations as described on Schedule 7 attached hereto and made a part hereof, shall be at least equal to 1.45; and

 

(iii) Each of the Crossed Loans shall be partially defeased by each Crossed Borrower in accordance with, and in satisfaction of the terms and conditions of, the terms and provisions of Section 2.7 of each Crossed Loan Agreement. An amount equal to (A)

 

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125% of the Loan Amount, less (B) the amount of the Principal Indebtedness of the Loan as of the Total Defeasance Date (the “ Aggregate Amount ”) will be apportioned among each of the Crossed Loans for purposes of such partial defeasance. The amount of the Aggregate Amount to be allocated to each Crossed Loan (the “ Allocated Amount ”) shall be determined by multiplying the Aggregate Amount by a fraction the numerator of which is the then-outstanding principal balance of such Crossed Loan and the denominator of which is the aggregate total of the then-outstanding principal balances of all of the Crossed Loans. Each Crossed Loan shall be partially defeased in the amount of the Allocated Amount for such Crossed Loan.

 

Except as set forth in this Section 2.7(b) , no repayment, prepayment or defeasance of all or any portion of the Loan, including, without limitation, a Partial Defeasance pursuant to Section 2.7(c) , shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Mortgage on the Mortgaged Property.

 

(c) Partial Defeasance . Borrower shall, as a condition to and only in connection with a Crossed Loan Total Defeasance on or after the First Open Defeasance Date and prior to the First Open Prepayment Date, have the right to defease a portion of the Loan (a “ Partial Defeasance ”) equal to the Applicable Crossed Loan Partial Defeasance Amount with respect to such Crossed Loan Total Defeasance (the “ Partial Defeasance Amount ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Partial Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(c) and on which it shall effect the Partial Defeasance, which date shall be the same date as the Crossed Loan Total Defeasance Date;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Partial Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Partial Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(c) and Sections 2.7(d) and (e) hereof;

 

(iv) Lender shall prepare (at Borrower’s expense) all necessary documents to modify this Loan Agreement and to amend and restate the Note and issue two substitute notes, one note having a principal balance equal to the Partial Defeasance Amount (the “ Defeased Note ”), and the other note having a principal balance equal to the excess of (A) the then-outstanding principal amount of the Loan, over (B) the amount of the Defeased Note (the “ Undefeased Note ”). The Defeased Note and Undefeased Note shall have identical terms as the Note except for the principal balance and monthly payments. The Defeased Note and the Undefeased Note shall be cross defaulted and cross collateralized unless the Rating Agencies shall require otherwise or unless a Successor Borrower that is not an Affiliate of Borrower is established pursuant to Section 2.7(e) . A Defeased Note may not be the subject of any further defeasance;

 

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(v) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Partial Defeasance Collateral;

 

(vi) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Partial Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Partial Defeasance pursuant to this Section 2.7(c) , and (y) if a Securitization has occurred, a Partial Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vii) If a Securitization has occurred, and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(viii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the Partial Defeasance and related transactions, including the substitution of the Partial Defeasance Collateral, will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

(ix) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(x) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Partial Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(xi) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xii) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(d) Defeasance Collateral Account . On or before the date on which Borrower delivers the Defeasance Collateral, Borrower or Successor Borrower (as applicable) shall open at any Eligible Bank the defeasance collateral account (the “ Defeasance Collateral Account ”) which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied to the monthly installments of principal and interest on the Loan (or, in the case of a Partial Defeasance, the portion thereof

 

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evidenced by the Defeased Note) and, upon Maturity, to accrued interest and the Principal Indebtedness of the Loan (or, in the case of a Partial Defeasance, the portion thereof evidenced by the Defeased Note). Borrower shall cause the Eligible Bank at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Bank shall agree to hold and distribute the Defeasance Collateral in accordance with this Loan Agreement. Borrower (or Successor Borrower, as applicable) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Borrower shall prepay all costs and expenses associated with opening and maintaining the Defeasance Collateral Account. Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.

 

(e) Successor Borrower . In connection with a Defeasance under this Section 2.7 , Borrower shall, if required by the Rating Agencies (if a Securitization has occurred) or if Borrower so elects or Lender requires, establish or designate a successor entity (the “ Successor Borrower ”) which shall be a single purpose bankruptcy remote entity and which shall be approved by the Rating Agencies (if a Securitization has occurred). Any such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the Rating Agencies (if a Securitization has occurred) or Lender shall require otherwise. Borrower shall transfer and assign all obligations, rights and duties under and to the Note, together with the Defeasance Collateral, to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Borrower shall pay all reasonable costs and expenses incurred by Lender, including Lender’s reasonable attorney’s fees and expenses incurred in connection therewith, and (if a Securitization has occurred) all fees, expenses and other charges of the Rating Agencies.

 

(f) Crossed Loans . Notwithstanding anything to the contrary contained herein, if any of the Crossed Loans remains outstanding and in any part undefeased, then, in connection with a Defeasance of the Loan, the Mortgaged Property will be released from the Liens of the Loan Documents if and only if either (i) all of the Crossed Loans have been fully defeased in accordance with the terms and conditions of the Crossed Loan Documents, or (ii) all of the Crossed Loans shall have been partially defeased in an aggregate amount equal to the Aggregate Amount (each Crossed Loan being partially defeased in the Allocated Amount with respect thereto) and the Crossed Loan Defeasance Conditions are satisfied at the time of the Total Defeasance of the Loan, and until such full (as indicated in clause (i) above) or partial (as indicated in clause (ii) above) defeasance of all the Crossed Loans, this Loan Agreement and the other Loan Documents as they relate to the Borrower and the Mortgaged Property shall remain in full force and effect notwithstanding the Total Defeasance of the Loan.

 

Section 2.8. Application of Payments During Event of Default . During the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments at any time thereafter received by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that Lender shall have the continuing exclusive right to apply any and all such payments and any and all proceeds and recoveries from the Pledged Accounts, the Mortgaged Property or Borrower after the occurrence and during the continuance of an Event of Default, in Lender’s sole discretion, to any of the following, in such

 

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order and manner as Lender may determine in its sole and absolute discretion: (a) any debt service or other Indebtedness due under this Loan Agreement or the other Loan Documents (including, without limitation, reasonable out-of-pocket costs and expenses of Lender reimbursable pursuant to the terms of this Agreement and any other Loan Document(s) arising as a result of such repayment, any accrued and unpaid interest then payable with respect to the Loan or the portion thereof being repaid, the Principal Indebtedness, any accrued and unpaid Prepayment Consideration in respect of any such Principal Indebtedness or the portion thereof being repaid, any other sums then due and payable to or for the benefit of Lender pursuant to this Agreement or any other Loan Document(s)); (b) any Crossed Indebtedness, (c) any Reserve Account established under this Loan Agreement; (d) otherwise as a reserve for Property Expenses, Capital Improvement Costs, Impositions and other expenditures relating to the use, management, operation or leasing of the Mortgaged Property; and/or (e) any costs and expenses incurred by Lender in connection with such Event of Default, or expended by Lender to protect or preserve the value of the Mortgaged Property.

 

Section 2.9. Method and Place of Payment . Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 p.m., Eastern time, on the date when due and shall be made in lawful money of the United States of America by wire transfer in federal or other immediately available funds to its account at such bank(s) as Lender may from time to time designate. Any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Lender shall notify Borrower in writing of any changes in the account to which payments are to be made. All payments made by Borrower hereunder, or by Borrower under the other Loan Documents, shall be made irrespective of, and without any deduction for, any defenses, set-offs or counterclaims. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day.

 

Section 2.10. Taxes .

 

(a) All payments made by or on behalf of Borrower under the Note and this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income, franchise or similar taxes (including branch profits taxes or alternative minimum tax) imposed or levied on (A) a Noteholder, as defined below, by the jurisdiction under the laws of which such Noteholder is organized or any political subdivision thereof, or (B) on Lender by the jurisdiction in which Lender’s lending office is located or any political subdivision thereof, and (ii) in the case of any Foreign Lender, as defined below, any taxes that are in effect and that would apply to a payment hereunder or under any other Loan Document made to such Foreign Lender as of the date such Foreign Lender becomes a party to this Agreement, or in the case of any other Lender which changes its lending office with respect to the Loan to an office outside the United States, any taxes that are in effect and would apply to a payment to such Lender as of the date of the change of the lending office.

 

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(b) On or prior to the date that Lender or any other subsequent holder of the Note (collectively, a “ Noteholder ”) becomes a Noteholder hereunder, (i) each such Noteholder that is organized under the laws of a jurisdiction outside of the United States within the meaning of the Code (each a “ Foreign Lender ”) shall deliver to Borrower two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Noteholder and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Noteholder under the Loan Documents) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Noteholder under the Loan Documents) or such other evidence satisfactory to Borrower that such Noteholder is entitled to an exemption from, or reduction of, U.S. withholding tax, or (ii) upon request by Borrower, each such Noteholder that is not a Foreign Lender shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. Thereafter and from time to time, each such Noteholder shall (i) upon request by Borrower, promptly submit to Borrower such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Noteholder pursuant to the Loan Documents, (ii) promptly notify Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Noteholder, and as may be reasonably necessary to avoid any Legal Requirement of Borrower to make any deduction or withholding for taxes from amounts payable to such Noteholder. If such Noteholder fails to deliver the above forms or other documentation as required herein, or if the forms or other documentation delivered by such Noteholder indicate that any payments made to such Noteholder pursuant to the Loan Documents are subject to a reduced rate of tax, then Borrower may withhold from any interest payment to such Noteholder an amount equivalent to the applicable withholding tax imposed by the Code or the applicable treaty (but in any event not in excess of the amount Borrower is required by law to withhold), without reduction, and such Noteholder shall not be entitled to additional amounts or indemnification for such withholding hereunder.

 

Section 2.11. Cross-Collateralization; Contribution; Release of Cross-Collateralization .

 

(a) Borrower acknowledges and agrees (subject to Lender’s election(s) at Lender’s sole discretion from time to time pursuant to Section 2.11(g) below): (i) that the Mortgaged Property shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loans to Borrower or the loans constituting the Crossed Loans unless Borrower and the Crossed Borrowers granted liens on the Mortgaged Property and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans.

 

(b) Borrower (i) until all of the Loan and the Crossed Loans shall have been paid and satisfied in full, hereby waives enforcement of any right of subrogation with respect to the Crossed Loans and (ii) waives any right to enforce any remedy which Lender now has or

 

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may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and Borrower waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that Borrower may have to the payment in full in cash of the Loan and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect Borrower’s liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents.

 

(c) Borrower agrees that any and all claims of Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the “ Crossed Obligors ”) with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the “ Crossed Party Obligations ”) shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of Borrower, whether now or hereafter arising and howsoever existing, in any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets and otherwise, under the Loan Documents, the Crossed Loan Documents and otherwise, and Borrower shall not, until the date that is ninety-one (91) days after the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of Borrower.

 

(d) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an “ Crossed Obligor Insolvency Event ”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and

 

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satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by Borrower as the property of Lender. If Borrower fails to make any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, Borrower will not assign or transfer to any individual or entity (other than Lender) any claim Borrower has or may have against any Crossed Obligor.

 

(e) Subject to the provisions of Section 2.11(g) , to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a “ Crossed Loans Collection ”) which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each of Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each of the Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then , following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each of Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the “Allocable Amount” of Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.11(g) below and to amendment by agreement of Borrower and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.11(e) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.11(e) for the benefit of Lender and (subject to the terms thereof) Borrower. This Section 2.11(e) and Section 2.11(e) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrower and Crossed Borrowers, and nothing set forth in this Section 2.11(e) or in Section 2.11(e) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrower and the Crossed Borrowers thereunder. Borrower acknowledges that the rights of contribution and indemnification under this Section 2.11(e) and under Section 2.11(e) of the Crossed Loan Agreements constitute assets of the Borrower or Crossed Borrowers to which such

 

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contribution and indemnification is owing, and any such right of contribution and indemnification owing to Borrower under Section 2.11(e) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.11 .

 

(f) Borrower hereby consents and agrees to each of the following, and agrees that Borrower’s obligations under this Loan Agreement and the other Loan Documents and the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice, except as expressly provided in the Loan Documents) that Borrower might otherwise have as a result of or in connection with any of the following:

 

(i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans, or any failure of Lender to notify Borrower of any such action, except as expressly provided in the Loan Documents.

 

(ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers with respect to the Crossed Loans.

 

(iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers.

 

(iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires , (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason.

 

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(v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by Borrower that Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Loan or Borrower’s obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans.

 

(vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans.

 

(vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans.

 

(viii) The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans.

 

(ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Borrower that Borrower is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans.

 

(x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else.

 

(xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor.

 

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(g) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to Borrower stating that this Loan Agreement and the other Loan Documents shall no longer secure one or more (at Lender’s sole election) of the Crossed Loans (each a “ Cross Release Notice ”), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (the “Excluded Loan(s) ”; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an “ Excluded Borrower ”, and the Crossed Loan Agreement and other Crossed Loan Documents executed and delivered by an Excluded Borrower with respect to the Excluded Loan made to it are herein referred to as the “ Excluded Loan Agreement ” and “ Excluded Loan Documents ”, respectively, and the Crossed Property encumbered by the Excluded Loan Documents is herein referred to as the “ Excluded Property ”), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by Borrower (herein collectively referred to as the “ Excluded Guaranties ”) shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the “Crossed Loans” shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the “Crossed Loan Agreements”, “Crossed Loan Documents”, “Crossed Properties” and “Cross Guaranties” shall be deemed to exclude the Excluded Loan Agreement, the Excluded Loan Documents, the Excluded Property and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the “Crossed Borrower” and the “Crossed Obligors” shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.11(e) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and Borrower shall have no obligation or liability on account thereof; and (vii) Borrower shall no longer be a beneficiary of the covenants and agreements set forth in Section 2.11(e) of each Excluded Loan Agreement, and Borrower shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.11(e) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, Borrower hereby agrees to fully cooperate with Lender, at Borrower’s expense, provided that Borrower shall not be obligated to incur unreasonable cost or expense, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Borrower’s cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement.

 

Section 2.12. Central Cash Management .

 

(a) Local Collection Account; Collection Account; Deposits to and Withdrawals from the Collection Account .

 

(i) On or before the Closing Date, Lender shall (1) establish on behalf of the Borrower and maintain with the Collection Account Bank a collection account (the “ Collection Account ”), which shall be an Eligible Account with a separate and unique identification number in the name of Lender, as secured party, or, at Lender’s option, in

 

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the name of Borrower for the benefit of Lender, as secured party, and (2) cause the Collection Account Bank to deliver to Lender the Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Collection Account. On or before the Closing Date, Borrower shall (x) establish and maintain with a financial institution acceptable to Lender in its sole reasonable discretion (the “ Local Collection Account Bank ”), one or more local collection accounts for the Mortgaged Property (the “ Local Collection Account ”), which shall be an Eligible Account with a separate and unique identification number and entitled in the same name as the Collection Account and (y) cause the Local Collection Account Bank to deliver to Lender a Local Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Local Collection Account. Not later than the Closing Date, Borrower shall deliver to each tenant under a Lease an irrevocable direction letter in a form approved by Lender requiring the tenant to pay all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and Proceeds thereof owed to Borrower directly to the Local Collection Account. Borrower shall provide to Lender proof of such delivery. In addition, Borrower shall deliver an irrevocable direction letter in such form to each tenant under a new Lease entered into after the date hereof prior to the commencement of such Lease. If a tenant under a Lease forwards such Rents, Money or Proceeds to Borrower rather than directly to the Local Collection Account, Borrower shall (i) deliver an additional irrevocable direction letter to the tenant and make other commercially reasonable efforts to cause the tenant to forward such Rents, Money or Proceeds directly to the Local Collateral Account and (ii) immediately deposit or cause the Manager to deposit in the Local Collection Account such Rents, Money or Proceeds. At all times during this Agreement, Borrower shall deposit or cause Manager to deposit in the Security Deposit Account all cash Security Deposits received from tenants at the applicable Mortgaged Property, by no later than the fifth (5 th ) Business Day following the collection and receipt thereof. Subject to Section 2.12(a)(ii) , Borrower shall sweep or cause to be swept on each Business Day during a calendar month all Money on deposit in the Local Collection Account to the Collection Account. Borrower shall not have any right to withdraw Money from the Local Collection Account, the Security Deposit Account or the Collection Account, which shall be under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Any such Rents, Money or Proceeds held by Borrower or the Manager prior to deposit into the Local Collection Account shall be held in trust for the benefit of Lender. Borrower shall be responsible for the payment of all costs and expenses in connection with establishing and maintaining the Collection Account, the Local Collection Account, the Security Deposit Account and the Reserve Accounts (including, without limitation, Collection Account Bank’s and Local Collection Account Bank’s customary fees and charges) and shall reimburse Lender upon demand for any such costs or expenses incurred by Lender.

 

(ii) In the event that any Event of Default has occurred and is continuing,

 

(A) all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and all Proceeds thereof shall be payable to Lender or as otherwise directed by Lender,

 

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(B) Borrower shall not have any right to direct Lender or any other Person to make any withdrawals from the Collection Account or the Reserve Accounts without the prior written consent of Lender, and

 

(C) proceeds on deposit in the Collection Account and the Reserve Accounts may be applied by Lender for the payment of the Indebtedness pursuant to Section 2.8 of this Agreement.

 

(iii) Borrower shall deposit in the Collection Account all Loss Proceeds received by Borrower.

 

(b) Distribution of Cash . So long as an Event of Default has not occurred and is not continuing, Lender shall apply funds on deposit in the Collection Account (to the extent not held in Reserve Accounts constituting sub-accounts of the Collection Account, if any, and with the exception of Loss Proceeds, which shall be applied as provided in Section 2.12(e) and Section 5.1(x) of this Agreement) on each Payment Date as follows:

 

(i) first , to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in that order, in the respective amounts required to be deposited therein as described in Section 2.13(b) ;

 

(ii) second , to the payment to Lender of any expenses then due and payable to Lender or its servicer(s) pursuant to this Agreement or the other Loan Documents;

 

(iii) third , to the payment to Lender of the Monthly Debt Service Payment due upon such Payment Date;

 

(iv) fourth , to the Replacement Reserve Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(v) fifth , to the Leasing Costs/TI Costs Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(vi) sixth , to the payment of any outstanding indemnification payment to which an Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j) , and any other amounts then due and payable to Lender or its servicer pursuant to this Agreement and the other Loan Documents which are not paid from applications under clause (iii) above;

 

(vii) seventh , if no Event of Default exists, to Borrower in an amount equal to remaining available funds, if any; provided , that if any Event of Default exists, no disbursement shall be made under this clause seventh ; and

 

(viii) eighth , if any Event of Default exists, then to the extent Lender has not made other application of such remaining available funds in Lender’s discretion as provided hereunder, all remaining available funds shall be allocated as determined by Lender in Lender’s sole and absolute discretion (and re-allocated from time to time as Lender may elect) and retained in the Debt Service Reserve Account and/or the Operating Expense Account.

 

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(c) Permitted Investments . So long as no Event of Default has occurred and is continuing, Borrower shall direct Lender in writing to invest and reinvest any balance in the Collection Account from time to time in Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank); provided , however , that

 

(i) the maturity of the Permitted Investments on deposit therein shall be at the discretion of Borrower, but in any event no later than the Business Day of or immediately preceding the date on which such funds are reasonably expected to be required to be withdrawn therefrom pursuant to Section 2.12(a) or 2.12(b) of this Agreement,

 

(ii) after an Event of Default has occurred and for so long as such Event of Default is continuing, Borrower shall not have any right to direct investment of the balance in the Collection Account,

 

(iii) all such Permitted Investments shall be held in the name of Lender or its servicer and shall be credited to the Collection Account, and

 

(iv) if no written investment direction is provided to Lender by Borrower, Lender may at Lender’s option invest any balance in the Collection Account in such Permitted Investments as may be selected by Lender.

 

Lender shall have no liability for any loss in investments of funds in the Collection Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Collection Account. All interest paid or other earnings on funds deposited into the Collection Account made hereunder shall be deposited into the Collection Account. Borrower shall include all earnings on the Collection Account as income of Borrower for federal and applicable state tax purposes.

 

(d) Intentionally Omitted .

 

(e) Loss Proceeds . In the event of a casualty or Taking with respect to the Mortgaged Property, all of Borrower’s interest in Loss Proceeds with respect thereto shall be paid directly to the Collection Account. Subject to the provisions of Section 5.1(x) of this Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of the terms and conditions set forth in Section 5.1(x) be made available for Restoration, Loss Proceeds may, at Lender’s option exercised in Lender’s sole discretion, be applied to the Indebtedness and, upon payment in full of the Indebtedness, to any Crossed Indebtedness or, if an Event of Default exists, in any manner determined by Lender in Lender’s sole discretion in accordance with Section 2.8 hereof. If the Loss Proceeds are to be made available for Restoration pursuant to Section 5.1(x) of this Agreement, such Loss Proceeds shall be held by Lender in a segregated interest-bearing Eligible Account in the name of Lender and under the sole dominion and control of Lender to be opened (if not previously opened and maintained by the Collection Account Bank under the Collection Account Agreement by the Lender) by Lender at a financial institution selected by Lender (the “ Loss Proceeds Account ”). Funds on deposit in the Loss Proceeds Account shall be invested in Permitted Investments (subject to the availability of such

 

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Permitted Investments with the Collection Account Bank) in the same manner and subject to the same restrictions as set forth in Section 2.12(c) with respect to the Collection Account (except that the maturity shall be not later than as reasonably necessary to satisfy any schedule of distributions for Restoration required or approved by Lender). If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid to Lender to the extent necessary to comply with this Agreement.

 

Section 2.13. Reserve Accounts .

 

(a) Deferred Maintenance Escrow Account, Replacement Reserve Account and Leasing Costs/TI Costs Account .

 

(i) On or before the Closing Date, Lender shall establish on behalf of Borrower and maintain with the Collection Account Bank four separate accounts for deferred maintenance, replacement reserves, cash Security Deposits and leasing costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account, for the benefit of Lender, until the Loan is paid in full. The four accounts shall be designated the “Deferred Maintenance Escrow Account” (the “ Deferred Maintenance Escrow Account ”), the “Leasing Costs/TI Costs Account” (the “ Leasing Costs/TI Costs Account ”), the “Replacement Reserve Account” (the “ Replacement Reserve Account ”) and the “Security Deposit Account” (the “ Security Deposit Account ”). On the Closing Date, Lender shall deposit out of the Loan proceeds $5,625.00 in the Deferred Maintenance Escrow Account, $41,869.00 in the Leasing Costs/TI Costs Account and $6,498.96 in the Replacement Reserve Account. On each Payment Date, Borrower shall deposit from the Collection Account (or if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions) to the Replacement Reserve Account, of an amount equal to $6,498.96 per month, and to the Leasing Costs/TI Costs Account an amount equal to $41,869.00 per month. Borrower may request withdrawals from the Replacement Reserve Account pursuant to the procedure set forth in Section 2.13(a)(iii) below. Borrower may request withdrawals from the Leasing Costs/TI Costs Account pursuant to the procedure set forth in Section 2.13(a)(iv) below.

 

(ii) Any and all Moneys remitted to the Deferred Maintenance Escrow Account, together with any interest, earnings or income earned thereon, shall be held in the Deferred Maintenance Escrow Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for repairs set forth on Schedule 1 attached hereto (the “ Immediate Repairs ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof. Within the applicable time period(s) for completion set forth on Schedule 1 , Borrower shall complete such Immediate Repairs and shall provide to Lender such documentation, and other evidence of compliance with law as Lender may reasonably require. The funds contained in the Deferred Maintenance Escrow Account shall be utilized by Borrower solely for performance of the Immediate Repairs in accordance with the Property Condition Assessments and Environmental Reports, and shall not be used by Borrower for purposes

 

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for which any other Reserve Account is established. Upon written application of Borrower (which may be done by electronic mail or e-mail), Borrower shall be entitled to obtain disbursements by Lender from the Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such Immediate Repairs, provided that (a) no Event of Default has occurred and is continuing, (b) Borrower shall provide to Lender (including electronic mail or e-mail) such documentation and certifications as Lender may reasonably request to substantiate the requirement for and entitlement to such disbursement, (c) Borrower shall provide to Lender (including by electronic mail or e-mail) with all invoices, receipts, lien waivers and other documentation of lawful and workmanlike progress or completion, lien-free status, and availability of sufficient funds, all as may be reasonably requested by Lender, and (d) Borrower shall provide Lender such evidence as may be reasonably satisfactory to Lender that after payment of any draw for Immediate Repairs, the funds remaining in the Deferred Maintenance Escrow Account shall be sufficient to pay for the remainder of such Immediate Repairs. In the event Borrower completes the repairs for which funds were reserved in the Deferred Maintenance Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse any and all amounts then on deposit in the Deferred Maintenance Escrow Account to the Collection Account.

 

(iii) Any and all Moneys remitted to the Replacement Reserve Account, together with any interest, earnings or income thereon, shall be held in the Replacement Reserve Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Capital Improvement Costs (other than those for Immediate Repairs) reasonably approved by Lender for disbursements from the Replacement Reserve Account (“ Approved Capital Expenditures ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof, provided that funds in the Replacement Reserve Account shall not be used by Borrower for purposes for which any other Reserve Account is established.

 

(iv) Any and all Moneys remitted to the Leasing Costs/TI Costs Account, together with any interest, earnings or income thereon, shall be held in the Leasing Costs/TI Costs Account to be withdrawn by Lender upon written request by Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Leasing Commissions and TI Costs (other than those for Immediate Repairs) reasonably approved by Lender (it being acknowledged that Leasing Commissions and TI Costs expressly set forth in any Lease approved by Lender in accordance with this Agreement shall be deemed to be reasonable) for disbursements from the Leasing Costs/TI Costs Account incurred in connection with leasing activities relating to the Mortgaged Property after the Closing Date as specified by Borrower in such written request (“ Approved Leasing Costs ”) upon satisfaction, in the case of TI Costs disbursements, of the disbursement conditions listed on Schedule 6 hereof relating to work for which TI Costs disbursements are requested.

 

(b) Real Estate Taxes Escrow Account and Insurance Escrow Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two separate accounts for Basic Carrying Costs, each of which shall be

 

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an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Real Estate Taxes Escrow Account” (the “ Real Estate Taxes Escrow Account ”) and the “Insurance Escrow Account” (the “ Insurance Escrow Account ”). On the Closing Date, the Lender shall deposit out of the Loan proceeds $261,440.00 in the Real Estate Taxes Escrow Account and $0.00 in the Insurance Escrow Account (i.e. the amount necessary to meet the first insurance and real property tax bills due and payable after the Closing Date with credit for existing monthly escrow payments made prior to the applicable due date). With respect to each Payment Date, Borrower shall deposit from the Collection Account (or, if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions),

 

(1) in the Real Estate Taxes Escrow Account, an amount equal to (1/12 th ) one-twelfth of the annual real estate taxes and assessments and any other Impositions that if not paid in a timely manner will result in a Lien on a Mortgaged Property,

 

(2) in the Insurance Escrow Account, an amount equal to one-twelfth (1/12 th ) of the annual insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents.

 

Any and all Moneys remitted to the Real Estate Taxes Escrow Account or Insurance Escrow Account (which shall not bear interest for the benefit of Borrower) shall be held in the Real Estate Taxes Escrow Account or Insurance Escrow Account, respectively, to be withdrawn from the Real Estate Taxes Escrow Account or Insurance Escrow Account, as applicable, by Lender or its servicer upon written request of Borrower delivered to Lender and its servicer together with documentation and other evidence (including invoices and, in the case of a reimbursement of Borrower, evidence that the related costs have been paid) with respect to the respective Basic Carrying Costs towards which such funds are to be applied, and applied to pay directly (or reimburse Borrower, in the case of insurance premiums only) for (x) any Impositions (in the case of the Real Estate Taxes Escrow Account) or (y) any insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents (in the case of the Insurance Escrow Account). Borrower shall provide Lender or its servicer with bills and other documents necessary for payment of Impositions and insurance premiums at least ten (10) Business Days prior to the due date therefor (in the case of insurance premiums) and at least ten (10) Business Days prior to the first date upon which the same will become delinquent if unpaid (in the case of Impositions). In the event the amount on deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow Account exceeds the amount due for Impositions by more than one-twelfth (1/12 th ) of the annual real estate taxes (in the case of the Real Estate Taxes Escrow Account) or the amount due for insurance premiums (in the case of the Insurance Escrow Account), respectively, Lender or its servicer shall in its sole discretion credit such excess against future payment obligations to the Real Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.

 

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(c) Operating Expense Account and Debt Service Reserve Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two accounts for the remittance of funds by Lender or its servicer in its sole discretion after an Event of Default has occurred and is continuing, each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Operating Expense Account” (the “ Operating Expense Account ”) and the “Debt Service Reserve Account” (the “ Debt Service Reserve Account ”). On any Business Day after the occurrence and during the continuance of an Event of Default, Lender or its servicer may in its sole discretion deposit into the Operating Expense Account or the Debt Service Reserve Account any funds then on deposit in the Local Collection Account or the Collection Account. Any and all Moneys remitted to the Operating Expense Account or the Debt Service Reserve Account shall, until otherwise applied by Lender from time to time at Lender’s sole discretion during the existence of any Event of Default, be held in the Operating Expense Account or the Debt Service Reserve Account, as applicable, and applied, if Lender elects in its sole discretion to make such funds available for such application,

 

(x) with respect to the Operating Expense Account only, to pay Property Expenses provided for in the Operating Budget approved by Lender, or for other Property Expenses approved by Lender, and

 

(y) with respect to the Debt Service Reserve Account only, applied to pay the Indebtedness or the Crossed Indebtedness at the sole election of Lender;

 

provided , that (1) notwithstanding the foregoing, Lender may at any time, in its sole discretion, elect to apply the funds on deposit in the Operating Expense Account to pay the Indebtedness (including without limitation any Prepayment Consideration and other amounts due Lender in connection with such prepayment) and the Crossed Indebtedness while any Event of Default exists, and (2) in the event Lender accepts in writing a proposed cure of the Event of Default which precipitated the deposits to the Operating Expense Account and the Debt Service Reserve Account and no other Event of Default exists, then the funds on deposit in the Operating Expense Account and the Debt Service Reserve Account shall be released to Borrower.

 

(d) Security Deposits . In the case of letters of credit or other non-cash collateral given by tenants or others as security for the performance of the obligations of tenants under any Leases, Borrower shall deliver such letters of credit or other collateral to Lender and at Lender’s request execute such endorsements, instruments and documents and take such actions as are necessary to create a perfected security interest in favor of Lender in such letters of credit and other collateral and the proceeds thereof, as determined by Lender, including without limitation, if Lender requires, causing the Lender or its designee to become the beneficiary under such letters of credit; provided, that so long as no Event of Default exists and Borrower delivers such letters of credit or other collateral to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as the beneficiary under such letters of credit or take other of the foregoing actions, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to transfer or re-issue any such letter of credit to Lender or its designee as beneficiary and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender,

 

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during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing such letters of credits to be transferred or re-issued to Lender as beneficiary. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. So long as an Event of Default has not occurred and is not continuing (or if an Event of Default has occurred and is continuing but Borrower is required to return the Security Deposit in accordance with applicable Lease or Lender elects to return the Security Deposit in accordance with such Lease), Lender shall promptly authorize disbursement of any Security Deposits then held in the Security Deposit Account in order to satisfy Borrower’s obligations to return the same to tenants entitled to them under and in accordance with the Leases. In the event of a Lease default or other occurrence whereby Borrower, as landlord, shall become entitled to retain any Security Deposits or apply the same to amounts owed under the applicable Lease, any such Security Deposits, together with any other recoveries from such defaulted tenants in connection with such default, whether by draw upon any letter of credit or other security for such tenant’s obligations, exercise of remedies or settlement of claims, shall be transferred to the Leasing Costs/TI Costs Account as additional deposits therein (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property. Any termination payments paid by tenants under any Leases in connection with any early or scheduled termination of such Leases shall also be deposited as additional deposits into the Leasing Costs/TI Costs Account (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property.

 

(e) Investment of Funds . All or a portion of any Moneys in the Reserve Accounts (other than the Real Estate Tax Escrow Account, the Insurance Escrow Account, the Operating Expense Account and the Debt Service Reserve Account, none of which shall bear interest for the benefit of Borrower) shall, so long as no Event of Default has occurred and is continuing, be invested and reinvested by Lender in accordance with written instructions delivered by Borrower, or after an Event of Default has occurred and is continuing, by Lender, in one or more Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank). If no written investment direction is provided to Lender by Borrower, Lender may at its option invest such Moneys in a Permitted Investment selected by Lender. All interest paid or other earnings on funds deposited into the Reserve Accounts made hereunder shall be deposited into the Reserve Accounts (other than with respect to the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account or the Debt Service Reserve Account, for which Lender and its servicer shall not have any obligation to deposit such interest or earnings into such accounts). Lender shall have no liability for any loss in investments of funds in any Reserve Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Reserve Accounts. Unless and until title to the funds therein shall have vested in any Person other than Borrower, Borrower shall include all such income or gain on any account of the Reserve Account as income of Borrower for federal and applicable state tax purposes.

 

(f) Event of Default . After an Event of Default has occurred and is continuing, Borrower shall not be permitted to direct Lender or any other Person to make any withdrawal(s) from any Pledged Accounts and Lender, in Lender’s sole and absolute discretion,

 

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may liquidate any Permitted Investments of the amount on deposit in such accounts and/or withdraw and use such amounts on deposit in the Pledged Accounts to make payments in accordance with Section 2.8 . Nothing contained in Section 2.8 or this Section 2.13(f) shall in any way limit any rights and remedies otherwise available to Lender under this Agreement, the other Loan Documents or applicable law upon an Event of Default.

 

Section 2.14. Additional Provisions Relating to the Pledged Accounts .

 

(a) Borrower covenants and agrees that: (i) all securities or other property underlying any financial assets credited to any Pledged Account shall be registered in the name of Lender, indorsed to Lender or indorsed in blank or credited to another securities account maintained in the name of Lender and in no case will any financial asset credited to any Pledged Account be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower except to the extent the foregoing have been specially indorsed to Lender or in blank; and (ii) all Permitted Investments and all other property delivered to Lender pursuant to this Agreement will be promptly credited to one of the Pledged Accounts.

 

(b) Borrower hereby agrees that each item of property (whether investment property, financial asset, security, instrument, cash or otherwise) credited to any Pledged Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.

 

(c) Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with all “entitlement orders” (i.e. an order directing transfer or redemption of any financial asset relating to a Pledged Account, and any “entitlement order” as defined in Section 8-102(a)(8) of the UCC) and instructions (including any “instruction” within the meaning of Section 9-104 of the UCC) originated by Lender without further action or consent by Borrower, Manager or any other Person. Lender shall deliver any such order or instruction in accordance with the terms of this Agreement.

 

(d) Regardless of any provision in any other agreement, for purposes of the UCC, with respect to each Pledged Account, New York shall be deemed to be the bank’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC).

 

(e) Except for the claims and interest of Lender and of Borrower in the Pledged Accounts, Borrower represents and warrants that it does not know of any Lien on or claim to, or interest in, any Pledged Account or in any “financial asset” (as defined in Section 8-102(a) of the UCC) credited thereto. If any Person (other than Lender, Collection Account Bank, as agent for Lender, or Local Collection Account Bank, as agent for Lender) asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Accounts or in any financial asset carried therein, Borrower will promptly notify Lender thereof and shall indemnify, defend and hold Lender and each of the Indemnified Parties harmless from and against any such Lien, encumbrance or claim.

 

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Section 2.15. Security Agreement .

 

(a) Pledge of Pledged Accounts . To secure the full and punctual payment and performance of all of the Indebtedness and Crossed Indebtedness, Borrower hereby assigns, conveys, pledges and transfers to Lender, as secured party, and grants Lender a first priority and continuing security interest in and to, the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (collectively, the “ Account Collateral ”):

 

(i) all of Borrower’s right, title and interest in the Pledged Accounts and all Money and Permitted Investments, if any, from time to time deposited or held in the Pledged Accounts or purchased with funds or assets on deposit in the Pledged Accounts;

 

(ii) all of Borrower’s right, title and interest in interest, dividends, Money, Instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any of the foregoing until such time as such items are disbursed from the Pledged Accounts; and

 

(iii) to the extent not covered by clause (i) or (ii) above, all Proceeds of any or all of the foregoing until such time as such items are disbursed from the Pledged Accounts.

 

Lender and Collection Account Bank and Local Collection Account Bank, each as agent for Lender, shall have with respect to the foregoing collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein.

 

(b) Covenants; Sole Dominion and Control . Borrower shall not have any right to withdraw Money from the Pledged Accounts. Borrower acknowledges and agrees that the Pledged Accounts are and shall at all times continue to be subject to and under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Notwithstanding anything set forth herein to the contrary, neither Borrower nor Manager nor any other person or entity, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Pledged Accounts, and Borrower acknowledges that the Collection Account Bank and the Local Collection Account Bank shall comply with all instructions originated by Lender without further consent by Borrower. Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with the instructions of Lender with respect to the Pledged Accounts without the further consent of Borrower or Manager. The Account Collateral shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other banking authority or Governmental Authority, as may now or hereafter be in effect, and to the rules, regulations and procedures of the financial institution where the Account Collateral is maintained relating to demand deposit accounts generally from time to time in effect.

 

(c) Financing Statements; Further Assurances . Borrower hereby irrevocably authorizes Lender at any time and from time to time to file any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are necessary or advisable to

 

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perfect the security interests granted to Lender in connection herewith. Such financing statements may describe the collateral in the same manner as described in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the collateral granted to Lender in connection herewith, including, without limitation, describing such property as “all assets” or “all personal property” of Borrower whether now owned or hereafter acquired. From time to time, at the expense of Borrower, Borrower shall promptly execute and deliver all further instruments, and take all further action, that Lender may reasonably request, in order to continue the perfection and protection of the pledge and security interest granted or purported to be granted hereby.

 

(d) Transfers and Other Liens . Borrower shall not sell or otherwise dispose of any of the Account Collateral other than pursuant to the terms of this Agreement and the other Loan Documents, or create or permit to exist any Lien upon or with respect to all or any of the Account Collateral, except for the Lien granted to Lender under or as contemplated by this Agreement.

 

(e) No Waiver . Every right and remedy granted to Lender under this Agreement or by law may be exercised by Lender at any time and from time to time, and as often as Lender may deem it expedient. Any and all of Lender’s rights with respect to the pledge of and security interest in the Account Collateral granted hereunder shall continue unimpaired, and to the extent permitted by law, Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (i) any proceeding of Borrower under the United States Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state, (ii) the release or substitution of Account Collateral at any time, or of any rights or interests therein or (iii) any delay, extension of time, renewal, compromise or other indulgence granted by Lender in the event of any Default with respect to the Account Collateral or otherwise hereunder. No delay or extension of time by Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon Borrower by Lender, shall constitute a waiver thereof, or limit, impair or prejudice Lender’s right, without notice or demand, to take any action against Borrower or to exercise any other power of sale, option or any other right or remedy.

 

(f) Lender Appointed Attorney-In-Fact . Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power of substitution, at any time after the occurrence and during the continuation of an Event of Default, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Account Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower with respect to the Account Collateral, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for herein with respect to the Account Collateral and to accomplish the purposes of this Agreement. The foregoing powers of attorney are irrevocable and coupled with an interest and shall terminate upon repayment of the Indebtedness and (subject to Section 2.11(g) ) Crossed Indebtedness in full.

 

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(g) Continuing Security Interest; Termination . This Section 2.15 shall create a continuing pledge of and security interest in the Account Collateral and shall remain in full force and effect until payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) the payment in full of all Crossed Indebtedness. Upon payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) payment in full of all Crossed Indebtedness, Lender shall return to Borrower such of the Account Collateral as shall not have been applied pursuant to the terms hereof, and shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the pledge and lien hereof.

 

Section 2.16. Mortgage Recording Taxes . The Lien to be created by the Mortgage is intended to encumber the Mortgaged Property to the full extent of the Indebtedness. On the Closing Date, Borrower shall have paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage, if any.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.1. Conditions Precedent to Closing . The obligation of the Lender to make the Loan is subject to the satisfaction by Borrower (and Guarantor, where applicable) or waiver by Lender of the following conditions no later than the Closing Date:

 

(a) Loan Agreement . Borrower and Lender shall have executed and delivered this Agreement.

 

(b) Note . Borrower shall have executed and delivered to Lender the Note.

 

(c) Environmental Indemnity Agreement; Guaranty of Non-Recourse Obligations . Borrower and Guarantor shall have executed and delivered the Environmental Indemnity Agreement to Lender. Guarantor shall have executed and delivered the Guaranty of Non-Recourse Obligations.

 

(d) Opinions of Counsel . Lender shall have received from counsel to Borrower and the Guarantor, legal opinions in form and substance acceptable to Lender, with respect to corporate matters and with respect to substantive non-consolidation of either Guarantor or the Manager, on the one hand, and either Borrower or any SPC Party, on the other, in the event of the bankruptcy of either Guarantor or the Manager. Such legal opinions shall be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(e) Organizational Documents . Lender shall have received with respect to each of Borrower and the Guarantor its certificate of formation, certificate of limited partnership or certificate of incorporation, as applicable, as amended, modified or supplemented to the Closing Date, as filed with the Secretary of State in the jurisdiction of organization and in effect on the Closing Date and certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than thirty (30) days prior to the Closing Date, together with a good standing certificate from such Secretary of State dated not more than thirty (30) days prior to the Closing Date and, for Borrower to the extent required by applicable law, a good standing

 

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certificate from the Secretaries of State (or the equivalent thereof) of each other State in which Borrower is required to be qualified to transact business, each dated not more than thirty (30) days prior to the Closing Date.

 

(f) Certified Resolutions, etc . Lender shall have received a certificate of each of Borrower and the Guarantor dated the Closing Date, certifying (i) the names and true signatures of its incumbent officers authorized to sign the Loan Documents to which Borrower or the Guarantor is a party, (ii) the Organizational Agreement of each of Borrower and Guarantor, in each case as in effect on the Closing Date, (iii) the resolutions of each of Borrower and the Guarantor, approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and (iv) that there have been no changes in any Organizational Agreement since the date of execution or preparation thereof.

 

(g) Additional Matters . Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender. All corporate and other organizational proceedings, all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender.

 

(h) Transaction Costs . Borrower shall have paid all Transaction Costs for which bills have been submitted in accordance with the provisions of Section 8.23 .

 

(i) No Default or Event of Default . No event which would constitute either a Default or Event of Default under this Agreement or the other Loan Documents shall have occurred and be continuing on the Closing Date.

 

(j) No Injunction . No law or regulation shall have been adopted, no order, judgment or decree of any Governmental Authority shall have been issued, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction.

 

(k) Representations and Warranties . The representations and warranties herein and in the other Loan Documents shall be true and correct in all material respects on the Closing Date.

 

(l) Survey; Appraisal . Lender shall have received the Survey and the Appraisal with respect to the Mortgaged Property, which shall be in form and substance reasonably satisfactory to Lender.

 

(m) Property Condition Assessment . Lender shall have received the Property Condition Assessment with respect to the Mortgaged Property prepared by the Engineer or another Person acceptable to the Lender, which Property Condition Assessment shall be reasonably acceptable to Lender.

 

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(n) Environmental Matters . Lender shall have received an Environmental Report prepared by an Environmental Auditor with respect to the Mortgaged Property, which Environmental Report shall be reasonably acceptable to Lender.

 

(o) Financial Information . Lender shall have received financial information relating to the Guarantor, Borrower and the Mortgaged Property reasonably satisfactory to Lender. Such information shall include the following, to the extent reasonably available:

 

(i) operating statements for the current year (including actual to date information, an annual budget and trailing twelve month data in hard copy and on diskette) and for not less than the three preceding years (including tenant improvements costs, leasing commissions, capital reserves, major repairs, replacement items and occupancy rates in hard copy and on diskette);

 

(ii) copies of Leases with respect to the tenants of the Mortgaged Property, a copy of the standard lease form, if any, and tenant lease abstracts, if available;

 

(iii) current property rent roll data on a tenant by tenant basis in hard copy (including name, square footage, lease term, expiration date, renewal options, base rent per square foot, sales volume psf (if applicable), percentage rent terms (if applicable), additional rent clauses (including stops, offsets, and other special provisions), escalation clauses for increase in operating expense, maintenance, insurance, real estate taxes and utilities, assignment, sublet and cancellation provisions and purchase options);

 

(iv) current real estate tax bills and historical real estate tax bills of record for the Mortgaged Property for not less than the three preceding years; and

 

(v) the most recent annual financial statements and unaudited quarterly financial statements (if any).

 

The annual financial statements relating to the Mortgaged Property and Borrower shall be either (x) audited by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender or (y) prepared in accordance with agreed upon procedures reasonably acceptable to Lender to be performed by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender to create similar information.

 

(p) Pro-Forma Financial Statement; Operating Budget . Lender shall have received (i) the initial pro-forma financial statement and Operating Budget for the Mortgaged Property for the following twelve months (including on an annual and monthly basis a break-down of projected Gross Revenues, Property Expenses, Capital Improvement Costs (including Leasing Commissions and TI Costs), replacement reserve costs and average occupancy level (expressed as a percentage)), (ii) a financial statement that forecasts projected revenues and operating expenses for not less than three years (including the assumptions used in such forecast), and (iii) any local market study and/or research and demographics report prepared for Borrower and/or commercially available.

 

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(q) Site Inspection . Borrower shall have provided to Lender the opportunity to perform, or cause to be performed on its behalf, an on-site due diligence review of the Mortgaged Property, which inspection is reasonably satisfactory to Lender.

 

(r) Mortgaged Property Documents .

 

(i) Mortgage; Assignment of Rents and Leases . Borrower shall have executed and delivered to Lender the Mortgage and the Assignment of Rents and Leases with respect to the Mortgaged Property and such Mortgage and Assignment of Rents and Leases shall have been filed of record in the appropriate filing office in the jurisdiction in which the Mortgaged Property is located or irrevocably delivered to a title agent for such recordation.

 

(ii) Financing Statements . Borrower shall have executed and delivered to Lender all financing statements required by Lender pursuant hereto and such financing statements shall have been filed of record in the appropriate filing offices in each of the appropriate jurisdictions or irrevocably delivered to a title agent for such recordation.

 

(iii) Management Agreement and Manager’s Subordination . Lender shall have received the executed Management Agreement for the Mortgaged Property and the Manager shall have executed and delivered the Manager’s Subordination to Lender.

 

(iv) Contract Assignment . Borrower shall have executed and delivered to Lender a Contract Assignment with respect to the Mortgaged Property.

 

(s) Opinions of Counsel . Lender shall have received from counsel to Borrower reasonably acceptable to Lender in each state in which any Mortgaged Property is located its legal opinion, as to (i) the enforceability of the Mortgage, Assignment of Rents and Leases and any other Loan Documents governed by the law of such jurisdiction, (ii) perfection of Liens and security interests and (iii) other matters referred to therein with respect to the Mortgaged Property. The legal opinions will be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(t) Insurance . Lender shall have received certificates of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement. Such certificates shall indicate that Lender is a named additional insured and shall contain a loss payee endorsement in favor of Lender with respect to the property policies required to be maintained under this Agreement.

 

(u) Title Insurance Policy . Lender shall have received countersigned pro forma title policies or marked binders constituting the unconditional commitment (in form and substance reasonably satisfactory to Lender) to issue the Title Insurance Policy covering the Mortgaged Property with an aggregate amount at least equal to the Loan Amount.

 

(v) Lien Search Reports . Lender shall have received satisfactory reports of UCC (collectively, the “ UCC Searches ”), tax lien, judgment and litigation searches and title

 

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updates conducted by the companies issuing the Title Insurance Policy with respect to the Collateral, Guarantor and Borrower, such searches to be conducted in each of the locations required by Lender.

 

(w) Consents, Licenses, Approvals, etc . Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower and Guarantor and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect.

 

(x) Additional Real Estate Matters . Lender shall have received such other real estate related certificates and documentation relating to the Mortgaged Property as Lender may have reasonably requested. Such documentation shall include the following as requested by Lender and to the extent reasonably available:

 

(i) certificates of occupancy issued by the appropriate Governmental Authority of the jurisdiction in which the Mortgaged Property is located reflecting, and consistent with, the use of the Mortgaged Property as of the Closing Date;

 

(ii) letters from the appropriate local Governmental Authorities of the jurisdiction in which the Mortgaged Property is located, certifying that the Mortgaged Property is in compliance with all applicable zoning laws, rules and regulations, and a zoning endorsement to the applicable Title Insurance Policy with respect to the Mortgaged Property or an opinion of zoning counsel to such effect;

 

(iii) copies of the Leases in effect at the Mortgaged Property as Lender may request (in addition to the copies delivered above); and

 

(iv) estoppel certificates in form and substance acceptable to Lender in respect of at least 75% of the rentable square footage rented to commercial tenants and every commercial tenant that rents more than 5% of the rentable square footage at the Mortgaged Property or such other percentages as shall be acceptable to Lender.

 

(y) Closing Statement . Lender and Borrower shall have agreed upon a detailed closing statement in a form reasonably acceptable to Lender, which includes a complete description of Borrower’s sources and uses of funds on the Closing Date.

 

(z) Crossed Loan Documents . The Crossed Loan Documents shall have been executed and delivered by the Crossed Borrower and other Persons party thereto.

 

Section 3.2. Execution and Delivery of Agreement . The execution and delivery of this Agreement by each party to this Agreement shall be deemed to constitute the satisfaction or waiver of the conditions set forth in Section 3.1 ; provided , that any such deemed satisfaction or waiver shall be solely for the purposes of Section 3.1 and shall not be deemed or construed to constitute a waiver of any other provision of this Agreement or of any provisions of any of the other Loan Documents, including, without limitation, any undelivered items undertaking or agreement or other post-closing agreement or undertaking entered into by Borrower and/or Guarantor.

 

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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.1. Representations and Warranties as to Borrower . Borrower represents and warrants that, as of the Closing Date:

 

(a) Organization . Borrower (i) is a duly organized and validly existing limited liability company or limited partnership, as applicable, in good standing under the laws of the State of Delaware, (ii) has the requisite power and authority to own its properties (including, without limitation, the Mortgaged Property) and to carry on its business as now being conducted and is qualified to do business in the jurisdiction in which the Mortgaged Property is located, and (iii) has the requisite power to execute and deliver, and perform its obligations under, this Agreement, the Note and all of the other Loan Documents to which it is a party.

 

(b) Authorization; No Conflict; Consents and Approvals . The execution and delivery by Borrower of this Agreement, the Note and each of the other Loan Documents to which it is a party, Borrower’s performance of its obligations hereunder and under such other Loan Documents and the creation of the security interests and liens provided for in this Agreement and the other Loan Documents to which it is a party (i) have been duly authorized by all requisite action on the part of Borrower, (ii) will not violate any provision of any Legal Requirements, any order of any court or other Governmental Authority, the Organizational Agreement or any indenture or agreement or other instrument to which Borrower is a party or by which Borrower is bound, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any Lien of any nature whatsoever upon the Mortgaged Property pursuant to, any such indenture or agreement or material instrument other than the Loan Documents. Other than those obtained or filed on or prior to the Closing Date, Borrower is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the other Loan Documents executed and delivered by Borrower.

 

(c) Enforceability . This Agreement, the Note and each other Loan Document executed by Borrower in connection with the Loan (including, without limitation, any Collateral Security Instrument), is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles. This Agreement, the Note and such other Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower (including the defense of usury), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

 

(d) Litigation . There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending and served or, to the best knowledge of Borrower, threatened against Borrower, Guarantor or any Collateral, which actions, suits or proceedings, if determined against Borrower, Guarantor or such Collateral, are reasonably likely to result in a Material Adverse Effect.

 

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(e) Agreements . Borrower is not in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any Collateral is bound which default is reasonably likely to have a Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor is a party to any agreement or instrument or subject to any restriction that is reasonably likely to have a Material Adverse Effect.

 

(f) No Bankruptcy Filing . Neither Borrower nor, to Borrower’s knowledge, Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a material portion of its assets or property. To the best knowledge of Borrower, no Person is contemplating the filing of any such petition against Borrower.

 

(g) Solvency . Giving effect to the transactions contemplated hereby, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities (including, without limitation, subordinated, unliquidated, disputed and contingent liabilities). The present fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities (including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured). Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including, without limitation, contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

 

(h) Other Debt . Borrower has not borrowed or received other debt financing (whether unsecured or secured by the Mortgaged Property or any part thereof) which is outstanding as of the Closing Date. As of the Closing Date, Borrower has no Other Borrowings other than trade debt expressly permitted under Article VIII of this Agreement and the Crossed Loans.

 

(i) Full and Accurate Disclosure . No statement of fact made by or on behalf of Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. To the best knowledge of Borrower, there is no fact that has not been disclosed to Lender that is reasonably likely to result in a Material Adverse Effect.

 

(j) Financial Information . All financial statements and other data concerning Borrower, the Mortgaged Property and, to Borrower’s knowledge, Guarantor, that has been delivered by or on behalf of Borrower or Guarantor to Lender is true, complete and correct in all material respects and, except as disclosed on Schedule 4 attached hereto, has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Lender, there has been no change in the financial position of Borrower, the Mortgaged Property or, to Borrower’s knowledge, Guarantor, or in the results of operations of Borrower or, to Borrower’s knowledge, Guarantor, which change results or is reasonably likely to result in a

 

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Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor has incurred any obligation or liability, contingent or otherwise, not reflected in such financial data, which is likely to have a Material Adverse Effect upon its business operations or the Mortgaged Property.

 

(k) Investment Company Act; Public Utility Holding Company Act . Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money in accordance with this Agreement.

 

(l) Compliance . Borrower is in compliance with all applicable Legal Requirements, except for noncompliance that is not reasonably likely to have a Material Adverse Effect. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority except for defaults or violations which are not reasonably likely to have a Material Adverse Effect.

 

(m) Use of Proceeds; Margin Regulations . Borrower will use the proceeds of the Loan for the purposes described in Section 2.2 . No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements.

 

(n) Organizational Chart . The organizational chart set forth as Schedule 2 accurately sets forth the direct and indirect ownership structure of Borrower as of the Closing Date.

 

(o) No Defaults . No Default or Event of Default exists under or with respect to any Loan Document.

 

(p) Plans and Welfare Plans . The assets of Borrower do not constitute “plan assets” under regulations currently promulgated under ERISA. Neither Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is required to contribute to any Plan or Multiemployer Plan nor has the Borrower or any ERISA Affiliate sponsored, maintained, contributed to or been required to contribute to any Plan or Multiemployer Plan within the past six years. There are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan that would reasonably be expected to result in a material liability to Borrower. There have been no violations of Section 4980B of the Code or Section 601, et seq. of ERISA by Borrower or any of its ERISA Affiliates that would reasonably be expected to result in a material liability to Borrower. No event has occurred, and there exists no condition or set of circumstances, in connection with any Plan or Welfare Plan under which Borrower or, to the best knowledge of Borrower, any ERISA Affiliate, directly or indirectly (through an indemnification agreement or

 

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otherwise), is reasonably likely to be subject to any material risk of material liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide any retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower, or, to the best knowledge of Borrower, any ERISA Affiliate other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by fully paid up insurance or (iii) severance benefits.

 

(q) Additional Borrower UCC Information . Borrower’s organizational identification number is 3569432 and the full legal name of Borrower is as set forth on the signature pages hereof and Borrower has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name).

 

(r) Not Foreign Person . Borrower is not a “foreign person” within the meaning of § 1445(f)(3) of the Code.

 

(s) Labor Matters . Borrower is not a party to any collective bargaining agreements.

 

(t) Pre-Closing Date Activities . Borrower has not conducted any business or other activity on or prior to the Closing Date, other than in connection with the acquisition, management and ownership of the Mortgaged Property.

 

(u) No Bankruptcies or Criminal Proceedings Involving Borrower or Related Parties . No bankruptcy, insolvency, reorganization or comparable proceedings have ever been instituted by or against Borrower, any Guarantor, any SPC Party, any other owner of any direct ownership interest in Borrower (each such Person being herein referred to as a “Principal”), and no such proceeding is now pending or contemplated. None of Borrower, any Principal, or to Borrower’s knowledge, any other individual or entity directly or indirectly owning or controlling, or the family members of which own or control, any direct or indirect beneficial ownership interest in Borrower or in the Manager or asset manager for the Mortgaged Property, have been charged, indicted or convicted, or are currently under the threat of charge, indictment or conviction, for any felony or crime punishable by imprisonment.

 

(v) No Prohibited Persons . Neither Borrower nor, to Borrower’s knowledge, any Guarantor or any other Principal or nor any of their respective officers, directors, shareholders, partners or members is or will be an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive` Order 13224 issued on September 24, 2001 (“ EO13224 ”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“ OFAC ”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf)(the “ OFAC List ”); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “ Prohibited Person ”).

 

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Section 4.2. Representations and Warranties as to the Mortgaged Property . Borrower hereby represents and warrants to Lender that, as to the Mortgaged Property and the Mortgage, as of the Closing Date:

 

(a) Title to the Mortgaged Property . Borrower owns good, marketable and insurable fee simple title to the Mortgaged Property (other than Personalty), free and clear of all Liens, other than the Permitted Encumbrances. Borrower owns the Personalty free and clear of any and all Liens, other than Permitted Encumbrances. There are no outstanding options to purchase or rights of first refusal or restrictions on transferability affecting any Mortgaged Property or any portion thereof or interest therein.

 

(b) Utilities and Public Access . Except as disclosed on Schedule 4, (i) the Mortgaged Property has adequate rights of access to public ways and is served by public water, electric, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary to the continued use and enjoyment of the Mortgaged Property as presently used and enjoyed are located in the public right-of-way abutting the premises, and all such utilities are connected so as to serve the Mortgaged Property without passing over other property except for land or easement areas of or available to the utility company providing such utility service; and (iii) all roads necessary for the full utilization of the Mortgaged Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities or are the subject of access easements for the benefit of the Mortgaged Property.

 

(c) Condemnation . No Taking has been commenced or, to the best of Borrower’s knowledge, is contemplated with respect to all or any portion of any Mortgaged Property or for the relocation of roadways providing access to any Mortgaged Property.

 

(d) Compliance . The Mortgaged Property and the current use thereof is in compliance with all applicable Legal Requirements (including, without limitation, building, parking, subdivision, land use, health, fire, safety and zoning ordinances and codes) and all applicable Insurance Requirements, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Mortgaged Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by Borrower with respect to the Mortgaged Property without Lender’s prior written consent.

 

(e) Environmental Compliance . Except for matters set forth in the Environmental Reports delivered to Lender in connection with the Loan (true, correct and complete copies of which have been provided to Lender by Borrower):

 

(i) Borrower and the Mortgaged Property are in full compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by Borrower or the Manager of all environmental, health and safety permits, licenses and other governmental authorizations required in connection with their ownership and operation of the Mortgaged Property under all Environmental Laws), except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

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(ii) There is no Environmental Claim pending or, to the actual knowledge of Borrower, threatened, and no penalties arising under Environmental Laws have been assessed against Borrower, to Borrower’s knowledge, the Manager or any Mortgaged Property, or, to the actual knowledge of Borrower, against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law which is reasonably likely to result in a Material Adverse Effect.

 

(iii) No investigation or review is pending or, to the actual knowledge of Borrower, threatened by any Governmental Authority, citizens group, employee or other Person with respect to any alleged failure by Borrower or the Manager or any Mortgaged Property to have any environmental, health or safety permit, license or other authorization required under, or to otherwise comply with, any Environmental Law or with respect to any alleged liability of Borrower or the Manager for any Use or Release of any Hazardous Substances which is reasonably likely to result in a Material Adverse Effect.

 

(iv) There are no present and, to the best knowledge of the Borrower, there have been no past Releases of any Hazardous Substances that are reasonably likely to form the basis of any Environmental Claim against Borrower, the Manager, any Mortgaged Property or against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) and which are reasonably likely to result in a Material Adverse Effect.

 

(v) Without limiting the generality of the foregoing, to the best knowledge of the Borrower, there is not present at, on, in or under any Mortgaged Property, any Hazardous Substances (including, without limitation, PCB-containing equipment, asbestos or asbestos containing materials, underground storage tanks or surface impoundments for Hazardous Substances, lead in drinking water or lead based paint) (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the respective tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) or any fungus, mold, mildew or biological agent the presence of which is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property.

 

(vi) No liens are presently recorded with the appropriate land records under or pursuant to any Environmental Law with respect to the Mortgaged Property and no Governmental Authority has been taking or, to the actual knowledge of Borrower, is in the process of taking any action that could subject the Mortgaged Property to Liens under any Environmental Law.

 

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(vii) There have been no environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession of Borrower in relation to any Mortgaged Property which have not been made available to Lender.

 

(f) Mortgage and Other Liens . Each Mortgage creates a valid and enforceable first priority Lien on the applicable Mortgaged Property described therein, as security for the repayment of the Indebtedness, subject only to the Permitted Encumbrances applicable to such Mortgaged Property. This Agreement creates a valid and enforceable first priority Lien on all Account Collateral (subject to Permitted Encumbrances). Each Collateral Security Instrument establishes and creates a valid, subsisting and enforceable Lien on and a security interest in, or claim to, the rights and property described therein. All property covered by any Collateral Security Instrument in which a security interest can be perfected by the filing of a financing statement is subject to a UCC financing statement filed and/or recorded, as appropriate (or irrevocably delivered to an agent for such recordation or filing) in all places necessary to perfect a valid first priority (subject to Permitted Encumbrances) Lien with respect to the rights and property that are the subject of such Collateral Security Instrument to the extent governed by the UCC.

 

(g) Assessments . Except as disclosed on the Title Insurance Policy, there are no pending or, to the best knowledge of Borrower, proposed special or other assessments for public improvements or otherwise affecting any Mortgaged Property, nor are there any contemplated improvements to any Mortgaged Property that may result in such special or other assessments.

 

(h) No Joint Assessment; Separate Lots . Borrower has not suffered, permitted or initiated the joint assessment of the Mortgaged Property (i) with any other real property constituting a separate tax lot, and (ii) with any portion of the Mortgaged Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Mortgaged Property as a single lien. The Mortgaged Property is comprised of one or more parcels, each of which constitutes a separate tax lot and none of which constitutes a portion of any other tax lot.

 

(i) No Prior Assignment . Lender is the collateral assignee of Borrower’s interest under the Leases. There are no prior assignments of the Leases or any portion of the Rent due and payable or to become due and payable which are presently effective.

 

(j) Permits; Certificate of Occupancy . Borrower has obtained all Permits necessary to the use and operation of the Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. The use being made of the Mortgaged Property is in conformity with the certificate of occupancy and/or such Permits for such Mortgaged Property and any other restrictions, covenants or conditions affecting such Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

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(k) Flood Zone . Except as shown on the Survey, no Mortgaged Property or any portion thereof is located in a flood hazard area as defined by the Federal Insurance Administration.

 

(l) Physical Condition . Except as set forth in the Property Condition Assessment, to the best knowledge of Borrower, the Mortgaged Property is free of structural defects and all Improvements, including the building systems contained therein are in good working order subject to ordinary wear and tear.

 

(m) Security Deposits . Borrower and the Manager are in compliance with all Legal Requirements relating to all Security Deposits with respect to the Mortgaged Property except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

(n) Intellectual Property . All material Intellectual Property that Borrower owns or has pending, or under which it is licensed, is in good standing and, to Borrower’s knowledge, uncontested. There is no right under any Intellectual Property necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business. Borrower has not received notice of infringement with respect to asserted Intellectual Property of others. To Borrower’s knowledge, there is no infringement by others of material Intellectual Property of Borrower.

 

(o) No Encroachments . Except as shown on the Survey, to the best knowledge of Borrower, (i) all of the Improvements which were included in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, (ii) no improvements on adjoining properties encroach upon any Mortgaged Property, (iii) no Improvements encroach upon any easements or other encumbrances affecting the Mortgaged Property in a manner that is reasonably expected to materially and adversely affect the value or marketability of the Mortgaged Property, and (iv) all of the Improvements comply with all material requirements of any applicable zoning and subdivision laws and ordinances.

 

(p) Management Agreement . The Management Agreement is in full force and effect in accordance with its terms. There is no default, breach or violation existing thereunder by Borrower or, to the best knowledge of Borrower, any other party thereto and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation by Borrower or, to the best knowledge of Borrower, any other party thereunder or entitle Borrower or, to the best knowledge of Borrower, any other party thereto to terminate any such agreement.

 

(q) Leases . No Mortgaged Property is subject to any Leases other than the Leases described in the rent rolls delivered to Lender in connection with the making of the Loan. No person has any possessory interest in any Mortgaged Property or right to occupy the same except under and pursuant to the provisions of the Leases. The current Leases are in full force and effect in accordance with their respective terms and, except as disclosed on Schedule 4 , there are no monetary or other material defaults thereunder by either party and no conditions which with the passage of time and/or notice would constitute monetary or other material defaults thereunder. Except as disclosed on Schedule 4 , no portion of the Mortgaged Property is leased to or occupied by any Affiliate of Borrower.

 

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Section 4.3. Survival of Representations . Borrower agrees that (i) all of the representations and warranties of Borrower set forth in Section 4.1 and 4.2 and in the other Loan Documents delivered on the Closing Date are made as of the Closing Date, and (ii) all representations and warranties made by Borrower shall survive the delivery of the Note and making of the Loan and continue for so long as any amount remains owing to Lender under this Agreement, the Note or any of the other Loan Documents; provided , however , that the representations set forth in Section 4.2(e) shall survive in perpetuity. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on Lender’s behalf.

 

ARTICLE V.

AFFIRMATIVE COVENANTS

 

Section 5.1. Affirmative Covenants . Borrower covenants and agrees that, from the date hereof and until payment in full of the Indebtedness:

 

(a) Existence; Compliance with Legal Requirements: Insurance . Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a limited liability company or limited partnership, as applicable, and any rights, licenses, Permits and franchises necessary for the conduct of its business and will comply with all Legal Requirements and Insurance Requirements applicable to it and to the Mortgaged Property in all material respects. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property necessary for the continued conduct of its business and keep the Mortgaged Property in good repair, working order and condition, except for reasonable wear and use (and except for casualty losses as to which other provisions hereof shall govern), and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto.

 

(b) Basic Carrying Costs and Other Claims; Contest .

 

(i) Subject to Borrower’s contest rights set forth in Section 5.1(b)(ii) below, Borrower will pay prior to delinquency (A) all Basic Carrying Costs with respect to Borrower and the Mortgaged Property; (B) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of the Mortgaged Property or its other properties or assets (hereinafter referred to as the “ Lien Claims ”); and (C) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. Borrower’s obligation to pay Basic Carrying Costs pursuant to this Agreement shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes on the Mortgaged Property or other Impositions.

 

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(ii) Borrower shall not be required to pay, discharge or remove any Imposition or Lien Claim so long as Borrower contests in good faith such Imposition or Lien Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Mortgaged Property or any portion thereof, so long as:

 

(A) the Indebtedness shall not have been accelerated, if an Event of Default shall have occurred and be continuing;

 

(B) prior to the date on which such Imposition or Lien Claim would otherwise have become delinquent, Borrower shall have given Lender prior written notice of its intent to contest said Imposition or Lien Claim deposited with Lender (or with a court of competent jurisdiction or other appropriate body approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount equal to at least one hundred twenty five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Lien Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon, together with such other security as may be required in the proceeding, or as may be reasonably required by Lender, to insure the payment of any such Imposition or Lien Claim and all interest and penalties thereon; provided , that notwithstanding the foregoing, with respect to Impositions or Lien Claims in an amount not in excess of $100,000, Borrower shall not be required to deposit such amounts with the Lender, so long as Borrower demonstrates to the reasonable satisfaction of the Lender that Borrower has otherwise reserved such funds or such funds are otherwise available to the Borrower;

 

(C) no reasonable risk of sale, forfeiture or loss of any interest in the Mortgaged Property or any part thereof arises, in Lender’s reasonable judgment, during the pendency of such contest;

 

(D) such contest does not, in Lender’s determination, have a Material Adverse Effect;

 

(E) such contest is based on bona fide , material, and reasonable claims or defenses;

 

(F) such proceeding shall be permitted under and be conducted in accordance with the provisions of any documents evidencing any Permitted Encumbrances to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; and

 

(G) Borrower shall have obtained such endorsements to the Title Insurance Policy with respect to such Imposition or Lien Claim as Lender may require (or escrowed with a title insurance company funds sufficient to obtain such endorsements pursuant to escrow arrangements reasonably satisfactory to Lender).

 

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Any such contest shall be prosecuted with due diligence, and Borrower shall promptly pay the amount (if any determined to be due) of such Imposition or Lien Claim as finally determined, together with all interest and penalties payable in connection therewith (if any). Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Lien Claim for which a deposit was made shall be promptly repaid to Borrower unless an Event of Default shall have occurred and be continuing, in which case said surplus may be retained by Lender to be applied in accordance with Section 2.8 .

 

(c) Litigation . Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower, any of the constituent members or partners of Borrower, any Guarantor or the Mortgaged Property (or any portion thereof) which is reasonably likely to have a Material Adverse Effect.

 

(d) Environmental Remediation .

 

(i) If Borrower is required to undertake any investigation, site monitoring, cleanup, removal, restoration or other remedial work of any kind or nature pursuant to an order or directive of any Governmental Authority or under any applicable Environmental Law, because of or in connection with the current or future presence, suspected presence, Release or suspected Release of a Hazardous Substance on, under or from any Mortgaged Property or any portion thereof (collectively, the “ Remedial Work ”), Borrower shall promptly commence and diligently prosecute to completion all such Remedial Work, and shall conduct such Remedial Work in accordance with all applicable Environmental Laws. If any fungus, mold, mildew or other biological agent is present at any Mortgaged Property in a manner or at a level that is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property or that poses a significant health risk, the Borrower shall promptly commence and diligently prosecute to completion the remediation of such condition to the reasonable satisfaction of the Lender or its servicer, which shall also constitute Remedial Work. In all events, such Remedial Work shall be commenced within such period of time as required under any applicable Environmental Law; provided , however , that Borrower shall not be required to commence such Remedial Work within the above specified time periods: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time periods would result in Borrower or such Remedial Work violating any Environmental Law or (z) if Borrower, at its expense and after prior notice to Lender, is contesting by appropriate legal, administrative or other proceedings conducted in good faith and with due diligence the need to perform Remedial Work, as long as (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Mortgaged Property nor any part thereof or interest therein shall be sold, forfeited or lost if Borrower does not perform the

 

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Remedial Work being contested, and Borrower would have the opportunity to do so, in the event of Borrower’s failure to prevail in the contest, (3) the Lenders would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Mortgaged Property nor any interest therein would be subject to the imposition of any lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to the Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower’s failure to prevail in such contest in such amount as may be reasonably requested by the Lender.

 

(ii) If requested by Lender, all Remedial Work under clause (i) above shall be performed by contractors, and under the supervision of a consulting Engineer, each approved in advance by Lender which approval shall not be unreasonably withheld or delayed. Borrower shall pay all costs and expenses reasonably incurred in connection with such Remedial Work. If Borrower does not timely commence and diligently prosecute to completion the Remedial Work, Lender may (but shall not be obligated to), upon 30 days prior written notice to Borrower of its intention to do so, cause such Remedial Work to be performed. Borrower shall pay or reimburse Lender on demand for all expenses (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to or incurred by Lender in connection with monitoring, reviewing or performing any Remedial Work in accordance herewith.

 

(iii) Borrower shall not commence any Remedial Work under clause (i) above, nor enter into any settlement agreement, consent decree or other compromise relating to any Hazardous Substances or Environmental Laws without providing notice to Lender as provided in Section 5.1(f) . Notwithstanding the foregoing, if the presence or threatened presence of Hazardous Substances on, under, about or emanating from the Mortgaged Property poses an immediate threat to the health, safety or welfare of any Person or the environment, or is of such a nature that an immediate response is necessary or required under applicable Environmental Law, Borrower may complete all necessary Remedial Work. In such events, Borrower shall notify Lender as soon as practicable and, in any event, within three (3) Business Days, of any action taken.

 

(iv) In the event the Environmental Report recommends the development of an operation and maintenance program for any recognized environmental condition at a Mortgaged Property (including, without limitation, underground storage tanks asbestos and asbestos containing materials, lead-based paints and lead in water supplies) (“ O & M Program ”), Borrower shall develop an O & M Program, as approved by Lender, in Lender’s reasonable discretion, and shall, during the term of the Loan, comply in all respects with the terms and conditions of the O & M Program.

 

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(e) Environmental Matters: Inspection .

 

(i) Borrower shall not permit any Hazardous Substances to be present on or under or to emanate from the Mortgaged Property, or migrate from adjoining property onto or into the Mortgaged Property, except under conditions permitted by applicable Environmental Laws (such as cleaning materials and other items used at the Mortgaged Property by Borrower, Manager or tenants thereof in each case in the ordinary course of business and in each case in compliance with, and in amounts not in excess of that permitted under, Environmental Laws) and, in the event that such Hazardous Substances are present on, under or emanate from the Mortgaged Property, or migrate onto or into the Mortgaged Property, Borrower shall cause the removal or remediation of such Hazardous Substances as required by applicable Environmental Laws, either on its own behalf or by causing a tenant or other party legally responsible therefor to perform such removal and remediation.

 

(ii) Upon reasonable prior written notice, Lender shall have the right, except as otherwise provided under Leases, at all reasonable times during normal business hours to enter upon and inspect environmental conditions with respect to all or any portion of any Mortgaged Property, provided that such inspections shall not unreasonably interfere with the operation or the tenants, residents or occupants of any Mortgaged Property. If Lender has reasonable grounds to suspect that Remedial Work may be required, Lender shall notify Borrower and, thereafter, may select a consulting Engineer to conduct and prepare reports of such inspections (with notice to Borrower prior to the commencement of such inspection). Borrower shall be given a reasonable opportunity to review any reports, data and other documents or materials reviewed or prepared by the Engineer, and to submit comments and suggested revisions or rebuttals to same. The inspection rights granted to Lender in this Section 5.1 (e) shall be in addition to, and not in limitation of, any other inspection rights granted to Lender in this Agreement, and shall expressly include the right (if Lender reasonably suspects that Remedial Work may be required) to conduct soil borings, establish ground water monitoring wells and conduct other customary environmental tests, assessments and audits.

 

(iii) Borrower agrees to bear and shall pay or reimburse Lender on demand for all sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to, or incurred by Lender in connection with, the inspections and reports described in this Section 5.1(e) (to the extent such inspections and reports relate to any Mortgaged Property) in the following situations:

 

(x) If Lender has reasonable grounds to believe, at the time any such inspection is ordered, that there exists an occurrence or condition that could lead to a material Environmental Claim;

 

(y) If any such inspection reveals an occurrence or condition that is reasonably likely to lead to a material Environmental Claim with respect to such Mortgaged Property; or

 

(z) If an Event of Default with respect to such Mortgaged Property exists at the time any such inspection is ordered, and such Event of Default relates to any representation, covenant or other obligation pertaining to Hazardous Substances, Environmental Laws or any other environmental matter.

 

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(f) Environmental Notices . Borrower shall promptly provide notice to Lender of:

 

(i) a material Environmental Claim asserted by any Governmental Authority with respect to any Hazardous Substance on, in, under or emanating from any Mortgaged Property;

 

(ii) any proceeding, investigation or inquiry commenced or threatened in writing by any Governmental Authority, against Borrower or with respect to any Mortgaged Property concerning the presence, suspected presence, Release or threatened Release of Hazardous Substances from or onto, in or under any property not owned by Borrower (including, without limitation, proceedings under CERCLA;

 

(iii) a material Environmental Claim asserted or threatened against any Mortgaged Property, against Borrower or against any other party occupying any Mortgaged Property or any portion thereof, in each case which becomes known to Borrower;

 

(iv) the discovery by Borrower of a material occurrence or condition giving rise to an obligation of the Borrower to the Lender hereunder on any Mortgaged Property or on any real property adjoining any Mortgaged Property;

 

(v) the commencement or completion of any Remedial Work; and

 

(vi) any of the foregoing clauses (i) – (v) as to which a tenant notifies Borrower under a Lease with respect to such tenant.

 

(g) Copies of Notices . Borrower shall transmit to Lender copies of any citations, orders, notices or other written communications received from any Person and any notices, reports or other written communications submitted to any Governmental Authority with respect to the matters described in Section 5.1(f) .

 

(h) Environmental Claims . Lender may join and participate in, as a party if Lender so determines, any legal or administrative proceeding or action concerning the Mortgaged Property or any portion thereof under any Environmental Law, if, in Lender’s reasonable judgment, the interests of Lender shall not be adequately protected by Borrower; provided , however , that Lender shall not participate in day-to-day decision making with respect to environmental compliance. Borrower shall pay or reimburse Lender on demand for all reasonable sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) by Lender in connection with any such action or proceeding.

 

(i) Environmental Indemnification . Borrower shall indemnify, reimburse, defend, and hold harmless Lender, and each of its respective parents, subsidiaries, Affiliates, shareholders, directors, officers, employees, representatives, agents, successors, assigns and

 

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attorneys (collectively, the “ Indemnified Parties ”) for, from, and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses (including, without limitation, interest, penalties, reasonable attorneys’ fees, disbursements and expenses, and reasonable consultants’ fees, disbursements and expenses (but excluding internal overhead, administrative, lost opportunity and similar costs of Lender)), asserted against, resulting to, imposed on, or incurred by any Indemnified Party, directly or indirectly, in connection with any of the following (except to the extent same are directly and solely caused by the gross negligence or willful misconduct of any Indemnified Party, and excepting matters resulting from actions taken or events occurring with respect to the Mortgaged Property or any portion thereof after the Lender forecloses its Lien upon the Mortgaged Property or any portion thereof or accepts a deed in lieu of foreclosure or acquires possession of the Mortgage Property upon an Event of Default as a so-called “mortgagee-in-possession” in which Borrower relinquishes possession of the Mortgaged Property unless and to the extent such matters relate to any of the following which occurred prior thereto):

 

(i) events, circumstances, or conditions which form the reasonable basis for an Environmental Claim;

 

(ii) any pollution or threat to human health or the environment that is related in any way to Borrower’s or any previous owner’s or operator’s management, use, control, ownership or operation of any Mortgaged Property (including, without limitation, all on-site and off-site activities involving Hazardous Substances), and whether occurring, existing or arising prior to or from and after the date hereof, and whether or not the pollution or threat to human health or the environment is described in the Environmental Reports;

 

(iii) any Environmental Claim against any Person whose liability for such Environmental Claim Borrower has or may have assumed or retained either contractually or by operation of law; or

 

(iv) the breach of any representation, warranty or covenant set forth in Section 4.2(e) and Sections 5.1(d) through 5.1(i) , inclusive.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(i) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(j) General Indemnity .

 

(i) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), administrative and judicial actions and proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, and litigation costs, of whatever kind or nature and whether or not incurred in connection with any judicial or administrative proceedings (including, but not limited to, reasonable attorneys’ fees and other reasonable costs of defense) (the “Losses”) imposed upon or incurred by or asserted against any Indemnified Parties (except as to any Indemnified

 

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Party to the extent same are directly and solely caused by the gross negligence or willful misconduct of such Indemnified Party) and directly or indirectly arising out of or in any way relating to any one or more of the following:

 

(A) ownership of the Note or any of the other Loan Documents or otherwise related to the Mortgaged Property or any interest therein or receipt of any Rents or Accounts;

 

(B) any untrue statement of any material fact provided by Borrower, its Affiliates or their respective officers, employees, representatives or agents and contained in any information concerning Borrower, the Mortgaged Property or the Loan or the omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information or in light of the circumstances under which they were made not misleading;

 

(C) any and all lawful action that may be taken and is taken by the Lender in connection with the enforcement of the provisions of this Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Borrower, any Guarantor, the SPC Party or any other holder of any direct ownership interest in Borrower becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding;

 

(D) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

(E) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

(F) any failure on the part of Borrower to perform or be in compliance with any of the terms of this Agreement or any of the other Loan Documents;

 

(G) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof pursuant to provisions of this Agreement;

 

(H) the failure of Borrower to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement;

 

(I) any failure of the Mortgaged Property to be in compliance with any Legal Requirement;

 

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(J) the enforcement by any Indemnified Party of the provisions of this Section 5.1(j) ; and

 

(K) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease.

 

Any amounts payable to an Indemnified Party by reason of the application of this Section 5.1(j)(i) shall become due and payable ten (10) Business Days after written demand and shall bear interest at the Default Rate from the tenth (10th) Business Day after demand until paid.

 

(ii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any of the Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Agreement, the Note or any of the other Loan Documents.

 

(iii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs) that the Indemnified Parties may incur, directly or indirectly, as a result of a default under Borrower’s covenants with respect to ERISA and employee benefits plans contained herein, including, without limitation, any costs or expenses incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in the Lender’s reasonable discretion).

 

(iv) Promptly after receipt by an Indemnified Party under this Section 5.1(j) of notice of the making of any claim or the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made by such Indemnified Party against Borrower under this Section 5.1(j) , notify Borrower in writing, but the omission so to notify Borrower will not relieve Borrower from any liability which it may have to any Indemnified Party under this Section 5.1(j) or otherwise unless and to the extent that Borrower did not otherwise possess knowledge of such claim or action and such failure resulted in the forfeiture by Borrower of substantial rights and defenses. In case any such claim is made or action is brought against any Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from Borrower, Borrower will be entitled to participate in, and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party; and, upon receipt of notice from Borrower to such Indemnified Party of its election so to assume the defense of such claim or action and only upon approval by the Indemnified Party of such counsel (such approval not to be unreasonably withheld or delayed), Borrower will not be liable to such Indemnified Party under this Section 5.1(j) for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof. Notwithstanding the preceding sentence, each Indemnified Party will be entitled to employ counsel separate from such counsel for Borrower and from any other party in

 

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such action if such Indemnified Party reasonably determines that a conflict of interest exists which makes representation by counsel chosen by Borrower not advisable. In such event, Borrower shall pay the reasonable fees and disbursements of such separate counsel. Borrower shall not, without the prior written consent of an Indemnified Party, which consent shall not be unreasonably withheld or delayed, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding. Each Indemnified Party shall not enter into a settlement of or consent to the entry of any judgment with respect to any action, claim, suit or proceeding as to which an Indemnified Party would be entitled to indemnification hereunder without the prior written consent of Borrower, which consent shall not be unreasonably withheld or delayed.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(j) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(k) Access to Mortgaged Property . Borrower shall permit agents, representatives and employees of Lender to inspect the Mortgaged Property or any part thereof at such reasonable times as may be requested by Lender upon reasonable advance written notice (except during an Event of Default, in which case advance notice shall not be required), subject, however, to the rights of Borrower and of the tenants of the Mortgaged Property.

 

(l) Notice of Default . Borrower shall promptly advise Lender in writing of any change in Borrower’s condition, financial or otherwise, that is reasonably likely to have a Material Adverse Effect, or of the occurrence of any Default or Event of Default.

 

(m) Cooperate in Legal Proceedings . Except with respect to any claim by Borrower or the Guarantor against Lender, Borrower shall reasonably cooperate with Lender with respect to any proceedings before any Governmental Authority that are reasonably likely to in any way materially affect the rights of Lender hereunder or any rights obtained by Lender under any of the Loan Documents and, in connection therewith, shall not prohibit Lender, at its election, from participating in any such proceedings.

 

(n) Perform Loan Documents . Borrower shall observe, perform and satisfy in all material respects all of the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Loan Documents.

 

(o) Insurance Benefits . Borrower shall reasonably cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Borrower or Lender in connection with any Mortgaged Property. Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) out of such Insurance Proceeds, all as more specifically provided in this Agreement.

 

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(p) Further Assurances . Borrower shall, at Borrower’s sole cost and expense:

 

(i) upon Lender’s reasonable request therefor given from time to time (but no more frequently than annually unless and Event of Default exists), pay for (a) reports of UCC, tax lien, judgment and litigation searches with respect to Borrower, and (b) searches of title to the Mortgaged Property, each such search to be conducted by search firms designated by Lender in each of the locations designated by Lender;

 

(ii) furnish to Lender all instruments, documents, certificates, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished pursuant to the terms of the Loan Documents;

 

(iii) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary, to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Note, as Lender may reasonably require (including, without limitation, tenant estoppel certificates, an amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments); and

 

(iv) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time.

 

(q) Management of Mortgaged Property .

 

(i) The Mortgaged Property shall be managed at all times by the current Manager or another manager reasonably satisfactory to Lender, pursuant to a Management Agreement. Any such Manager may be an Affiliate of Borrower, provided that: (a) the terms and conditions of such Manager’s engagement are at arm’s length, reasonable, competitive and customary in the applicable marketplace; and (b) Lender has approved such Manager and such terms, which approval shall not be unreasonably withheld or delayed. The Management Agreement, dated as of the date hereof, between the Borrower and the Manager is deemed approved by Lender in all respects. Borrower shall cause the Manager of the Mortgaged Property to agree that such Management Agreement is subject and subordinate in all respects to the Indebtedness and to the Lien of the Mortgage. A Management Agreement may be terminated or assigned by the Manager (1) by Borrower at any time in accordance with the provisions of such Management Agreement so long as a successor or assignee Manager as specified below shall have been appointed and approved and such successor Manager has (i) entered into (or assumed) a Management Agreement in form and substance approved by Lender, which approval shall not be unreasonably denied, conditioned or delayed, and (ii) has executed and delivered a Manager’s Subordination to Lender, and (2) by Lender upon thirty (30) days’ prior written notice to Borrower and the Manager (a) upon the occurrence and continuation of an Event of Default or (b) if the Manager commits any act which would permit termination under the Management Agreement (subject to any

 

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applicable notice, grace and cure periods provided in the Management Agreement). Notwithstanding the foregoing, any successor manager selected hereunder by Lender or Borrower to manage the Mortgaged Property shall be a reputable management company having substantial experience in the management of real property of a similar type, size and quality in the state in which the Mortgaged Property is located. Borrower may from time to time appoint a successor manager to manage the Mortgaged Property with Lender’s prior written consent, such consent not to be unreasonably withheld. Borrower acknowledges and agrees that any consent or approval requested of Lender under this Section may (if a Securitization has occurred) be conditioned by Lender, at Lender’s discretion, upon Borrower first obtaining a Rating Confirmation with respect to such change in management, and Lender shall not be deemed to be acting unreasonably in requiring such a Rating Confirmation. Borrower further covenants and agrees that any manager of Mortgaged Property shall at all times while any Indebtedness is outstanding maintain worker’s compensation insurance as required by Governmental Authorities.

 

(ii) Borrower further covenants and agrees that the Mortgaged Property shall be operated pursuant to the Management Agreement and that Borrower shall: (w) promptly perform and/or observe all of the material covenants and agreements required to be performed and observed by it under the Management Agreement and do all things reasonably necessary to preserve and to keep unimpaired its material rights thereunder; (x) promptly notify Lender of any material default under the Management Agreement of which it is aware; (y) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice and report received by it under the Management Agreement, including, but not limited to, financial statements; and (z) promptly enforce the performance and observance of the covenants and agreements required to be performed and/or observed by the Manager under the Management Agreement.

 

(r) Financial Reporting .

 

(i) Borrower shall keep and maintain or shall cause to be kept and maintained on a Fiscal Year basis in accordance with GAAP consistently applied, books, records and accounts reflecting in reasonable detail all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Mortgaged Property and ownership of the Mortgaged Property and in connection with any services, equipment or furnishings provided in connection with the operation of the Mortgaged Property, whether such income or expense may be realized by Borrower or by any other Person whatsoever. Lender shall have the right from time to time at all times during normal business hours upon reasonable prior written notice to Borrower to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. During the continuation of an Event of Default (including, without limitation, an Event of Default resulting from the failure of Borrower to deliver any of the financial information required to be delivered pursuant to this Section 5.1(r) ), Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower’s accounting records, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lender’s interest.

 

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(ii) Borrower shall furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year, a complete copy of Borrower’s and Guarantor’s financial statements, each audited by a “Big Four” accounting firm or such other Independent certified public accountant acceptable to Lender, in accordance with GAAP consistently applied, covering Borrower’s and Guarantor’s respective financial position and results of operations, for such Fiscal Year and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s or Guarantor’s (as applicable) equity, all of which shall be in form and substance reasonably acceptable to Lender. Lender shall have the right from time to time to review and consult with respect to the auditing procedures used in the preparation of such annual financial statements. Together with Borrower’s and Guarantors’ annual financial statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender an Officer’s Certificate certifying as of the date thereof (x) that the annual financial statements present fairly in all material respects the results of operations and financial condition of Borrower or Guarantor, as applicable, all in accordance with GAAP consistently applied, and (y) whether there exists an Event of Default or Default, and if such Event of Default or Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy same.

 

(iii) Borrower shall furnish to Lender, within forty-five (45) days following the end of each Fiscal Year quarter, quarterly unaudited financial statements (including statements of cash flow) prepared in accordance with GAAP consistently applied, with respect to Borrower and Guarantor for the portion of the Fiscal Year then ended.

 

(iv) No later than forty-five (45) days following the end of each of the months of December, March, June, and September, Borrower shall prepare and deliver to Lender a statement (each a “ Quarterly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property,

 

(A) a rent roll dated as of the last day of such quarter identifying the name of each tenant and the associated premises, Security Deposit, amount due at the beginning of the month, charges in the current month, payments made during the month, amount due at the end of the month, and the occupancy level expressed as a percentage;

 

(B) quarterly and year-to-date operating statements, each of which shall include an itemization of budgeted and actual (not pro forma) capital expenditures during the applicable period; and

 

(C) a quarterly and year-to-date comparison of the budgeted income and expenses with the actual income and expenses for such quarter and year to date, together with, if requested by Lender, a detailed explanation of any variances between budgeted and actual amounts that are in excess of five percent (5%) for each line item therein.

 

(v) Within thirty (30) days after the end of each calendar month (and as to rent rolls requested by Lender on an interim basis, within thirty (30) days after Lender’s

 

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request therefor), Borrower shall provide to Lender and its servicer a statement (each a “ Monthly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property

 

(A) a certified rent roll for the Mortgaged Property containing the information referred to in Section 5.1(r)(iv)(A) , and

 

(B) monthly operating financial statements for the last twelve (12) months, including a comparison on a year-to-date basis to budget and prior year, for the Mortgaged Property and Borrower.

 

(vi) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information with respect to the operation of the Mortgaged Property and the financial affairs of Borrower as may be reasonably requested by Lender, including all business plans prepared for Borrower.

 

(vii) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information regarding any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA as may be reasonably requested by Lender in writing.

 

(viii) At least thirty (30) days prior to the end of each of Borrower’s Fiscal Years, Borrower shall submit or cause to be submitted to Lender for its approval, such approval not to be unreasonably withheld or delayed, an Operating Budget for Gross Revenues, Property Expenses, Capital Improvement Costs, Leasing Commissions, and replacement reserve costs for the next Fiscal Year for the Mortgaged Property. Such Operating Budget may allow for a five percent (5%) line item variance. Until so approved by Lender for the subsequent Fiscal Year in accordance with the procedure set forth in Section 5.1(r)(ix) below, the Operating Budget approved by Lender for the preceding Fiscal Year shall remain in effect for purposes of Section 2.12 ; provided , that for so long as such prior Operating Budget remains in effect, amounts set forth in the prior Operating Budget with respect to Property Expenses shall be deemed increased on a percentage basis by an amount equal to the greater of (x) actual increases then known to Borrower and (y) the increase in the Consumer Price Index (expressed as a percentage) as measured over the calendar year that the prior Operating Budget was in effect.

 

(ix) Together with the financial statements, rent rolls, operating statements and other documents and information provided to Lender by or on behalf of Borrower under this Section 5.1(r) , Borrower also shall deliver to Lender a certification in form and substance reasonably satisfactory to Lender, executed on behalf of Borrower by its chief executive officer or chief financial officer stating that, to such officer’s or individual’s knowledge, such financial statements, rent rolls, operating statements and other documents and information delivered on behalf of Borrower are true and complete in all material respects.

 

(s) Operation of Mortgaged Property . Borrower shall cause the operation of the Mortgaged Property to be conducted at all times in a manner consistent with at least the level of operation of such Mortgaged Property as of the Closing Date, including, without limitation, the following:

 

(i) to maintain or cause to be maintained the standard of the Mortgaged Property at all times at a level not lower than that maintained by prudent managers of similar facilities or land in the region where the Mortgaged Property is located;

 

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(ii) to operate or cause to be operated the Mortgaged Property in a prudent manner in compliance in all material respects with applicable Legal Requirements and Insurance Requirements relating thereto and maintain or cause to be maintained all material licenses, Permits and any other agreements necessary for the continued use and operation of the Mortgaged Property; and

 

(iii) to maintain or cause to be maintained sufficient Inventory and Equipment of types and quantities at the Mortgaged Property to enable Borrower to operate the Mortgaged Property and to comply in all material respects with all Leases affecting the Mortgaged Property.

 

(t) Material Agreements . Except for (i) Leases and any Management Agreement complying with the Loan Documents, (ii) agreements evidencing financing leases and purchase money debt expressly permitted under Section 8.1(e)(iii) , and (iii) extensions, renewals or replacements (on then-current market terms) of the existing operating and maintenance agreements relating to the elevators and HVAC system at the Mortgaged Property, Borrower shall not enter into or become obligated under any material agreement pertaining to the Mortgaged Property, including without limitation brokerage agreements, unless the same may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days’ prior written notice. Borrower will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, (B) maintain all material licenses and permits now held or hereafter acquired by Borrower, and (C) perform, observe, comply and fulfill all of its obligations, covenants and conditions contained in any material agreement pertaining to the Mortgaged Property.

 

(u) ERISA . Borrower shall deliver to Lender as soon as possible, and in any event within ten days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to such event or condition):

 

(i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required

 

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installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan;

 

(ii) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

 

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

 

(iv) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate of Borrower that results in material liability to Borrower or such ERISA Affiliate under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

 

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

 

(vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate of Borrower fails to timely provide security to the Plan in accordance with the provisions of said Sections; and

 

(vii) the imposition of a lien or a security interest in connection with a Plan.

 

(v) Intentionally Omitted .

 

(w) Secondary Market Transaction . Borrower acknowledges that Lender and its successors and assigns may (i) sell the Loan to one or more investors as a whole loan, (ii) participate the Loan to one or more investors, (iii) deposit the Loan with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interests therein to investors (the transactions referred to in clauses (i) through (iv) above are hereinafter each referred to as a “ Secondary Market Transaction ”). Borrower shall cooperate with Lender in attempting to effect or effecting any such Secondary Market Transaction and shall cooperate in attempting to implement or implementing all requirements imposed by any Rating Agency involved in any Secondary Market Transaction, including but not limited to,

 

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(i) providing Lender an estoppel certificate and such information, legal opinions and documents (including updated non-consolidation opinions) relating to Borrower, the Guarantor, the Mortgaged Property and any tenants of the Mortgaged Property as Lender or the Rating Agencies, may reasonably request in connection with such Secondary Market Transaction, including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I’s and, if appropriate, Phase II’s), Mortgaged Property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants, as of the closing date of the Secondary Market Transaction,

 

(ii) amending the Loan Documents and Organizational Agreement of Borrower and any SPC Party, updating and/or restating officer’s certificates, title insurance and other closing items, and providing updated representations and warranties in Loan Documents and such additional representations and warranties, as may be required by the Rating Agencies,

 

(iii) participating during reasonable hours upon reasonable advance written notice in bank, investors and Rating Agencies’ meetings if requested by Lender,

 

(iv) upon Lender’s request, amending the Loan Documents (and updating and/or restating officer’s certificates, title insurance and other closing items in connection therewith) to divide the Loan into first and a second mortgage loan, or into one or more loans secured by mortgages and by ownership interests in Borrower in whatever proportion Lender determines, or into two or more notes in such order of priority and secured by such mortgages as Lender determines, which separated loans and/or notes may have different principal amounts, interest rates, amortization schedules and other financial terms (but with aggregated financial terms which are equivalent to that of the Loan prior to such separation) and thereafter to engage in separate Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation, and

 

(v) reviewing the offering documents relating to any Secondary Market Transaction to ensure that all information concerning Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct in all material respects, and certifying to the accuracy thereof.

 

Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, purchasers, transferees, assignees, participants, servicers and actual or potential investors involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction (collectively, “ Interested Parties ”). Lender and all of the aforesaid Interested Parties who become parties to the Secondary Market Transaction shall be entitled to rely on the information supplied by, or on behalf of, Borrower. Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development. Borrower shall provide such reasonable access, upon reasonable advance written notice, to the Mortgaged Property and personnel of the Manager and of Borrower’s constituent members and the business and operations of all of the foregoing as

 

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Lender or other Interested Parties may request in connection with any such Secondary Market Transaction, subject to the rights of tenants. Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Without limiting the foregoing, after having a reasonable opportunity to review the same, Borrower and Guarantor shall provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the “ Disclosure Documents ”), an agreement certifying that Borrower and Guarantor have examined such Disclosure Documents specified by Lender and that each such Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the Mortgaged Property and Manager, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (a “ Disclosure Certificate ”). Borrower and Guarantor shall indemnify, defend, protect and hold harmless Lender, its Affiliates, directors, employees, agents and each Person, if any, who controls Lender or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, from and against any losses, claims, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) that arise out of or are based upon any untrue statement of any material fact contained in any Disclosure Certificate or other information or documents furnished by Borrower, Guarantor or their Affiliates or in any representation or warranty of any Borrower contained herein or in the other Loan Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Indebtedness), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a “Lender” hereunder. The holders from time to time of the Loan and/or any other interest of the “Lender” under this Loan Agreement and the other Loan Documents may from time to time enter into one or more co-lender or similar agreements in their discretion. Borrower acknowledges and agrees that such agreements, as the same may from time to time be amended, modified or restated, may govern the exercise of the powers and discretionary authority of the Lender hereunder and under the other Loan Documents, but Borrower shall be entitled to rely upon any actions taken by Lender or the designated servicer(s) or agent(s) for Lender, whether or not within the scope of its power and authority under such other agreements.

 

Borrower shall not be obligated to pay Lender’s costs and expenses incurred in connection with any Secondary Market Transaction; Borrower shall, however, pay the costs and expenses of Borrower’s counsel in the event Borrower engages counsel in connection with any Secondary Market Transaction or in responding to Lender’s requests for cooperation hereunder.

 

(x) Insurance .

 

(i) Borrower, at its sole cost and expense, shall keep the Improvements and Equipment insured (including, but not limited to, any period of renovation, alteration

 

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and/or construction) during the term of the Loan with the coverage and in the amounts required under this Agreement for the mutual benefit of Borrower and Lender against loss or damage by fire, lightning, wind and such other perils as are customarily included in a standard “all-risk” or “special cause of loss” form and against loss or damage by other risks and hazards covered by a standard extended coverage insurance policy (including, without limitation, fire, lightning, hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism, riot and civil commotion, vandalism, malicious mischief, strike, water damage, sprinkler leakage, collapse, burglary, theft, mold and microbial matter coverage arising as a result of covered perils under the standard “all risk” policy and such other coverages as may be reasonably required by Lender on the special form (formerly known as an all risk form)). Such insurance shall be in an amount (i) equal to then full replacement cost of the Improvements and Equipment (exclusive of the cost of foundations and footings), without deduction for physical depreciation, and (ii) such that the insurer would not deem Borrower a co-insurer under said policies. The policies of insurance carried in accordance with this Section 5.1(x) shall be paid not less than ten (10) days in advance of the due date thereof and shall contain the “Replacement Cost Endorsement” with a waiver of depreciation. If terrorism coverage is excluded on an “all-risk” basis, then Borrower shall obtain coverage for terrorism and similar acts in the stand alone terrorism market. Notwithstanding the foregoing, Lender shall not unreasonably withhold its consent to reductions in the stated amounts and types of coverage required to be maintained by Borrower hereunder if such levels of coverage or types of insurance, as determined by Lender in its sole discretion, (A) are not available at commercially reasonable rates and (B) are not at the time commonly maintained for properties similar to the Mortgaged Property and located in or around the region in which the Mortgaged Property is located.

 

(ii) Borrower, at its sole cost and expense, for the mutual benefit of Borrower and Lender, shall also obtain and maintain or cause to be obtained and maintained during the entire term of the Loan the following policies of insurance:

 

(A) flood insurance, if any part of the Improvements on any part of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (and any amendment or successor act thereto) in an amount at least equal to the maximum limit of coverage available with respect to the Improvements and Equipment under said Act;

 

(B) Comprehensive General Liability or Commercial General Liability insurance, including a broad form comprehensive general liability endorsement and coverage for broad form property damage, contractual damages, personal injuries (including death resulting therefrom) and a liquor liability endorsement if liquor is sold on the Mortgaged Property, containing minimum limits of liability of $1 million for both injury to or death of a person and for property damage per occurrence and $2 million in the aggregate for the Mortgaged Property, and such other liability insurance reasonably requested by Lender; in addition, at least $25

 

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million excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including all legal liability imposed upon Borrower and all court costs and attorneys’ fees incurred in connection with the ownership, operation and maintenance of the Mortgaged Property;

 

(C) business interruption insurance (including rental value) in an annual aggregate amount equal to the estimated gross revenues from the Leases of the Mortgaged Property (including, without limitation, the loss of all Rents and additional Rents payable by all of the lessees under the Leases (whether or not such Leases are terminable in the event of a fire or casualty)), such insurance to cover losses for a period of the longer of (x) eighteen (18) months after the date of the fire or casualty in question, or (y) the period from the time of loss until all repairs are fully completed with reasonable diligence and dispatch, plus an extended period of indemnity commencing at the time repairs are completed for a period of not less than 365 days and to be increased or decreased, as applicable, from time to time during the term of the Loan if, and when, the gross revenues from the Leases of the Mortgaged Property materially increase or decrease, as applicable (including, without limitation, increases from new Leases and renewal Leases entered into in accordance with the terms of this Agreement), to reflect all increased Rent and increased additional Rent payable by all of the lessees under such renewal Leases and all Rent and additional Rent payable by all of the lessees under such new Leases;

 

(D) insurance against loss or damage from (x) leakage of sprinkler systems and (y) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), covering all boilers or other pressure vessels, machinery and equipment located in, on, or about the Improvements; coverage is required in an amount at least equal to the full replacement cost of such equipment and the building or buildings housing same and shall extend to electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping;

 

(E) to the extent required by an applicable Governmental Authority with jurisdiction thereover, worker’s compensation insurance coverage (covering, and in amounts not less than the statutory minimums for, all persons employed by Borrower at the Mortgaged Property and subject to worker’s compensation laws in the state where the Mortgaged Property is located and in compliance with all other requirements of applicable local, state and federal law) and “Employers Liability” insurance in amounts not less than required by statute;

 

(F) during any period of repair or restoration, builder’s “all risk” insurance in an amount equal to not less than the full insurable value of the Mortgaged Property against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may request, in form and substance acceptable to Lender;

 

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(G) ordinance or law coverage to compensate for the cost of demolition, increased cost of construction, and loss to any undamaged portions of the Improvements, if the current use of the Mortgaged Property or the Improvements themselves are or become “nonconforming” pursuant to the applicable zoning regulations or full rebuildability following casualty is not otherwise permitted under such zoning regulations;

 

(H) if reasonably required by Lender as a result of any Mortgaged Property being located in an area with a high degree of seismic activity, earthquake damage insurance in an amount and form reasonably acceptable to Lender; and

 

(I) such other insurance as may from time to time be reasonably required by Lender in order to protect its interests with respect to the Loan and the Mortgaged Property and to conform such requirements to then current standards for a Securitization.

 

(iii) All policies of insurance (the “ Policies ”) required pursuant to this Section 5.1(x) :

 

(A) shall be issued by (1) an insurer approved by Lender which has a claims paying ability rating of not less than “A” (or the equivalent) by Rating Agencies satisfactory to Lender (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best, or (2) an insurer within the CB Richard Ellis Insurance Program which has a claims paying ability rating of not less than “BBB” or “BBB(pi)”(as applicable) (or the equivalent) by Rating Agencies satisfactory to Agent (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best; provided, however, if any of the Policies shall be delivered in accordance with this subsection 5.1(x)(iii)(A)(2) , then Lender shall have the right, to be exercised at anytime during the term of the Loan, at Lender’s sole and absolute discretion, to require Borrower to replace the Policies under this subsection 5.1(x)(iii)(A)(2) with Policies that conform with subsection 5.1(x)(iii)(A)(1) above.

 

(B) shall name Lender as an additional insured under all liability policies and contain a standard noncontributory mortgagee clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender (and/or such other party as may be designated by Lender) as the party to which all payments made by such insurance company shall be paid (except general public liability and excess liability, as to which Lender shall be named as additional insured, but not as loss payee),

 

(C) shall be maintained throughout the term of the Loan without cost to Lender,

 

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(D) shall contain such provisions as Lender deems reasonably necessary or desirable to protect its interest (including, without limitation, endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under said Policies and that Lender shall receive at least thirty (30) days prior written notice of any modification, reduction or cancellation),

 

(E) shall contain a waiver of subrogation against Lender,

 

(F) shall be for a term of not less than one year,

 

(G) shall provide for claims to be made on an occurrence basis,

 

(H) shall contain an agreed value clause updated annually (if the amount of coverage under such policy is based upon the replacement cost of the Mortgaged Property),

 

(I) shall be issued by an insurer licensed in the state in which the Mortgaged Property is located,

 

(J) shall provide that Lender may, but shall not be obligated to, make premium payments to prevent any cancellation, endorsement, alteration or reissuance, and such payments shall be accepted by the insurer to prevent same, and

 

(K) shall be reasonably satisfactory in form and substance to Lender and reasonably approved by Lender as to amounts, form, risk coverage, deductibles, loss payees and insureds to the extent not otherwise specified in this Section 5.1(x) . All property damage insurance policies (except for flood and earthquake policies) must automatically reinstate after each loss.

 

Copies of said Policies, certified as true and correct by Borrower, or insurance certificates thereof, shall be delivered to Lender. Not later than ten (10) days prior to the expiration date of each of the Policies, Borrower shall deliver to Lender satisfactory evidence of the renewal of each Policy. The insurance coverage required under this Section 5.1(x) may be effected under a blanket policy or policies covering the Mortgaged Property and other property and assets not constituting a part of the Collateral; provided that any such blanket policy shall provide at least the same amount and form of protection as would a separate policy insuring the Mortgaged Property individually, which amount shall not be less than the amount required pursuant to this Section 5.1(x) and which shall in any case comply in all other respects with the requirements of this Section 5.1(x) . Upon demand therefor, Borrower shall reimburse Lender for all of Lender’s or its designee’s reasonable costs and expenses incurred in obtaining any or all of the Policies or otherwise causing the compliance with the terms and provisions of this Section 5.1(x), including (without limitation) obtaining updated flood hazard certificates and replacement of any so-called “forced placed” insurance coverages to the extent Borrower was required to obtain and maintain any such Policy or Policies hereunder and failed to do so. Borrower shall pay the premiums for such Policies (the “ Insurance Premiums ”) as the same become due and payable and shall furnish to Lender evidence of the renewal of each of the Policies with

 

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receipts for the payment of the Insurance Premiums or other evidence of such payment reasonably satisfactory to Lender (provided, however, that Borrower is not required to furnish such evidence of payment to Lender in the event that such Insurance Premiums have been paid by Lender). If Borrower does not furnish such evidence and receipts at least ten (10) days prior to the expiration of any expiring Policy, then Lender may procure, but shall not be obligated to procure, such insurance and pay the Insurance Premiums therefor, and Borrower agrees to reimburse Lender for the cost of such Insurance Premiums promptly on demand. Within thirty (30) days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, based on then industry-standard amounts of coverage then being obtained by prudent owners of properties similar to the Mortgaged Property in the same applicable market region as the Mortgaged Property. Borrower shall give Lender prompt written notice if Borrower (or any Affiliate) receives from any insurer any written notification or threat of any actions or proceedings regarding the non-compliance or non-conformity of the Mortgaged Property with any insurance requirements. In addition to the foregoing, Borrower shall monitor, in a commercially reasonable manner on a monthly basis, the status of, and the delivery of evidence to Borrower of, each tenant’s insurance coverage carried with respect to such tenant’s property, fixtures and equipment at the Mortgaged Property, and give Lender prompt written notice if Borrower (or, to Borrower’s knowledge, any Affiliate) receives from any insurance carrier which insures such property, any notice that such tenant’s coverage is being cancelled, terminated, has expired or is being materially modified. Borrower shall not agree or acquiesce to any such cancellation, termination, expiration or material modification of tenant insurance coverage without the prior consent of Lender (not to be unreasonably withheld or delayed). In the event of the cancellation, termination or expiration of such tenant’s insurance coverage, Borrower shall cause such tenant to promptly replace such lapsed coverage with comparable coverage, or, to the extent the same is available, purchase and “force-place” such coverage on such tenant’s behalf, at Borrower’s expense, within five (5) days following such lapse. Borrower’s covenants and obligations set forth in the previous two (2) sentences are hereinafter collectively referred to as the “ Force-Place Obligation .”

 

(iv) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender.

 

(A) In case of loss covered by Policies, Lender may either (a) jointly with Borrower settle and adjust any claim and agree with the insurance company or companies on the amount to be paid on the loss or (b) allow Borrower to agree with the insurance company or companies on the amount to be paid upon the loss; provided , that Borrower may settle and adjust losses without participation by Lender with respect to a single loss aggregating not in excess of an amount equal to two percent (2%) of the Loan Amount, agree with the insurance company or companies on the amount to be paid upon the loss and collect and receive any such Insurance Proceeds; provided , further , that if (x) at the time of the settlement of such claim an Event of Default has occurred and is continuing or (y) Lender and Borrower are unable to agree upon a joint settlement (other than with respect to claims which Borrower may settle and adjust in accordance with the first

 

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proviso in this Section 5.1(x)(iv)(A) ) or (z) Lender disapproves of Borrower’s proposed settlement with the insurance company (other than with respect to claims which Borrower may settle and adjust in accordance with the first proviso in this Section 5.1(x)(iv)(A)), then Lender shall settle and adjust such claim without the consent of Borrower. In any such case Lender shall and is hereby authorized to collect and receipt for any such Insurance Proceeds subject to and to the extent provided for in this Agreement. The reasonable out-of-pocket expenses incurred by Lender in the adjustment and collection of Insurance Proceeds shall become part of the Indebtedness and be secured by the Mortgage and shall be reimbursed by Borrower to Lender upon demand therefor.

 

(B) In the event of any insured damage to or destruction of the Mortgaged Property or any part thereof (herein called an “ Insured Casualty ”) where (1) the aggregate amount of the loss, as reasonably determined by an Independent insurance adjuster, is less than thirty percent (30%) of the Lender’s reasonable estimate of the fair market value of the Mortgaged Property, (2) in the reasonable judgment of Lender, the Mortgaged Property can be restored, replaced and/or rebuilt (collectively, the “ Restoration ”) by not later than the first to occur of (a) twelve (12) months of settlement of the claim and (b) the expiration of the business interruption insurance and, in any case, not later than six (6) months prior to the Maturity Date to an economic unit not materially less valuable (including an assessment of the impact of the termination of any Leases due to such Insured Casualty) and not less useful than the same was prior to the Insured Casualty, (3) Lender reasonably determines that the rental income of the Mortgaged Property, after the Restoration thereof, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Loan and satisfy a debt service coverage ratio (as reasonably determined by Lender) of 1.30:1.00, and (4) tenant leases requiring payment of annual rent equal to at least seventy-five percent (75%) of the gross revenues from the Mortgaged Property during the twelve (12) month period immediately preceding the date of such fire or other casualty remain in full force and effect during and after the Restoration of the Property (subject to the rent abatement provisions thereof applicable as a result of the casualty, so long as such abatement will end, and full rental payments shall resume, upon completion of the Restoration in a manner such that the applicable tenant premises are habitable and available for occupancy by the applicable tenants for the conduct of their respective businesses therefrom), or if Lender otherwise elects to allow a Borrower to restore the Mortgaged Property, then, if no Event of Default shall have occurred and be continuing, the Insurance Proceeds (after reimbursement of any reasonable out-of-pocket expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds) shall be made available to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or part thereof subject to the Insured Casualty, as provided for below. Borrower hereby covenants and agrees to commence and diligently to prosecute such Restoration of the affected Mortgaged Property. Borrower shall pay all out-of-pocket costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Insurance Proceeds made available pursuant to the terms hereof.

 

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(C) Except as provided above, the Insurance Proceeds collected upon any Insured Casualty shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing) or applied to the cost of Restoration of the affected Mortgaged Property or part thereof subject to the Insured Casualty, in the manner set forth below.

 

(D) In the event that Insurance Proceeds (after reimbursement of any reasonable expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds), if any, shall be made available to Borrower for the Restoration of any portion of the affected Mortgaged Property, Borrower covenants to complete such Restoration of the affected Mortgaged Property to be of at least comparable value as prior to such damage or destruction, all to be effected in accordance with Legal Requirements and plans and specifications approved in advance by Lender, such approval not to be unreasonably withheld or delayed.

 

(E) In the event Borrower is entitled to reimbursement out of Insurance Proceeds, such proceeds shall be held by Lender in the Loss Proceeds Account and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to the Insurance Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing Restoration as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review Borrower’s request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work). No funds other than Insurance Proceeds shall be disbursed prior to disbursement of such proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds remaining in the Loss Proceeds Account, together with funds deposited therein to

 

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pay the costs of the Restoration by or on behalf of Borrower, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration free and clear of all liens or claims for lien, except for Permitted Encumbrances. Any surplus which may remain out of Insurance Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

(F) Notwithstanding the foregoing, if: (1) an Insured Casualty occurs as to which Borrower is required pursuant to the terms of this Section 5.1(x) to pay the Insurance Proceeds to the Lenders for application to the Indebtedness; and (2) the amount of such Insurance Proceeds is less than 125% of the Indebtedness as to which such Insured Casualty occurred (such deficiency being the “ Insurance Gap ”), then Borrower and Guarantor shall be fully liable to the Lender (for application to the remaining Indebtedness and Crossed Indebtedness) in an amount equal to such Insurance Gap.

 

(v) Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement that would be considered “co-insurance” or adversely affect the ability to collect under a policy of insurance required hereunder.

 

(y) Condemnation .

 

(i) Borrower shall promptly give Lender written notice of the actual or threatened commencement of any proceeding for a Taking and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Condemnation Proceeds for said Taking. With respect to any compromise or settlement in connection with such proceeding, Lender shall jointly with Borrower compromise and reach settlement unless at the time of such Taking an Event of Default has occurred and is continuing and the Indebtedness has been accelerated, in which event Lender shall compromise and reach settlement without the consent of Borrower. Notwithstanding the foregoing provisions of this Section 5.1(y) , Borrower is authorized to negotiate, compromise and settle, without participation by Lender, Condemnation Proceeds of up to $100,000 in connection with any Taking. Notwithstanding any Taking, Borrower shall continue to pay the Indebtedness at the time and in the manner provided for in this Agreement and the other Loan Documents and the Indebtedness shall not be reduced except in accordance herewith.

 

(ii) Borrower shall cause the Condemnation Proceeds to be paid directly to Lender. Lender may, in its sole discretion, apply any such Condemnation Proceeds to the reduction or discharge of the Indebtedness (whether or not then due and payable) (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing).

 

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(iii) With respect to a Taking in part, which shall mean any Taking which does not render the affected Mortgaged Property physically or economically unsuitable in the reasonable judgment of Lender for the use to which it was devoted prior to the Taking, Borrower shall cause the Condemnation Proceeds to be paid to Lender as described above, and if Lender does not elect to apply the same to the Indebtedness as provided in Section 5.1(y)(ii) above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds Account and the same shall be made available for application to the cost of Restoration of the affected Mortgaged Property and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to Lender that such funds are available and sufficient in addition to the Condemnation Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing repair, restoration, replacement or rebuilding as Lender may reasonably require and approve.

 

(iv) Provided that Condemnation Proceeds shall be made available to Borrower for Restoration of the affected Mortgaged Property, Borrower hereby covenants to complete the Restoration of the affected Mortgaged Property to be of at least comparable value and, to the extent commercially practicable, of substantially the same character as prior to the Taking, all to be effected in accordance with applicable law and plans and specifications reasonably approved in advance by Lender. Borrower shall pay all costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Condemnation Proceeds made available pursuant to the terms hereof. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review any request by Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the construction work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work); funds other than Condemnation Proceeds shall be disbursed prior to disbursement of such proceeds; and at all times, the undisbursed balance of such proceeds remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the repayment of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens or claims for lien. Any surplus which may remain out of Condemnation Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness or be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

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(v) If the affected Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of any such Condemnation Proceeds to which it is entitled hereunder, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to have reserved in any foreclosure decree a right to receive said award or payment, or a portion thereof sufficient to pay the Indebtedness. In no case shall any such application reduce or postpone any payments otherwise required pursuant to this Agreement, other than the final payment on the Note.

 

(z) Leases and Rents .

 

(i) Borrower absolutely and unconditionally assigns to Lender, Borrower’s right, title and interest in all current and future Leases and Rents as collateral for the Loan, it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Lender shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon Lender. Borrower shall execute and deliver to Lender such additional instruments, in form and substance reasonably satisfactory to Lender, as may hereafter be reasonably requested in writing by Lender to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section 5.1(z) , Lender grants to Borrower a license to lease, maintain, operate and manage the Mortgaged Property and to collect, use and apply the Rents in accordance with the terms hereof and otherwise act as the landlord under the Leases. Any portion of the Rents held by Borrower shall be held in trust for the benefit of Lender for use in the payment of the Indebtedness. Upon the occurrence of an Event of Default and during the continuance thereof, the license granted to Borrower herein shall automatically be revoked, and Lender shall immediately be entitled to possession of all Rents, whether or not Lender enters upon or takes control of the Mortgaged Property. Lender is hereby granted and assigned by Borrower the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Any Rents collected after the revocation of the license shall be applied toward payment of the Indebtedness as set forth in Section 2.8 hereof.

 

(ii) All Leases entered into by Borrower shall provide for rental rates comparable to (or more favorable to Borrower than) then-existing local market rates and terms and conditions commercially reasonable and consistent with (or more favorable to Borrower than) then-prevailing local market terms and conditions for similar type properties. With respect to any Lease for more than 15% of the rentable square footage of the Mortgaged Property, Borrower shall not enter into such Lease without the prior written consent of Lender. Borrower shall furnish Lender with (1) detailed term sheets in advance in the case of any Leases, modifications, amendments or renewals for which Lender’s consent is required and (2) in the case of any other Leases, executed copies of such Leases upon written request. All renewals or amendments or modifications of

 

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Leases that do not satisfy the requirements of the first sentence of this Section 5.1(z)(ii) shall be subject to the prior approval of Lender. All Leases shall be written on the standard lease form previously approved by Lender which form shall not be materially changed without Lender’s prior written consent which consent shall not be unreasonably withheld. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage, and that the lessee agrees to attorn to Lender upon Lender’s non-disturbance of such tenant so long as such tenant is not in default under its Lease. Borrower,

 

(A) shall observe and perform all of the material obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Indebtedness;

 

(B) shall promptly send copies to Lender of all written notices of default which Borrower shall send or receive thereunder;

 

(C) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed and shall effect a termination or diminution of the obligations of tenants under leases, only in a manner that a prudent owner of a similar property to the Mortgaged Property would enforce such terms covenants and conditions or effect such termination or diminution in the ordinary course of business;

 

(D) shall not collect any of the Rents more than one (1) month in advance;

 

(E) shall not execute any other assignment of lessor’s interest in Leases or Rents; and

 

(F) shall not convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder.

 

Borrower shall submit any Lease, modification, amendment or renewal for which Lender’s consent is required (together with all applicable information and documents, if any, relating thereto as Lender may reasonably require in connection with its determination) to Lender in writing sent by recognized overnight delivery service or by registered or certified mail (and simultaneously shall contact the Lender by telephone and by electronic mail) in accordance with the terms of this Agreement (the “ First Notice ”), requesting Lender’s approval of such Lease, modification, amendment or renewal. Lender shall use reasonable efforts to deliver to Borrower its written approval or disapproval of the proposed Lease, modification, amendment or renewal within ten (10) Business Days after Lender shall have received the First Notice. Unless Lender shall have approved the Lease, modification, amendment or renewal contained in the First Notice, Lender’s approval shall be deemed to be withheld. If Borrower does not receive Lender’s response by the end of such ten (10) Business Days period, Borrower may

 

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resubmit its written request to Lender (the “Second Notice”). The Second Notice shall make reference to the First Notice and shall bear the following legend in capital letters: “LENDER’S FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN FIVE (5) BUSINESS DAYS FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE [LEASE] [MODIFICATION] [AMENDMENT] [RENEWAL] DESCRIBED HEREIN.” If Lender does not approve or disapprove the proposed Lease, modification, amendment or renewal within five (5) Business Days after Lender shall have received Borrower’s Second Notice, Lender shall be deemed to have approved the proposed Lease, modification, amendment or renewal.

 

(iii) Borrower shall within five Business Days of receipt deposit cash Security Deposits of lessees which are turned over to or for the benefit of Borrower or otherwise collected by or on behalf of Borrower, into the Security Deposit Account and shall not commingle such funds with any other funds of Borrower, and shall deliver all instruments evidencing non-cash Security Deposits and all related documents to Lender. Any bond or other instrument which Borrower is permitted to hold in lieu of cash Security Deposits under any applicable Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall, if permitted pursuant to Legal Requirements, name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender) and shall, in all respects, comply with any applicable Legal Requirements and otherwise be reasonably satisfactory to Lender; provided, however, that so long as no Event of Default exists and Borrower delivers such bond or other instrument to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as payee thereunder, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to cause Lender or to be named as payee thereunder and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender, during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing Lender to be named as payee thereunder. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance with the foregoing. Upon the occurrence and during the continuance of any Event of Default, to the extent permitted by applicable Legal Requirements, Borrower shall, upon Lender’s request, turn over to Lender any Security Deposits (and any interest theretofore earned thereon) not yet deposited into the Security Deposit Account or delivered to Lender with respect to all or any portion of the Mortgaged Property, to be held by Lender subject to the terms of the Leases.

 

(aa) Maintenance of Mortgaged Property . Borrower shall cause the Mortgaged Property to be maintained in a good and safe condition and repair, subject to wear and tear and damage caused by casualty or condemnation. The Improvements and the Equipment shall not be removed, demolished or altered (except for (1) normal replacement of the Equipment, (2) Improvements contemplated in an approved Operating Budget or pursuant to Leases in effect from time to time, or (3) removals, demolition or alterations that do not cost more than $100,000) without the consent of Lender which consent shall not be unreasonably withheld or

 

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delayed. Except with respect to an Insured Casualty which shall be governed by the terms and conditions provided herein, Borrower shall, or shall cause any tenants obligated under their respective Leases to, promptly repair, replace or rebuild any part of the Mortgaged Property that becomes damaged, worn or dilapidated. Borrower shall complete and pay for any structure at any time in the process of construction or repair on the Land. Borrower shall not initiate, join in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of any Mortgaged Property or any part thereof without the written consent of Lender. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Borrower will not cause or permit such nonconforming use to be discontinued or abandoned if such discontinuance of abandonment would cause such nonconforming use to no longer be permitted without the express written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall not (i) change the use of any of the Land or Improvements in any material respect, (ii) permit or suffer to occur any waste on or to any Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever to convert any Mortgaged Property, or any portion thereof, to a condominium or cooperative form of management.

 

(bb) Taxes on Security . Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Lien created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law (1) deducting the Loan from the value of the Collateral for the purpose of taxation, (2) affecting Lender’s Lien on the Collateral or (3) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by realty, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof; provided , however , if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable.

 

ARTICLE VI.

NEGATIVE COVENANTS

 

Section 6.1. Negative Covenants . Borrower covenants and agrees that, until payment in full of the Indebtedness, it will not do, directly or indirectly, any of the following unless Lender consents thereto in writing:

 

(a) Liens on the Mortgaged Property . Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, except as permitted by Section 5.1(b) above, any Lien with respect to any Mortgaged Property or any portion thereof, except: (i) Liens in favor of Lender and (ii) the Permitted Encumbrances.

 

(b) Ownership . Except as expressly permitted by or pursuant to this Agreement or the other Loan Documents, own any property of any kind other than the Mortgaged Property.

 

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(c) Other Borrowings . Incur, create, assume, become or be liable in any manner with respect to Other Borrowings, other than the Crossed Loans.

 

(d) Dissolution; Merger or Consolidation . Dissolve, terminate, liquidate, merge with or consolidate into another Person.

 

(e) Change In Business . Make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.

 

(f) Debt Cancellation . Cancel or otherwise forgive or release any material claim or debt owed to Borrower by any Person, except for adequate consideration or in the ordinary course of Borrower’s business.

 

(g) Affiliate Transactions . (i) Enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Borrower or with any director, officer or employee of any Affiliate of Borrower, except transactions in the ordinary course of business of Borrower and upon terms which are no less favorable to Borrower than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate of Borrower, or (ii) make any payment or permit any payment to be made to any Affiliate of Borrower (other than the Independent Director’s fees for acting such capacity) when or as to any time when any Event of Default shall exist, provided , however , that Borrower shall be able to make distributions to its owner(s) as reasonably necessary for Digital Realty Trust to meet the REIT Distribution Requirement in any taxable year, but in no event shall such distributions, in the aggregate, exceed Borrower’s taxable income, as determined under Section 703(a) of the Code, for such taxable year.

 

(h) Creation of Easements . Except as expressly permitted by or pursuant to the Mortgage or this Agreement, create, or permit any Mortgaged Property or any part thereof to become subject to, any easement, license or restrictive covenant, other than a Permitted Encumbrance, provided , that the consent of Lender shall not be unreasonably withheld or delayed to the extent that any such easement, license or restrictive covenant is reasonably necessary for the continued use, enjoyment, access to or operation of the applicable Mortgaged Property.

 

(i) Misapplication of Funds . Distribute any Rents or Moneys received from Accounts in violation of the provisions of Section 2.12 , or fail to deposit into the Security Deposit Account or deliver to Lender and pledge to Lender any Security Deposit, or misappropriate any Security Deposit or portion thereof.

 

(j) Certain Restrictions . Enter into any agreement that expressly restricts the ability of Borrower to enter into amendments, modifications or waivers of any of the Loan Documents.

 

(k) Assignment of Licenses and Permits . Assign or transfer any of its interest in any Permits pertaining to any Mortgaged Property, or assign, transfer or remove or permit any other Person to assign any records pertaining to any Mortgaged Property.

 

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(l) Place of Organization . Change its jurisdiction of organization, creation or formation, as applicable, without giving Lender at least fifteen (15) days’ prior written notice thereof and promptly providing Lender such information as Lender may reasonably request in connection therewith.

 

(m) Leases . Enter into, amend or cancel (or permit the same to occur) Leases, except as permitted by or pursuant to or would not result in a violation of this Agreement.

 

(n) Management Agreement . Except in accordance with this Agreement, (i) terminate or cancel the Management Agreement, (ii) consent to either the reduction of the term of or the assignment of the Management Agreement, (iii) increase or consent to the increase of the amount of any charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.

 

(o) Plans and Welfare Plans . Knowingly engage in or permit any transaction in connection with which Borrower or any subsidiary could be subject to either a material civil penalty or material tax assessed pursuant to Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (iii) severance benefits (unless such coverage is provided after notification of and with the reasonable approval of Lender), permit the assets of Borrower to become “plan assets”, whether by operation of law or under regulations promulgated under ERISA or adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, or permit any subsidiary to adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, any Plan, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower or any subsidiary.

 

(p) Transfer of Ownership Interests . Permit any Transfer to occur, other than a Permitted Transfer. Notwithstanding the foregoing, in the event that Borrower desires to transfer all of the Mortgaged Property to another party (the “ Transferee Borrower ”) and have the Transferee Borrower assume all of the Borrower’s obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of Guarantor under the Loan Documents from and after such transfer (collectively, a “ Transfer and Assumption ”), the Borrower may make a written application to Lender for Lender’s consent to the Transfer and Assumption, subject to the conditions set forth below in this Section; provided that no more than one Transfer and Assumption shall be permitted during the term of the Loan. Together with such written application, Borrower shall pay to Lender the reasonable review fee then required by Lender. Borrower also shall pay on demand all of the reasonable costs and expenses incurred by Lender, including reasonable attorneys’ fees and expenses, and including the fees and expenses of Rating Agencies and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs. Lender may grant or withhold its consent to a Transfer and Assumption in its reasonable discretion. Completion of any Transfer and Assumption shall be subject, in addition to such other conditions as Lender reasonably may determine to impose, to satisfaction of the following conditions:

 

(i) No Default or Event of Default shall have occurred and be continuing at the time of the proposed Transfer and Assumption;

 

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(ii) Borrower shall have submitted to Lender true, correct and complete copies of information and documents reasonably requested by Lender concerning the Mortgaged Property, the Transferee Borrower and any replacement guarantors and indemnitors;

 

(iii) Evidence satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall be designated by Lender comply with Article VIII, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates;

 

(iv) If a Securitization has occurred, Borrower shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Transfer and Assumption and all related transactions;

 

(v) The identity, experience, and financial condition of the Transferee Borrower and the replacement guarantors and indemnitors shall be acceptable to Lender in its sole and absolute discretion;

 

(vi) Borrower shall deliver to Lender at the closing of the Transfer and Assumption an assumption fee in the amount of one percent (1%) of the then unpaid principal balance of the Loan;

 

(vii) Borrower, Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver such documents as Lender may require, in form and substance satisfactory to Lender, to evidence the Transfer and Assumption, including replacement guaranties and indemnities and Loan Document modifications;

 

(viii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance satisfactory to Lender as to substantially the same matters for which opinions were required in connection with the origination of the Loan (and as to such additional matters as the Lender and (if a Securitization has occurred) Rating Agencies may require), including, without limitation, a bankruptcy non-consolidation opinion;

 

(ix) Borrower shall cause to be delivered to Lender an endorsement to Lender’s policy of title insurance in form and substance acceptable to Lender, in Lender’s reasonable discretion, relating to, among other things, the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents and the continuing priority of the Mortgage and the continuing effect of the title insurance and all endorsements thereto (in each case subject to Permitted Encumbrances);

 

(x) under no circumstance shall any Transfer and Assumption be permitted hereunder unless after giving effect to such Transfer and Assumption the Transferee

 

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Borrower and each Crossed Borrower (or each “Borrower Transferee” as defined in each Crossed Loan Agreement, pursuant to a “Transfer and Assumption”, as defined in each Crossed Loan Agreement, occurring simultaneously with the Transfer and Assumption hereunder) is under 100% common ownership (direct and indirect) and control; and

 

(xi) Borrower or Borrower Transferee shall deliver to Lender a payment in the amount of all reasonable costs and expenses incurred by Lender in connection with the Transfer and Assumption, including but not limited to, Lender’s reasonable attorneys’ fees and expenses, all recording fees, Rating Agency fees and expenses, and all fees payable to the title company in connection with the Transfer and Assumption.

 

(q) Equipment and Inventory . Except pursuant to the Management Agreement, permit any Equipment owned by Borrower or any of its Affiliates to be removed at any time from any Mortgaged Property unless the removed item is consumed or sold in the usual and customary course of business, removed temporarily for maintenance and repair or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any Lien (other than Permitted Encumbrances).

 

(r) Management Fees . Pay Borrower or any Affiliate of Borrower any management fees with respect to the Mortgaged Property except for management fees paid to Manager under the Management Agreement.

 

(s) Prohibited Persons . With respect to Borrower, Guarantor and any of their respective officers, directors, partners, members or majority-owned Affiliates: (i) conduct any business, or engage in any transaction or dealing, with any known Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a known Prohibited Person; or (ii) knowingly and intentionally engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224.

 

ARTICLE VII.

EVENT OF DEFAULT

 

Section 7.1. Event of Default . The occurrence of one or more of the following events shall be an “ Event of Default ” hereunder:

 

(a) if on any Payment Date Borrower fails to pay any Monthly Debt Service Payment due and payable on such Payment Date, or if Borrower fails to make any scheduled deposits into the Reserve Accounts when due and payable in accordance with the provisions hereof;

 

(b) if Borrower fails to pay the outstanding Indebtedness on the Maturity Date;

 

(c) if Borrower fails to pay or deposit any other amount payable or required to be deposited pursuant to this Agreement or any other Loan Document when due and payable in accordance with the provisions hereof or thereof, as the case may be, and such failure continues for ten (10) Business Days after Lender delivers written notice thereof to Borrower;

 

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(d) if any representation or warranty made herein or in any other Loan Document, or in any report, certificate, financial statement or other Instrument, agreement or document furnished by Borrower or Guarantor in connection with this Agreement, the Note or any other Loan Document executed and delivered by Borrower or Guarantor shall be false or misleading in any material respect as of the date such representation or warranty was made (or if such representation or warranty relates to an earlier date, then as of such earlier date);

 

(e) if Borrower, any SPC Party or the Guarantor makes a general assignment for the benefit of creditors;

 

(f) if a receiver, liquidator or trustee shall be appointed for Borrower, any SPC Party or the Guarantor or if Borrower, any SPC Party or the Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, any SPC Party or the Guarantor, or if any proceeding for the dissolution or liquidation of Borrower or the Guarantor shall be instituted; provided , however , that if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, any SPC Party or the Guarantor, upon the same not being discharged, stayed or dismissed within ninety (90) days, or if Borrower, any SPC Party or the Guarantor shall generally not be paying its debts as they become due;

 

(g) if Borrower attempts to delegate its obligations or assign its rights under this Agreement, any of the other Loan Documents or any interest herein or therein, or if any Transfer occurs, other than in accordance with or as permitted under this Agreement;

 

(h) if any breach or failure to perform any of the covenants in Article VI hereof shall occur, which breach or failure to perform, in the case of Section 6.1(o) or (q) only, shall remain uncured for a period of thirty (30) days after the occurrence of such breach or failure to perform, or if any material breach or failure to perform any of the covenants in Article VIII hereof shall occur;

 

(i) if an Event of Default as defined or described in the Note or any other Loan Document occurs, whether as to Borrower or the Mortgaged Property or any portion thereof;

 

(j) if Borrower fails (i) to maintain any insurance required to be maintained pursuant to Section 5.1(x) hereof; or (ii) to satisfy the Force-Place Obligation;

 

(k) if any Crossed Loan Default shall occur under any of the Crossed Loan Documents; and

 

(l) if Borrower shall fail to perform any of the terms, covenants or conditions of this Agreement, the Note, the Mortgage or the other Loan Documents, other than as specifically otherwise referred to above in this definition of “Event of Default,” for ten (10) Business Days after notice to Borrower from Lender or its successors or assigns, in the case of any Default which can be cured by the payment of a sum of money (other than Events of Default pursuant to Sections 7.1(a) and 7.1(b) above, as to which the grace period, if any, set forth therein is applicable), or for thirty (30) days after notice from Lender or its successors or assigns,

 

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in the case of any other Default (unless a longer notice period is otherwise provided herein or in such other Loan Document); provided , however , that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and such Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) days;

 

then, upon the occurrence of any such Event of Default and at any time thereafter, Lender or its successors or assigns, may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents, or under the Crossed Loan Documents, or at law or in equity, take such action, without further notice or demand, as Lender or its successors or assigns, deems advisable to protect and enforce its rights against Borrower and in and to all or any portion of the Collateral and in and to the Crossed Properties, and may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and/or the Collateral (including, without limitation, all rights or remedies available at law or in equity), and any and all rights or remedies provided in the Crossed Loan Documents against the Crossed Borrowers and/or the Crossed Properties. In addition to and without limiting the foregoing, upon the occurrence of any Event of Default described in any of Sections 7.1(e) , (f) , or (g) , the unpaid principal amount of and accrued interest and fees on the Loan and all other Indebtedness shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Indebtedness shall immediately become due and payable.

 

Section 7.2. Remedies .

 

(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed by or with respect to Borrower, or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any portion of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral, and under any of the Crossed Loan Documents with respect to all or any portion of the Crossed Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents or in the Crossed Loan Documents.

 

(b) In the event of the foreclosure or other action by Lender to enforce Lender’s remedies in connection with all or any portion of the Collateral, Lender shall apply all Net Proceeds received to repay the Indebtedness and Crossed Indebtedness in accordance with Section 2.8 , the Indebtedness or Crossed Indebtedness (as selected by Lender in its sole

 

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discretion) shall be reduced to the extent of such Net Proceeds and the remaining portion of the Indebtedness and Crossed Indebtedness shall remain outstanding and secured by the Loan Documents, it being understood and agreed by Borrower that Borrower is liable for the repayment of all the Indebtedness; provided , however , that the Loan shall be deemed to have been repaid only to the extent of the Net Proceeds actually received by Lender with respect to the Collateral and applied in reduction of the Indebtedness evidenced by the Note in accordance with the provisions of this Agreement (rather than application to the Crossed Indebtedness or other obligations other than the Loan), after payment by Borrower of all Transaction Costs and costs of enforcement.

 

(c) Upon and during the continuation of an Event of Default, Lender shall have the right, but not the obligation, with respect to any and all bankruptcy proceedings that are now or hereafter commenced in connection with the Mortgaged Property, to (i) vote to accept or reject any plans of reorganization, (ii) vote in any election of a trustee, (iii) elect the treatment of secured claims as specified in Section 1111(b) of the Bankruptcy Code, and (iv) make any other decisions requested of holders of claims or interests that Borrower would have had the right to do in such bankruptcy proceedings in the absence of an Event of Default.

 

Section 7.3. Remedies Cumulative . The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents executed by or with respect to Borrower, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of any Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in connection with the foreclosure of any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on other parts of the Collateral.

 

Section 7.4. Intentionally Omitted .

 

Section 7.5. Curative Advances . If any Event of Default occurs and is not cured by Borrower after notice from Lender, then Lender may expend such sums as either shall reasonably deem appropriate to cure or attempt to cure such Event of Default. Borrower shall immediately repay all such sums so advanced, which sums shall immediately become part of the Indebtedness, bear interest at the Default Rate from the date advanced until the date repaid, and be secured by all Collateral.

 

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ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS

 

Section 8.1. Applicable to Borrower and any SPC Party . Borrower hereby acknowledges that, as a condition of Lender’s agreements and performance of its obligations hereunder, Lender is relying on the status of Borrower and any SPC Party as a legal entity separate and apart from any Affiliate or other entity and has required that Borrower and any SPC Party maintain such status, and Lender hereby acknowledges such reliance and requirement. Accordingly, Borrower hereby represents, warrants and covenants as of the Closing Date, at all times prior to the Closing Date and until such time as the Loan is paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender’s sole discretion, Borrower and each SPC Party (if applicable):

 

(a) was and will be organized solely for purpose of owning and operating the Mortgaged Property, or in the case of any SPC Party, owning the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(b) has not owned, does not own and will not own any assets other than the Mortgaged Property (including incidental personal property necessary for the operation thereof and proceeds therefrom) or, in the case of any SPC Party, its general partnership interest (if Borrower is a limited partnership) sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(c) was not engaged, is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Mortgaged Property;

 

(d) has not entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of Borrower or any SPC Party except in the ordinary course of its business pursuant to written agreements upon terms and conditions that are no less favorable than those that would be available on an arm’s-length basis with third parties other than such Affiliate;

 

(e) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (in each case in the case of Borrower only): (i) the Loan and the Crossed Loans, (ii) trade payables not evidenced by a promissory note incurred in the ordinary course of business with trade creditors in connection with owning, operating and maintaining the Mortgaged Property, and customarily paid by Borrower within 60 days of incurrence and in fact not more than 60 days outstanding (other than those being disputed or contested in good faith by the Borrower in the same manner and with the same deposits as Lien Claims set forth in Section 5.1(b)(ii) of this Agreement), and (iii) equipment financing leases and purchase money debt for equipment, in each case incurred in the ordinary course of business in connection with the financing or purchase of equipment used on the Mortgaged Property, the payments upon which are made

 

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currently and in any event prior to delinquency, provided, (A) that the aggregate capitalized amount of all such permitted financing leases plus the aggregate amount of all such permitted purchase money debt shall not at any time be in excess of one percent (1%) of the Loan Amount or require payments aggregating in excess of $100,000 in any one calendar year, and (b) the aggregate outstanding amount of (1) all trade payables described in clause (ii) above, plus (2) the aggregate capitalized amount of all permitted financing leases plus the aggregate amount of all permitted purchase money debt described in clause (iii) above, shall not at any time be in excess of two percent (2%) of the Loan Amount.

 

(f) (i) has not made and will not make any loan or advance to any Person (including any of its Affiliates), (ii) has not pledged and will not pledge its assets for the benefit of any other Person (other than to Lender for the indirect benefit of the Crossed Borrowers to secure the Crossed Loans), (iii) has not sought or obtained and will not seek or obtain credit, and has not incurred and will not incur any obligation to any third party, based upon the assets of any other Person, and (iv) has not induced and will not induce any third party to rely on the creditworthiness of any other Person in extending benefits to Borrower;

 

(g) has remained and as of the Closing Date reasonably expects to remain, solvent, and has maintained, and as of the Closing Date reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

 

(h) has not acquired and will not acquire obligations or securities of any Person;

 

(i) has not failed and will not fail to correct any known misunderstanding or misrepresentation regarding its separate identity;

 

(j) has done or caused to be done and will do all things necessary to preserve its existence;

 

(k) has continuously maintained and shall continuously maintain its existence and good standing and has been and will be qualified to do business in all states necessary to carry on its business, including the state in which the Mortgaged Property is located;

 

(l) has conducted and operated and will conduct and operate its business solely in its own name, with all oral and written communications from Borrower or SPC Party, as applicable, including, without limitation, correspondence, invoices, purchase orders, billing statements, applications and business forms, made solely in the name of Borrower or SPC Party, as applicable;

 

(m) has accurately maintained and will continue to accurately maintain books, records, bank accounts, accounting records, financial statements and other entity documents separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person, with such accounting records and financial statements having been prepared and kept in accordance with reasonable accounting practices applied on a consistent basis, and such financial statements of Borrower (and any SPC Party, if applicable) have been and shall be prepared in a manner that indicates (through appropriate footnotes if

 

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necessary) the existence of Borrower (and any SPC Party, if applicable) and its assets and liabilities separate and apart from any other Person; moreover, Borrower (and any SPC Party, if applicable) has indicated and shall indicate in its financial statements that the assets of Borrower are not available to satisfy the claims of creditors of any Affiliate of Borrower (or any SPC Party, if applicable) and that the assets of any Affiliate of Borrower (or any SPC Party, if applicable) have not been and are not available to satisfy the claims of creditors of Borrower (or any SPC Party, if applicable) and, except with appropriate designation as set forth above, Borrower has not authorized and shall not authorize its assets or liabilities to be listed on the financial statement of any other Person;

 

(n) has been and will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person;

 

(o) has filed and will file such tax returns with respect to itself as may be required under applicable law and has prepared and will prepare separate tax returns and financial statements, or if part of a consolidated group, has been shown and will be shown as a separate member of such group;

 

(p) has paid and shall pay its own liabilities, indebtedness, and obligations of any kind, as the same shall become due, from its own separate assets, rather than from those of other Persons, and Borrower has not consented and shall not consent to any Person operating the Mortgaged Property to incur expenses as agent or on behalf of Borrower, unless such Person agreed or agrees, prior to incurring such expense, to clearly indicate that such expenses were or are the sole responsibility of, and any payment will come from, Borrower;

 

(q) has not entered into and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person;

 

(r) has not commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; and has held and will hold title to all of its real and personal property in its own name and not in the name of any other Person;

 

(s) has maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(t) has not, does not and will not hold itself out to be responsible for the debts or obligations of any other Person (other than the Crossed Loans) and, except for the Loan Documents to which other Persons are party, shall not consent to any other Person holding itself out as being responsible for the debts or obligations of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(u) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the

 

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Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) assumed, guaranteed or otherwise become liable on, and will not assume, guarantee or otherwise become liable on, or in connection with any obligation of any other Person (other than the Crossed Borrowers under the Crossed Loans) and, except for the Loan Documents to which other Persons are party, has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) consented and shall not consent to any other Person guaranteeing, assuming or otherwise becoming liable for any obligation of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(v) except for funds deposited into the Local Collection Account, the Collection Account or the Reserve Accounts in accordance with the Loan Documents, has not and shall not hold title to its assets other than in its name;

 

(w) has complied, complies and shall at all times hereafter comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto;

 

(x) has paid and will pay its own liabilities and expenses, out of its own funds and has not consented and shall not consent to any other Person paying Borrower’s (or any SPC Party’s, if applicable) obligations except to the extent that timely reimbursement is made for the same;

 

(y) has held and will hold regular meetings, as appropriate to conduct its business and has observed at all times and will observe all limited liability company (if a limited liability company) or limited partnership (if a limited partnership) or corporate (if a corporation) formalities and record keeping;

 

(z) has allocated and will allocate to Borrower (and any SPC Party, if applicable) reasonably and on the basis of fair market value determined on an arm’s-length basis all general overhead and administrative expenses, including all costs associated with common employees and shared office space, any such allocation has been and shall be specifically and reasonably documented and substantiated, any such allocation of expenses to Borrower (or any SPC Party, if applicable) has been and shall be paid solely by Borrower (or such SPC Party, if applicable) from Borrower’s (or such SPC Party’s, if applicable) own funds, and Borrower (and any SPC Party, if applicable) has used and shall at all times use separate stationary, letterhead, invoices and checks;

 

(aa) has not identified and will not identify its members or partners, Independent Director (as defined below) or any other member or partner of any Affiliate of Borrower, or any other Person, as a division or part of it;

 

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(bb) has paid and will pay the salaries of its own employees and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations;

 

(cc) has maintained, currently maintains, and will continue to maintain, its own cash, cash positions and bank accounts separate from any other Person;

 

(dd) (i) has not (A) liquidated or dissolved, in whole or in part; (B) consolidated, merged or entered into any form of consolidation with or into any other Person, nor conveyed, transferred or leased its assets substantially as an entirety to any Person nor permitted any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor conveyed, transferred or leased its assets substantially as an entirety to any Person; (C) engaged in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower); or (D) amended any provisions of its organizational documents containing provisions similar to those contained in this Article VIII ; and (ii) shall not (A) to the extent permitted by law, liquidate or dissolve, in whole or in part; (B) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor convey, transfer or lease its assets substantially as an entirety to any Person; (C) engage in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest in Borrower); or (D) amend any provisions of its organizational documents containing provisions similar to those contained in this Article VIII ;

 

(ee) If Borrower is a limited partnership or a non-Delaware limited liability company:

 

(A) each general partner or managing member (each, an “ SPC Party ”) shall be either a corporation or a Delaware single member limited liability company, in either case, whose sole asset is its interest in Borrower and each such SPC Party will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Article VIII as if such representation, warranty or covenant was made directly by such SPC Party. The SPC Party’s Organizational Documents shall incorporate the provisions of this Article VIII and require that the directors, managers or members, as applicable, of such SPC Party consider the interests of the creditors of such SPC Party in connection with any Material Action (as defined below). As used herein, “ Material Action ” shall mean to institute proceedings to have Borrower or SPC Party adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against Borrower or SPC Party or file a petition seeking or consent to, reorganization or relief with respect to Borrower or SPC Party under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Borrower or SPC Party or a substantial part of Borrower’s or SPC Party’s property, or make any assignment

 

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for the benefit of creditors of Borrower or SPC Party, or admit in writing Borrower’s or SPC Party’s inability to pay its debts generally as they become due, or any similar action, or take action in furtherance of any of the foregoing actions.

 

(B) If the SPC Party is a corporation, Borrower shall at all times cause there to be at least one (1) duly appointed member of the board of directors of the SPC Party who is an Independent Director.

 

(C) If the SPC Party is a limited liability company, Borrower shall at all times cause there to be at least one (1) duly appointed independent manager of the SPC Party who is also a non-economic member of SPC Party, who is an Independent Director.

 

(D) The Borrower’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of Borrower’s Organizational Documents and the SPC Party’s Organizational Documents) will be required in order for Borrower to take any Material Action.

 

(E) The SPC Party’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of the SPC Party’s Organizational Documents) will be required in order for the SPC Party to take any Material Action.

 

(F) The SPC Party shall not: (i) if the SPC Party is a corporation, cause or permit the board of directors of the SPC Party to take any action which, under the terms of any certificate of incorporation, by-laws or any voting trust agreement with respect to any common stock, requires the vote of the board of directors of the SPC Party unless at the time of such action there shall be at least one (1) member of such board of directors who is an Independent Director; and (ii) if the SPC Party is a limited liability company, cause or permit the members or managers of the SPC Party to take any action which, under the terms of any certificate of formation, operating agreement or other organizational document requires the vote of the members or managers of the SPC Party unless at the time of such action there shall be at least one (1) independent manager and non-economic member of such SPC Party who is an Independent Director.

 

(ff) If Borrower is a Delaware single member limited liability company:

 

(A) Borrower shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ Borrower Single Member ”), and Borrower’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

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(B) Borrower’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require Borrower to at all times cause there to be at least one (1) duly appointed independent manager of Borrower who is also a non-economic member of Borrower and an Independent Director whose affirmative vote will be required in order for Borrower to take any Material Action. Borrower’s Organizational Documents shall further require that upon the occurrence of any event that causes the Borrower Single Member to cease to be a member in Borrower, the Independent Director shall, without action of any person and simultaneously with the Borrower Single Member ceasing to be a member of Borrower, automatically be admitted to Borrower as a member and shall continue Borrower without dissolution.

 

(C) Borrower shall cause reputable Delaware counsel reasonably acceptable to Lender (the “ Delaware Law Firm ”) to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of Borrower Single Member and the Independent Director is required in order for Borrower to file a voluntary bankruptcy petition; (2) the provision in Borrower’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against Borrower Single Member; (3) the bankruptcy of Borrower Single Member will not cause Borrower to be dissolved; (4) no creditor of Borrower Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, Borrower’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

(D) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

(gg) If the SPC Party is a Delaware single member limited liability company:

 

(A) SPC Party shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ SPC Single Member ”), and SPC Party’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

(B) SPC Party’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require SPC Party to at all times cause there to be at least one (1) duly appointed

 

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independent manager of SPC Party who is also a non-economic member of SPC Party and an Independent Director whose affirmative vote will be required in order for SPC Party to take any Material Action. SPC Party’s Organizational Documents shall further require that upon the occurrence of any event that causes the SPC Single Member to cease to be a member in SPC Party, the Independent Director shall, without action of any person and simultaneously with the SPC Single Member ceasing to be a member of SPC Party, automatically be admitted to SPC Party as a member and shall continue SPC Party without dissolution.

 

(C) Borrower shall cause the Delaware Law Firm to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of SPC Single Member and the Independent Director is required in order for SPC Party to file a voluntary bankruptcy petition; (2) the provision in SPC Party’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against SPC Single Member; (3) the bankruptcy of SPC Single Member will not cause SPC Party to be dissolved; (4) no creditor of SPC Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, SPC Party’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

(hh) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

(ii) has complied and will comply with the separateness provisions of the Borrower’s Organizational Documents since such Borrower’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to limited liability companies or limited partnerships, as applicable, and each SPC Party, if applicable, has complied and will comply with the separateness provisions of the SPC Party’s Organizational Documents since such SPC Party’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to corporations;

 

(jj) the Borrower’s Organizational Documents and, if applicable, the SPC Party’s Organizational Documents provide and shall at all times continue to provide that Borrower (and the SPC Party, if applicable) shall not cause, permit, or empower any Person to consolidate or merge Borrower or the SPC Party into any other entity; and

 

(kk) has not funded and will not fund any other Person’s operations and has not paid and will not pay any other Person’s expenses.

 

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Notwithstanding any other provision of the Borrower’s Organizational Documents, any SPC Party’s Organizational Documents or any provision of law that otherwise so empowers the Borrower, any SPC Party or any other Person, neither the Borrower, any SPC Party nor any other Person shall be authorized or empowered, nor shall they permit the Borrower, without the prior unanimous written consent of the Borrower and any SPC Party (including, in each case, all Independent Directors), to take any Material Action, provided, however, that neither the Borrower nor any SPC Party may vote on, or authorize the taking of, any Material Action, unless there is at least one (1) Independent Director then serving in such capacity.

 

Borrower hereby further represents, warrants and certifies to and for the benefit and reliance of Lender that: (i) upon closing of the Loan, the Mortgaged Property, Borrower and the SPC Party each shall have been fully released from the Prior Loans, neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, for the Prior Loans, and no recourse whatsoever against any portion of the Mortgaged Property shall be available to satisfy the Prior Loans under any circumstances; (ii) Borrower has provided Lender with true, correct and complete copies of (A) Borrower’s current (and since the date of its inception) financial statements, (B) Borrower’s current (and since the date of its inception) Borrower’s Organizational Documents, and (C) the Prior Loan Documents; (iii) Borrower has prior to the Closing Date (and at all times since the date of its inception) conducted its affairs as a special purpose bankruptcy remote entity in substantial accordance with (A) the provisions of this Section 8.1 , (B) the provisions of Borrower’s Organizational Documents (as in effect now and as in effect at all times since the date of its inception), and (C) the Prior Loan Documents; and (iv) the Borrower’s certifications and statements set forth in the certificate attached hereto as Schedule 8.1(a) are true and correct.

 

ARTICLE IX.

MISCELLANEOUS

 

Section 9.1. Survival . This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement, the making the Loan hereunder and the execution and delivery by Borrower to Lender of the Loan Documents, and shall continue in full force and effect so long as any portion of the Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of the respective successors and assigns of Lender. Nothing in this Agreement or in any other Loan Document, express or implied, shall give to any Person other than the parties and the holder of the Note and the other Loan Documents, and their legal representatives, successors and assigns, any benefit or any legal or equitable right, remedy or claim hereunder.

 

Section 9.2. Lender’s Discretion . Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

 

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Section 9.3. Governing Law .

 

This Agreement was negotiated in New York and made by Lender and accepted by Borrower in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity, performance, and maximum permissible rates of interest), this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

(a) Borrower hereby consents to the jurisdiction of any federal court or state court in New York, New York or within the county and state in which any Mortgaged Property is located and irrevocably agrees that, subject to Lender’s election, any legal suit, action or proceeding against Lender or Borrower arising out of or relating to this Agreement or the other Loan Documents may be instituted and litigated in such courts. Borrower hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. Borrower does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by Borrower from time to time in accordance with the terms hereof) with a copy to Borrower and written notice of said service of Borrower mailed or delivered to Borrower in the manner provided herein shall be deemed in every respect effective service of process upon Borrower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to Lender of any change in address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

Section 9.4. Modification, Waiver in Writing . No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or any other Loan Document, or consent or waiver referred to in any Loan Document or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

 

Section 9.5. Delay Not a Waiver . Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document,

 

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or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 9.6. Notices . All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if delivered or sent by: (a) hand delivery, (b) certified or registered United States mail, postage prepaid, (c) nationally recognized overnight delivery service, (d) by facsimile transmission, addressed if to Lender or to Borrower at its applicable address set forth on Schedule 5 hereto, or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 8.6 , or (e) other than with respect to an amendment or modification, an electronic medium. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or three Business Days after mailing; in the case of overnight delivery and facsimile transmission, on the Business Day after the same was sent; or in the case of electronic medium, when confirmed by e-mail. A party receiving a notice which does not comply with the technical requirements for notice under this Section 9.6 may elect to waive any deficiencies and treat the notice as having been properly given. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

 

Section 9.7. TRIAL BY JURY . BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

 

Section 9.8. Headings . The Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

Section 9.9. Assignment .

 

(a) Borrower may not sell, assign or transfer any interest in the Loan Documents, or any portion of the foregoing (including, without limitation, Borrower’s rights, title, interests, remedies, powers and duties hereunder and thereunder) without Lender’s prior written consent. Lender shall have the right to assign or participate this Agreement and/or its interest in any of the other Loan Documents and the obligations hereunder to any Person. In the event of an assignment by Lender, (a) the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would have if it were an original “Lender”

 

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hereunder; (b) the assignee shall be deemed for all purposes to be a “Lender” hereunder; and (c) upon any such substitution of Lender, a replacement or addition “Lender signature page” shall be executed by the new Lender and attached to this Agreement and thereupon become a part of this Agreement. After the effectiveness of any assignment, the new Lender shall provide notice to Borrower of the identity, address and other pertinent information pertaining to the new Lender. Borrower shall maintain a copy of each assignment and notice delivered to it and a register (the “ Register ”) for the recordation of the names and addresses of the Lenders and the principal amount of the assigned loans owing to each Lender from time to time. The entries on the Register shall be conclusive, in the absence of manifest error, and the Borrower and the Lenders shall treat each person whose name is recorded in the Register as the owner of the assigned loans recorded therein for all purposes of this Agreement. Any assignment or transfer of all or a part of a loan evidenced by a note shall be registered on the Register only upon surrender for registration of assignment or transfer of the note evidencing such loan, accompanied by a duly executed assignment and notice, and thereupon one or more new notes shall be issued to the designated assignee. Notwithstanding anything in this Agreement to the contrary, after an assignment by Lender, the “Lender” (prior to such assignment) shall continue to have the benefits of any rights or indemnifications and shall continue to have the obligations contained herein which Lender had during the period such party was a “Lender” hereunder.

 

(b) Lender may from time to time elect to enter into a servicing agreement with a servicer, pursuant to which the servicer shall be appointed to service and administer the Loan and the Account Collateral in accordance with the terms hereof and to exercise any and all other rights of Lender with respect to the Loan as set forth in such servicing agreement. Lender shall promptly notify Borrower if Lender shall elect to appoint or change the servicer, and all notices and other communications from Borrower to Lender shall be delivered to the servicer with a copy concurrently delivered to the Lender, and any notice, direction or other communication from the servicer to Borrower shall have the same force and effect as a notice, direction or communication from Lender. The servicer shall be entitled to be reimbursed for any cost, expense or liability which is incurred by the servicer pursuant to such servicing and administrative duties and which would otherwise be reimbursable to Lender under this Agreement or any other Loan Document in the same manner and to the same extent as if Lender incurred such cost, expense or liability in the first place. The parties hereto acknowledge and agree that the servicer shall be a third party beneficiary to this Agreement and the other Loan Documents.

 

Section 9.10. Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

Section 9.11. Preferences . Lender shall have no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the obligations of Borrower pursuant to this Agreement, the Note or any other Loan Document. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder, provided that such application or reapplication is performed by Lender in accordance with the terms of this Agreement or any

 

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other applicable Loan Document. To the extent Borrower makes a payment or payments to Lender for Borrower’s benefit, which payment or proceeds 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 under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

 

Section 9.12. Waiver of Notice . Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or another Loan Document specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents does not specifically and expressly provide for the giving of notice by Lender to Borrower.

 

Section 9.13. Failure to Consent . If Borrower shall seek the approval by or consent of Lender hereunder or under the Note, or any of the other Loan Documents, and Lender shall fail or refuse to give such consent or approval, then Borrower shall not be entitled to any damages for any withholding or delay of such approval or consent by Lender, it being intended that Borrower’s sole remedy shall be to bring an action for an injunction or specific performance.

 

Section 9.14. Schedules Incorporated . The information set forth on the cover, heading and recitals hereof, and the Schedules attached hereto, are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

 

Section 9.15. Offsets, Counterclaims and Defenses . Any assignee of any of Lender’s interest in and to this Agreement and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to this Agreement and the other Loan Documents which Borrower may otherwise have against any assignor or this Agreement and the other Loan Documents. No such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement or upon any other Loan Document. Any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

 

Section 9.16. No Joint Venture or Partnership . Borrower and Lender intend that the relationship created hereunder be solely that of borrower and lender. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower (or any Affiliate of Borrower) and Lender nor to grant Lender any interest in the Collateral other than that of secured party, mortgagee or lender.

 

Section 9.17. Waiver of Marshalling of Assets Defense . To the fullest extent Borrower may legally do so, Borrower waives all rights to a marshalling of the assets of Borrower, and others with interests in Borrower, and of the Collateral, or to a sale in inverse

 

120


order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of any Collateral for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender to the payment of the Indebtedness out of the Net Proceeds of the Collateral in preference to every other claimant whatsoever.

 

Section 9.18. Waiver of Counterclaim . To the extent permitted by applicable law, Borrower hereby waives the right to assert a counterclaim, other than compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

 

Section 9.19. Conflict; Construction of Documents . In the event of any conflict between the provisions of this Agreement and the provisions of any of the other Loan Documents, the provisions of this Agreement shall prevail. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same.

 

Section 9.20. Brokers and Financial Advisors . Borrower and the Lender hereby represent that they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower and Lender hereby agree to indemnify and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of the indemnifying party in connection with the transactions contemplated herein. The provisions of this Section 9.20 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness.

 

Section 9.21. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

Section 9.22. Estoppel Certificates . Borrower and Lender hereby agree at any time and from time to time upon not less than fifteen (15) days prior written notice by Borrower or Lender to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the knowledge of such certifying party, any Default or Event of Default has occurred and is then continuing, and, if so, specifying each such Default or Event of Default; provided , however , that it shall be a condition precedent to Lender’s obligation to deliver the statement pursuant to this Section 9.22 , that Lender shall have received, together with Borrower’s request for such statement, an Officer’s Certificate stating that, to the knowledge of Borrower, no Default or Event of Default exists as of the date of such certificate (or specifying such Default or Event of Default).

 

Section 9.23. Payment of Expenses . Borrower shall pay all Transaction Costs, which shall include, without limitation, (a) reasonable out-of-pocket costs and expenses of

 

121


Lender in connection with (i) the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein; (ii) the creation, perfection or protection of Lender’s Liens in the Collateral (including, without limitation, fees and expenses for title and lien searches or amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments, title insurance premiums and filing and recording fees, third party due diligence expenses for the Mortgaged Property plus travel expenses, accounting firm fees, costs of the Appraisals, Environmental Reports (and an environmental consultant), and the Property Condition Assessments and earthquake “maximum probable loss” report and costs and fees incurred in connection with arranging, setting up, servicing and maintaining the Account Collateral); (iii) response to any requests by Borrower (or its Affiliates) for Lender consent or approval of any matter relating to the Loan, the Loan Documents or the Mortgaged Property; (iv) the negotiation, preparation, execution and delivery of any amendment, waiver, restructuring or consent relating to any of the Loan Documents, and (v) the preservation of rights under and enforcement of the Loan Documents and the documents and instruments referred to therein, including any communications or discussions relating to any action that Borrower shall from time to time request Lender to take, as well as any restructuring or rescheduling of the Indebtedness, (b) the reasonable fees, expenses and other charges of counsel to Lender in connection with all of the foregoing, and (c) Lender’s reasonable out-of-pocket travel expenses in connection with site visits to the Mortgaged Property.

 

Section 9.24. Non-Recourse . Anything contained herein, in the Note or in any other Loan Document to the contrary notwithstanding, but subject in all respects to the provisions set forth below, Lender shall not enforce the liability and obligation of the Borrower to perform and observe any of its obligations that may be contained in the Note, this Agreement, the Mortgage or any other Loan Document by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Mortgaged Property, the Rents and other Receivables, or any other Collateral pursuant to the Loan Documents; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Mortgaged Property, in the Rents and other Receivables and in any other Collateral. NOTWITHSTANDING ANYTHING TO THE CONTRARY ABOVE OR ELSEWHERE IN THIS AGREEMENT, THE MORTGAGE OR ANY OF THE LOAN DOCUMENTS, however,

 

(a) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not: (i) constitute a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Indebtedness or to require that all Collateral and all Crossed Properties shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents; (ii) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (iii) impair the right of Lender to name Borrower (or any Crossed Borrowers) as a party defendant in any action or suit for foreclosure and sale under the Mortgage or other Loan Documents (or Crossed Loan Documents); (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Rents and Leases (or any Assignment of Rents and Leases (as defined in the Crossed Loan

 

122


Agreements)); (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Mortgage, any other Mortgages (as defined in the Crossed Loan Agreements), the other Loan Documents and the Crossed Loan Documents, or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Mortgaged Property, any other Collateral or any Crossed Properties; (vii) have any applicability whatsoever to or limit the liability of the Borrower, Guarantor or other parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement or any other guaranty or indemnity made in connection with the Loan, the Crossed Loans or any of the rights and remedies of Lender thereunder; or (viii) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or this Agreement or secured by the Loan Documents or evidenced or secured by the Crossed Loan Documents, and the same shall continue until paid or discharged in full, and

 

(b) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not

 

(A) prevent recourse to the assets of Borrower or any Crossed Borrower, the Mortgaged Property, any Crossed Property or any other instrument or document which is pledged by Borrower or Crossed Borrower to Lender pursuant to the Loan Documents or Crossed Loan Documents, including all Collateral;

 

(B) have any applicability whatsoever to or limit the liability of the parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement (or any “Environmental Indemnity Agreement” as defined and referred to or included among any Crossed Loan Documents) or any Crossed Guaranty;

 

(C) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or secured by the Loan Documents (or evidenced and/or secured by any Crossed Loan Documents), and the same shall continue until paid or discharged in full; or

 

(D) prevent recourse to Borrower, any Crossed Borrowers and Guarantor, jointly and severally, and their respective assets for repayment of the Indebtedness, and Lender’s agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force or effect, and the Indebtedness shall be fully recourse not only to Borrower but also to any Crossed Borrowers and Guarantor, in the event:

 

  (1) Borrower shall file or commence any voluntary bankruptcy, insolvency or similar proceeding, including any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, or Borrower shall make a general assignment for the benefit of creditors or institute receivership proceedings or similar proceedings with respect to the Mortgaged Property, Borrower or Borrower’s assets,

 

123


or (A) any such proceedings or petition shall be filed or commenced against Borrower by Guarantor, or its Affiliates or agents acting under the control or direction of Guarantor, or (B) if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor (or if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor cause Borrower to, by exercise of their rights as equity owners or officers or directors of Borrower or otherwise) aid, solicit or otherwise cooperate or collude to bring about the filing or commencement of any such proceedings or petition;

 

  (2) any Transfer or removal of material Equipment occurs in violation of the terms of the Loan Documents; or

 

  (3) any material breach of the provisions of Article VIII of this Agreement occurs; or

 

(E) prevent recourse to Borrower, any Crossed Borrower and Guarantor, jointly and severally, and their respective assets, and Borrower, any Crossed Borrowers and Guarantor shall be fully and personally liable, for (x) any obligation to pay Lender any Insurance Gap and (y) any loss, costs, liability, damage or expense (including, without limitation, attorneys’ fees and disbursements) suffered or incurred by Lender or any Indemnified Party, in each case, to the extent related to or arising from any of the following acts committed by or on behalf of Borrower, any Crossed Borrowers, Guarantor or any of their respective Affiliates:

 

  (1) any fraud on the part of Borrower, Guarantor or their respective Affiliates in connection with the Loan;

 

  (2) any willful misrepresentation contained in any Loan Documents or report furnished pursuant to any Loan Document;

 

  (3) any misappropriation or misapplication of funds (including Loss Proceeds or Rents) in contravention of the Loan Documents;

 

  (4) additional financing obtained by Borrower (whether secured or unsecured) in violation of the terms of the Loan Documents;

 

  (5) actual material physical waste to the Mortgaged Property or material damage to the Mortgaged Property resulting from gross negligence or willful misconduct;

 

  (6) any breach of any representation, warranty or covenant in this Agreement or the Environmental Indemnity Agreement, concerning Environmental Laws and Hazardous Substances;

 

124


  (7) any Security Deposits received by Borrower or Manager from tenants not being properly applied, returned to tenants when due or delivered to Lender, a receiver or a purchaser of the Mortgaged Property in the event of a foreclosure sale upon such Person taking possession of the Mortgaged Property;

 

  (8) all costs and expenses, including reasonable attorneys’ fees and expenses, incurred in enforcing any obligation or liability or in collecting any amount due under this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, which, as to Borrower, is a recourse obligation of Borrower as described in this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the Environmental Indemnity;

 

  (9) the failure to pay Impositions assessed against the Mortgaged Property to the extent there were sufficient funds available to pay and Lender allows Borrower to apply the same, or the failure to pay and discharge any mechanic’s or materialman’s Liens against the Mortgaged Property to the extent there was sufficient funds available to pay and discharge and Lender allows Borrower to apply the same, except, in the case of each of the foregoing, to the extent the same were or are being contested in accordance with the terms of the Loan Documents;

 

  (10) any Rents or Proceeds received or collected by Borrower, any Affiliate of Borrower or Manager and not deposited into the Local Collection Account or the Collection Account in accordance with Section 2.12 or otherwise endorsed, delivered or turned over to Lender; or

 

  (11) If the Indebtedness is not paid in full by the Maturity Date or is accelerated or if any monetary Event of Default has occurred, and Borrower or any Affiliate contests or in any way interferes with, directly or indirectly (collectively, a “ Contest ”), any foreclosure action or sale commenced by Lender or with any other enforcement of Lender’s rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to any of the Collateral (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise) (except this clause (11) shall not prohibit a good faith defense on the basis that no Event of Default exists, and such a good faith defense shall not give rise to recourse liability under this clause (11)).

 

125


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

 

LENDER:

CITIGROUP GLOBAL MARKETS REALTY CORP.,

a New York corporation

By:  

/s/    D ONALD D REWITZ


Name:   Donald Drewitz
Title:   Authorized Agent

 

126


BORROWER:    
Global Weehawken Acquisition Company, LLC,
a Delaware limited liability company
By:   Global Weehawken Holding Company, LLC,
    a Delaware limited liability company,
    its Member and Manager
    By:   Digital Realty Trust, L.P.,
        a Maryland limited partnership,
        its Member and Manager
        By:   Digital Realty Trust, Inc.,
            a Maryland corporation
            its General Partner
            By:  

/s/    M ICHAEL F. F OUST


            Print Name:  

Michael F. Foust


            Title:  

Chief Executive Officer


 

127

Exhibit 10.41

 

PROMISSORY NOTE

 

$46,800,000

 

New York, New York

November 3, 2004

 

FOR VALUE RECEIVED, the undersigned, GLOBAL WEEHAWKEN ACQUISITION COMPANY, LLC, a Delaware limited liability company (the “ Maker ”), promises to pay to the order of CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation (collectively, with any subsequent holder of this Note, the “ Holder ”) at its offices located at 388 Greenwich Street, 11th Floor, New York, New York 10013 or at such other address as the Holder may from time to time designate in writing, the principal sum of FORTY-SIX MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($46,800,000), together with interest thereon, and all other amounts payable under the Loan Documents, such principal, interest and other amounts to be payable as provided in the Loan Agreement.

 

This Note is the Note referred to in that certain Loan Agreement, dated as of November 3, 2004, among the Maker and the Holder (as modified and supplemented and in effect from time to time, the “ Loan Agreement ”). Reference to the Loan Agreement is hereby made for a statement of the rights of the Holder and the duties and obligations of the Maker, but neither this reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Maker to pay the principal, interest and other amounts, if any, payable with respect to this Note when due. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement. The outstanding principal amount shall bear interest at the rates provided for in the Loan Agreement.

 

This Note is secured by the Mortgage and certain other Loan Documents and (subject to Section 2.11(g) of the Loan Agreement) Crossed Loan Documents.

 

The principal sum evidenced by this Note, together with accrued interest and other sums or amounts due hereunder, shall become immediately due and payable at the option of the Holder upon the occurrence of any Event of Default in accordance with the provisions of the Loan Agreement.

 

With respect to the amounts due pursuant to this Note, the Maker waives the following: (1) all rights of exemption of property from levy or sale under execution or other process for the collection of debts under the Constitution or laws of the United States or any state thereof; (2) demand, presentment, protest, notice of dishonor, notice of nonpayment, suit against any party, diligence in collection of this Note, and all other requirements necessary to enforce this Note, except for notices required by Governmental Authorities and notices required by the Loan Agreement and any of the other Loan Documents; and (3) any further receipt by or acknowledgment of any Collateral now or hereafter deposited as security for the Loan.

 

In no event shall the amount of interest (and any other sums or amounts that are deemed to constitute interest under applicable Legal Requirements) due or payable hereunder (including interest calculated at the Default Rate) exceed the maximum rate of interest designated by applicable Legal Requirements (the “ Maximum Amount ”), and in the event such payment is inadvertently paid by the Maker or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal (without prepayment penalty), and if in excess of such balance, shall be immediately returned to the Maker upon such determination. It is the express intent hereof that the Maker not pay and the Holder not receive, directly or indirectly, interest in excess of the Maximum Amount.


The Holder shall not by any act, delay, omission or otherwise be deemed to have modified, amended, waived, extended, discharged or terminated any of its rights or remedies, and no modification, amendment, waiver, extension, discharge or termination of any kind shall be valid unless in writing and signed by the Holder. All rights and remedies of the Holder under the terms of this Note and applicable statutes or rules of law shall be cumulative, and may be exercised successively or concurrently.

 

Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements, but if any provision of this Note shall be prohibited by or invalid under applicable Legal Requirements, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

 

The Holder may, at its option, release any Collateral given to secure the indebtedness evidenced hereby, and no such release shall impair the obligations of the Maker to the Holder.

 

This Note was negotiated in New York, and made by the Maker and accepted by the Holder in the State of New York, and the proceeds of this Note were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity and performance), this Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

Any legal suit, action or proceeding against the Maker by the Holder arising out of or relating to this Note shall be instituted in any federal or state court in New York, New York or in the state where the Mortgaged Property is located. The Maker hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. The Maker does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by such agent in accordance with the terms hereof) with a copy to the Maker, together with written notice of said service of the Maker, mailed or delivered to the Maker in the manner provided in the Loan Agreement shall be deemed in every respect effective service of process upon the Maker, in any such suit, action or proceeding in the State of New York or the state where the Mortgaged Property is located (as applicable). The Maker (i) shall give prompt notice to the Holder of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

The provisions of this Note shall be subject to the provisions of Section 9.24 of the Loan Agreement, which provisions are incorporated by reference as if herein set forth in full.

 

THE MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS NOTE OR THE OTHER LOAN DOCUMENTS. THE MAKER AGREES THAT THE HOLDER

 

2


MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF THE MAKER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THE MAKER AND THE HOLDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Upon the transfer of this Note, Holder may deliver all Collateral granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights and obligations herein or under applicable law given to Holder with respect thereto, and Holder shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter, but Holder shall retain all rights and obligations hereby given to it with respect to any liabilities and the Collateral not so transferred.

 

3


IN WITNESS WHEREOF, the Maker has caused this Note to be properly executed on the date first above written, and has authorized this Note to be dated as of the day and year first above written.

 

MAKER:

GLOBAL WEEHAWKEN ACQUISITION COMPANY, LLC,

a Delaware limited liability company

By:

 

Global Weehawken Holding Company, LLC,

a Delaware limited liability company,

its Member and Manager

   

By:

 

Digital Realty Trust, L.P.,

a Maryland limited partnership,

its Member and Manager

       

By:

 

Digital Realty Trust, Inc.,

a Maryland corporation

its General Partner

           

By:

 

/s/ S COTT P ETERSON


           

Print Name:

 

Scott Peterson


           

Title:

 

Senior Vice President


Exhibit 10.42

 

EXECUTION COPY

 

LOAN AGREEMENT

 

Dated as of November 3, 2004

 

by and among

 

GIP WAKEFIELD, LLC

 

as Borrower,

 

and

 

CITIGROUP GLOBAL MARKETS REALTY CORP.


EXECUTION COPY

 

Table of Contents

 

     Page

ARTICLE I. CERTAIN DEFINITIONS

   1
     Section 1.1.   

Definitions

   1

ARTICLE II. GENERAL TERMS

   28
     Section 2.1.   

The Loan.

   28
     Section 2.2.   

Use of Proceeds

   28
     Section 2.3.   

Security for the Loan

   28
     Section 2.4.   

Borrower’s Note

   29
     Section 2.5.   

Principal and Interest.

   29
     Section 2.6.   

Prepayment.

   30
     Section 2.7.   

Defeasance.

   34
     Section 2.8.   

Application of Payments During Event of Default

   38
     Section 2.9.   

Method and Place of Payment

   39
     Section 2.10.   

Taxes.

   39
     Section 2.11.   

Cross-Collateralization; Contribution; Release of Cross-Collateralization.

   40
     Section 2.12.   

Central Cash Management.

   45
     Section 2.13.   

Reserve Accounts.

   49
     Section 2.14.   

Additional Provisions Relating to the Pledged Accounts.

   54
     Section 2.15.   

Security Agreement.

   55
     Section 2.16.   

Mortgage Recording Taxes

   57

ARTICLE III. CONDITIONS PRECEDENT

   57
     Section 3.1.   

Conditions Precedent to Closing

   57
     Section 3.2.   

Execution and Delivery of Agreement

   61

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

   62
     Section 4.1.   

Representations and Warranties as to Borrower

   62
     Section 4.2.   

Representations and Warranties as to the Mortgaged Property

   66
     Section 4.3.   

Survival of Representations

   70

ARTICLE V. AFFIRMATIVE COVENANTS

   70
     Section 5.1.   

Affirmative Covenants

   70

ARTICLE VI. NEGATIVE COVENANTS

   100
     Section 6.1.   

Negative Covenants

   100
     Section 6.2.   

Transfer of Ownership Interests

   102

ARTICLE VII. EVENT OF DEFAULT

   104
     Section 7.1.   

Event of Default

   104
     Section 7.2.   

Remedies.

   106
     Section 7.3.   

Remedies Cumulative

   107

 

i


               Page

     Section 7.4.   

Intentionally Omitted.

   107
     Section 7.5.   

Curative Advances

   107

ARTICLE VIII. SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS

   107
     Section 8.1.   

Applicable to Borrower and any SPC Party

   108

ARTICLE IX. MISCELLANEOUS

   116
     Section 9.1.   

Survival

   116
     Section 9.2.   

Lender’s Discretion

   116
     Section 9.3.   

Governing Law.

   117
     Section 9.4.   

Modification, Waiver in Writing

   117
     Section 9.5.   

Delay Not a Waiver

   117
     Section 9.6.   

Notices

   118
     Section 9.7.   

TRIAL BY JURY

   118
     Section 9.8.   

Headings

   118
     Section 9.9.   

Assignment.

   118
     Section 9.10.   

Severability

   119
     Section 9.11.   

Preferences

   119
     Section 9.12.   

Waiver of Notice

   120
     Section 9.13.   

Failure to Consent

   120
     Section 9.14.   

Schedules Incorporated

   120
     Section 9.15.   

Offsets, Counterclaims and Defenses

   120
     Section 9.16.   

No Joint Venture or Partnership

   120
     Section 9.17.   

Waiver of Marshalling of Assets Defense

   120
     Section 9.18.   

Waiver of Counterclaim

   121
     Section 9.19.   

Conflict; Construction of Documents

   121
     Section 9.20.   

Brokers and Financial Advisors

   121
     Section 9.21.   

Counterparts

   121
     Section 9.22.   

Estoppel Certificates

   121
     Section 9.23.   

Payment of Expenses

   121
     Section 9.24.   

Non-Recourse

   122

 

SCHEDULES

1

     

Immediate Repairs Reserved for in Deferred Maintenance Escrow Account

2

     

Organizational Chart

3

     

Crossed Borrowers and Crossed Loans

4

     

Exceptions to Representations and Warranties

5

     

Addresses for Notices

6

     

Work Reserve Funding Conditions

7

     

DSCR Calculations

8.1(a)

     

Certificate of Executive Officer

8.1(b)

     

List of Prior Loan Documents

 

ii


LOAN AGREEMENT

 

THIS LOAN AGREEMENT, made as of November 3, 2004, is by and among GIP WAKEFIELD, LLC, a Delaware limited liability company, having an address at c/o Digital Realty Trust, L.P., 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025 (“ Borrower ”), and CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an address at 388 Greenwich Street, 11th Floor, New York, New York 10013 (together with its successors and assigns, whether one or more, “ Lender ”).

 

RECITALS

 

WHEREAS, Borrower desires to obtain from Lender the Loan in an amount equal to the Loan Amount (each as hereinafter defined) to, with respect to the Mortgaged Property (as hereinafter defined), finance a portion of the acquisition cost thereof, and/or refinance existing debt at such Mortgaged Property and to pay certain other fees and expenses;

 

WHEREAS, Lender is unwilling to make the Loan unless Borrower executes and delivers this Agreement, the Note and the Loan Documents (each as hereinafter defined) to which it is a party which shall establish the terms and conditions of, and provide security for, the Loan; and

 

WHEREAS, Borrower has agreed to establish certain accounts and to grant to Lender a security interest therein upon the terms and conditions of the security agreement set forth in Section 2.15 .

 

NOW, THEREFORE, in consideration of the making of the Loan by Lender and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereby covenant, agree, represent and warrant as follows:

 

ARTICLE I.

CERTAIN DEFINITIONS

 

Section 1.1. Definitions . For all purposes of this Agreement: (1) the capitalized terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; (2) all accounting terms have the meanings assigned to them in accordance with GAAP (as hereinafter defined) unless otherwise explicitly set forth herein; (3) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision; (4) the words “include,” “includes” or “including” shall be deemed to be followed by the phrase “without limitation,” if not already so drafted; and (5) the following terms have the following meanings:

 

Account Collateral ” has the meaning set forth in Section 2.15(a) hereof.

 

Accounts ” means all accounts (as defined in the relevant UCC), now owned or hereafter acquired by Borrower, and arising out of or in connection with, the operation of the


Mortgaged Property and all other accounts described in the Management Agreement and all present and future accounts receivable, inventory accounts, chattel paper, notes, insurance policies, Instruments, Documents or other rights to payment and all forms of obligations owing at any time to Borrower thereunder, whether now existing or hereafter created or otherwise acquired by or on behalf of Borrower, and all Proceeds thereof and all liens, security interests, guaranties, remedies, privileges and other rights pertaining thereto, and all rights and remedies of any kind forming the subject matter of any of the foregoing.

 

Affiliate ” of any specified Person means any other Person (i) controlling or controlled by or under common control with such specified Person; (ii) directly or indirectly owning or holding twenty percent (20%) or more of any equity interest in the first Person; or (iii) twenty percent (20%) or more of whose equity interests are directly or indirectly owned or held by the first Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Agreement ” means this Loan Agreement, together with the Schedules and Exhibits hereto, as the same may from time to time hereafter be modified, supplemented or amended.

 

Aggregate Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Allocated Amount ” has the meaning set forth in Section 2.7(b) hereof.

 

Applicable Crossed Loan Partial Defeasance Amount ” means, with respect to a Crossed Loan Total Defeasance, the portion of the “Aggregate Amount”, as defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance, which is equal to the “Allocated Amount” for the Loan (as a “Crossed Loan” as defined in such Crossed Loan Agreement), as such “Allocated Amount” is defined in and calculated pursuant to Section 2.7(b) of the Crossed Loan Agreement for the Crossed Loan subject to a Crossed Loan Total Defeasance.

 

Appraisal ” means each appraisal with respect to the Mortgaged Property prepared by an Appraiser in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches.

 

Appraiser ” means a nationally recognized MAI appraiser selected by Borrower and reasonably approved by Lender.

 

Approved Capital Expenditures ” has the meaning set forth in Section 2.13(a)(iii) hereof.

 

Approved Leasing Costs ” has the meaning set forth in Section 2.13(a)(iv) hereof.

 

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Assignment of Rents and Leases ” means the Assignment of Rents and Leases, dated as of the Closing Date, granted by the Borrower to Lender with respect to the Leases, as same may thereafter from time to time be supplemented, amended, modified or extended.

 

Basic Carrying Costs ” means the following costs with respect to the Mortgaged Property: (i) Impositions and (ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents.

 

Borrower ” has the meaning provided in the first paragraph of this Agreement.

 

Borrower Single Member ” has the meaning set forth in Section 8.1(ff)(A) .

 

Borrower’s Organizational Documents ” shall mean: (i) Borrower’s limited partnership agreement, if Borrower is a limited partnership, and (ii) Borrower’s limited liability company operating agreement, if Borrower is a limited liability company.

 

Business Day ” means any day other than a Saturday, a Sunday or a day on which commercial banks in the State of New York or the State of Illinois are authorized or obligated by law, governmental decree or executive order to be closed.

 

Capital Improvement Costs ” means costs incurred or to be incurred in connection with replacements and capital repairs made to the Mortgaged Property which would be capitalized in accordance with GAAP (including without limitation, TI Costs and Leasing Commissions).

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended, and as it may be further amended from time to time and any successor statutes thereto.

 

Chattel Paper ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “chattel paper” as defined in the UCC (whether tangible chattel paper or electronic chattel paper).

 

Closing Date ” means the date of the funding of the Loan.

 

Code ” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

Collateral ” means, collectively, the Land, Improvements, Leases, Rents, Personalty, and all Proceeds, and (to the full extent assignable) Permits, which is or hereafter may become subject to a Lien in favor Lender as security for the Loan (whether pursuant to the Mortgage, any other Loan Document or otherwise), all whether now owned or hereafter acquired and all other property which is or hereafter may become subject to a Lien in favor Lender as security for the Loan and including all property of any kind described as part of the Mortgaged Property under the Mortgage.

 

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Collateral Security Instrument ” means any right, document or instrument, other than the Mortgage, given as security for the Loan, including, without limitation, and the Contract Assignment.

 

Collection Account ” has the meaning set forth in Section 2.12(a)(i) hereof.

 

Collection Account Agreement ” means the Collection Account Agreement, dated as of the applicable date and executed by Borrower, Lender and the Collection Account Bank, relating to the Collection Account and the Reserve Accounts and any other accounts maintained with the Collection Account Bank.

 

Collection Account Bank ” means LaSalle Bank, National Association, or any successor financial institution appointed by Lender.

 

Condemnation Proceeds ” means, in the event of a Taking with respect to the Mortgaged Property, the proceeds in respect of such Taking less any reasonable third party out-of-pocket expenses incurred in prosecuting the claim for and otherwise collecting such proceeds.

 

Consumer Price Index ” means the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, in the area where the Mortgaged Property is located; All Items (1982-84 = 100), or any successor index thereto, appropriately adjusted and if the Consumer Price Index ceases to be published and there is no successor thereto, such other index as Agent and Borrower shall mutually agree upon.

 

Contest ” has the meaning set forth in Section 9.24(E)(11) hereof.

 

Contingent Obligation ” means, as used in the definition of Other Borrowings, without duplication, any obligation of Borrower guaranteeing any indebtedness, leases, dividends or other obligations (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly. Without limiting the generality of the foregoing, the term “ Contingent Obligation ” shall include any obligation of Borrower:

 

(i) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

 

(ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor;

 

(iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or

 

(iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof.

 

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The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming Borrower is required to perform thereunder).

 

Contract Assignment ” means, with respect to the Mortgaged Property, the Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the Closing Date and executed by the Borrower in favor of Lender.

 

Contracts ” means the Management Agreement and all other agreements to which Borrower is a party or which are assigned to Borrower by the Manager in the Management Agreement and which are executed in connection with the construction, operation and management of the Mortgaged Property (including, without limitation, agreements for the sale, lease or exchange of goods or other property and/or the performance of services by it, in each case whether now in existence or hereafter arising or acquired), as any such agreements have been or may be from time to time amended, supplemented or otherwise modified.

 

Crossed Borrowers ” shall mean the mortgage loan borrowers (other than Borrower) listed on Schedule 3 attached hereto and made a part hereof, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Indebtedness ” shall mean the Crossed Loans and all other “Indebtedness” as defined in each Crossed Loan Agreement.

 

Crossed Loan Agreements ” shall mean each Loan Agreement, each dated as of the date hereof, between Lender and each Crossed Borrower (i.e., a separate Loan Agreement for each Crossed Loan and Crossed Borrower), each as amended, modified, supplemented or restated from time to time, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Default ” shall mean any “Event of Default” as defined in any Crossed Loan Agreement, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Documents ” shall mean the “Loan Documents” as defined in each Crossed Loan Agreement for each Crossed Loan, including without limitation the promissory note(s), mortgage(s) and/or deed(s) of trust and Crossed Loan Agreement evidencing and/or securing each Crossed Loan and each of the Crossed Guaranties of the Crossed Loans, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loan Partial Defeasance Conditions ” shall have the meaning set forth in Section 2.7(b) hereof.

 

Crossed Loans ” shall mean each of the mortgage loans (other than the Loan) listed on Schedule 3 attached hereto and made a part hereof with respect to each Crossed Borrower, subject to modification pursuant to Section 2.11(g) hereof.

 

Crossed Loans Collection ” has the meaning set forth in Section 2.11(e) .

 

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Crossed Loan Total Defeasance ” with respect to a Crossed Loan shall mean a “Total Defeasance” (as defined in the Crossed Loan Agreement for such Crossed Loan) of such Crossed Loan.

 

Crossed Loan Total Defeasance Date ” with respect to a Crossed Loan subject to a Crossed Loan Total Defeasance, shall mean the “Total Defeasance Date” (as defined in the Crossed Loan Agreement for such Crossed Loan) for such Crossed Loan Total Defeasance of such Crossed Loan.

 

Crossed Obligor Insolvency Event ” has the meaning set forth in Section 2.11(d) .

 

Crossed Obligors ” has the meaning set forth in Section 2.11(c) .

 

Crossed Party Obligations ” has the meaning set forth in Section 2.11(c) .

 

Crossed Properties ” shall mean the “Mortgaged Property” securing each Crossed Loan, as defined in each Crossed Loan Agreement for each Crossed Loan, subject to modification pursuant to Section 2.11(g) hereof.

 

Cross Guaranties ” shall mean (i) each Guaranty of the Loan, each dated as of the date hereof, executed by each of the Crossed Borrowers, and (ii) each Guaranty, each dated as of the date hereof, of each of the Crossed Loans, each executed by the Borrower.

 

Cross Release Notice ” has the meaning set forth in Section 2.11(g) .

 

Debt Service Reserve Account ” has the meaning set forth in Section 2.13(c) .

 

Deed of Trust Trustee ” means the trustee under any Mortgage that constitutes a “deed of trust” under applicable law.

 

Default ” means the occurrence of any event which, but for the giving of notice or the passage of time, or both, would be an Event of Default.

 

Default Rate ” means the per annum interest rate equal to the lesser of (a) 5.0% per annum in excess of the rate otherwise applicable hereunder and (b) the maximum rate allowable by applicable law.

 

Defeasance ” means any of a Total Defeasance or a Partial Defeasance.

 

Defeasance Collateral ” shall mean Partial Defeasance Collateral or Total Defeasance Collateral, as applicable.

 

Defeasance Collateral Account ” has the meaning set forth in Section 2.7(d) .

 

Defeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Deferred Maintenance Escrow Account ” has the meaning set forth in Section 2.13(a) .

 

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Delaware Law Firm ” has the meaning set forth in Section 8.1(ff)(C) hereof.

 

Deposit Account ” means all “deposit accounts” as defined in the UCC.

 

Digital Realty Trust ” means Digital Realty Trust, Inc., a Maryland corporation.

 

Disclosure Certificate ” has the meaning set forth in Section 5.1(w) hereof.

 

Disclosure Documents ” has the meaning set forth in Section 5.1(w) hereof.

 

Documents ” means all “documents” as defined in the UCC (whether negotiable or non-negotiable) or other receipts covering, evidencing or representing goods.

 

DRT Operating Partnership ” means Digital Realty Trust, L.P., a Maryland limited partnership.

 

EO13224 ” has the meaning set forth in Section 4.1(v) hereof.

 

Eligible Account ” means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with a federal or state chartered depository institution or trust company that satisfies the Rating Criteria, or (ii) a segregated trust account maintained with the corporate trust department of a federal or state chartered depository institution or trust company subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either case, has corporate trust powers, acting in its fiduciary capacity and in either case having combined capital and surplus of at least $100,000,000 or otherwise acceptable to the Rating Agencies. An Eligible Account shall not be evidenced by a certificate of deposit, passbook, other instrument or any other physical indicia of ownership. Following a downgrade below the Rating Criteria, or a withdrawal, qualification or suspension of such institution’s rating, each account must at Lender’s request promptly (and in any case within not more than thirty (30) calendar days) be moved to a qualifying institution or to one or more segregated trust accounts in the trust department of such institution, if permitted.

 

Eligible Bank ” shall mean a bank that (i) satisfies the Rating Criteria and (ii) insures the deposits hereunder through the Federal Deposit Insurance Corporation.

 

Engineer ” means an Independent engineer selected by Borrower and reasonably approved by Lender.

 

Environmental Auditor ” means an Independent environmental auditor selected by Borrower and reasonably approved by Lender.

 

Environmental Claim ” means any notice, notification, request for information, claim, administrative, regulatory or judicial action, suit, judgment, demand or other written communication by any Person or Governmental Authority alleging or asserting liability with respect to Borrower or any Mortgaged Property (whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, response, remedial or cleanup costs, damages to natural resources, personal injuries, fines or penalties) arising out

 

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of, based on or resulting from (i) the presence, Use or Release into the environment of any Hazardous Substance at any location (whether or not owned, managed or operated by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law or (iii) any alleged injury or threat of injury to human health, safety or the environment.

 

Environmental Indemnity Agreement ” means the Environmental Indemnity Agreement dated as of the Closing Date, from Borrower and the Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as the same may be amended, modified or supplemented from time to time.

 

Environmental Laws ” means any and all present and future federal, state or local laws, statutes, ordinances, rules or regulations, or any judicial interpretation thereof, any judicial or administrative orders, decrees or judgments thereunder issued by a Governmental Authority, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to the environment, the effect of the environment on human health or safety, or the Release or threatened Release of Hazardous Substances or otherwise relating to the Use of Hazardous Substances.

 

Environmental Reports ” means each and every “Phase I Environmental Site Assessment” (and, if applicable, “Phase II Environment Site Assessment”) as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-2000, and an asbestos survey, in each case with respect to the Mortgaged Property, prepared by one or more Environmental Auditors and delivered to Lender and any amendments or supplements thereto delivered to Lender.

 

Equipment ” means all (i) all “equipment” as defined in the UCC, and (ii) all of the following (regardless of how classified under the UCC): all personal property constituting furniture, fittings, appliances, apparatus, leasehold improvements, machinery, devices, interior improvements, appurtenances, equipment, plant, furnishings, fixtures, computers, electronic data processing equipment, telecommunications equipment and other fixed assets now owned or hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all additions to, substitutions for, replacements of or accessions to any of the items recited as aforesaid and all attachments, components, parts (including spare parts) and accessories, whether installed thereon or affixed thereto, all regardless of whether the same are located on any Mortgaged Property or are located elsewhere (including, without limitation, in warehouses or other storage facilities or in the possession of or on the premises of a bailee, vendor or manufacturer) for purposes of manufacture, storage, fabrication or transportation and all extensions and replacements to, and proceeds of, any of the foregoing.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

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ERISA Affiliate ” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower is a member.

 

Event of Default ” has the meaning set forth in Section 7.1 hereof.

 

Excluded Borrower ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Guaranties ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan(s) ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Agreement ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Loan Documents ” has the meaning set forth in Section 2.11(g) hereof.

 

Excluded Property ” has the meaning set forth in Section 2.11(g) hereof.

 

First Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

First Open Defeasance Date ” shall mean the earlier of (i) the Payment Date in December, 2008, or (ii) the date that is two (2) years from the “start up day” (within the meaning of Section 860G(a)(9) of the IRC) of the REMIC Trust established in connection with the final Securitization involving the Loan.

 

First Open Prepayment Date ” is the Payment Date which is in the second month preceding the month in which the Scheduled Maturity Date occurs. For example, if the Scheduled Maturity Date is November 11, 2014, the First Open Prepayment Date is the Payment Date in the month of September, 2014.

 

First Payment Date ” has the meaning set forth in Section 2.5 hereof.

 

Fiscal Year ” means the 12-month period ending on December 31st of each year (or, in the case of the fiscal year in which the Closing Date occurs, such shorter period from the Closing Date through such date) or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender.

 

Fitch ” means Fitch, Inc. and its successors.

 

Foreign Lender ” has the meaning set forth in Section 2.10(b) hereof.

 

Fund ” has the meaning set forth in the definition of “Permitted Investments”.

 

GAAP ” means generally accepted accounting principles in the United States of America as of the date of the applicable financial report, consistently applied.

 

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General Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “general intangibles” as defined in the relevant UCC, now owned or hereafter acquired by Borrower and (ii) all of the following (regardless of how characterized): all agreements, covenants, restrictions or encumbrances affecting the Mortgaged Property or any part thereof.

 

Governmental Authority ” means any national or federal government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality of any of the foregoing (including, without limitation, any court or tribunal) lawfully exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

Gross Revenue ” means, for any period, the total dollar amount of all income and receipts received by, or for the account of, Borrower in the ordinary course of business with respect to the Mortgaged Property, but excluding Loss Proceeds (other than the proceeds of business interruption insurance or the proceeds of a temporary Taking in lieu of Rents which shall be included in Gross Revenue).

 

Guarantor ” means Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, on a joint and several basis.

 

Guaranty of Nonrecourse Obligations ” means, with respect to the Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse provisions of the Loan Documents for which liability is retained as described in Section 9.24 hereof from the Guarantor to Lender.

 

Hazardous Substance ” means, collectively, (i) any petroleum or petroleum products or waste oils, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls (“ PCBs ”), lead in drinking water, lead-based paint and radon, (ii) any chemicals or other materials or substances which are now or hereafter become defined as or included in the definitions of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import under any Environmental Law, and (iii) any other chemical or any other hazardous material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law.

 

Immediate Repairs ” has the meaning set forth in Section 2.13(a)(ii) hereof.

 

Impositions ” means all real estate and personal property taxes and assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed within the term of the Loan), ground rents, water, sewer or other rents and charges, excises, levies, governmental fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, in respect of the Mortgaged Property (including all interest and penalties thereon), accruing during or in

 

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respect of the term hereof and which may be assessed against or imposed on or in respect of or be a Lien upon any Mortgaged Property, or any other collateral delivered or pledged to Lender in connection with the Loan, or any part thereof or any Rents therefrom or any estate, right, title or interest therein.

 

Improvements ” means all buildings, structures, fixtures and improvements now or hereafter owned by Borrower of every nature whatsoever situated on any Land constituting part of the Mortgaged Property (including, without limitation, all gas and electric fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, carpeting and other floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus which are or shall be affixed to the Land or said buildings, structures or improvements and including any additions, enlargements, extensions, modifications, repairs or replacements thereto).

 

Indebtedness ” means the Principal Indebtedness, together with all other obligations and liabilities due or to become due to Lender pursuant hereto, under the Note or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses paid by or payable to Lender hereunder or pursuant to the Note or any of the other Loan Documents.

 

Indemnified Parties ” has the meaning set forth in Section 5.1(i) .

 

Independent ” means, when used with respect to any Person, a Person that (i) does not have any direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower (other than any such Affiliate of Borrower that is an Affiliate of Borrower solely as a result of such Affiliate’s ownership of a less than twenty percent (20%) ownership interest in Digital Realty Trust), (ii) is not connected with Borrower or any Affiliate of Borrower as an officer, employee, trustee, partner, director or person performing similar functions, and (iii) is not a member of the immediate family of any Person described in clauses (i) or (ii).

 

Independent Director ” means, (a) with respect to the SPC Party if the SPC Party is a corporation, one (1) duly appointed member of the board of directors of the SPC Party who is reasonably satisfactory to Lender who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a shareholder of, or an officer, director, partner, paid consultant or employee of, Borrower or any of its shareholders, subsidiaries or affiliates, a customer of, or supplier to, Borrower or any of its shareholders, subsidiaries or affiliates, or a person or other entity controlling or under common control with any such shareholder, partner, supplier or customer, or a member of the immediate family of any such shareholder, officer, director, partner, employee, supplier or customer of Borrower, and (b) with respect to the SPC Party if the SPC Party is a limited liability company, and with respect to the Borrower if the Borrower is a limited liability company, one (1) duly appointed independent manager of the SPC Party or Borrower (as applicable) who is also a non-economic member of SPC Party or Borrower (as applicable), who is reasonably satisfactory to Lender and who shall be an individual, natural person and who shall not have been at the time of such individual’s appointment, and may not have been at any time during the preceding five years, a member or manager of, or an officer,

 

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director, partner, paid consultant or employee of, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), a customer of, or supplier to, SPC Party or Borrower (as applicable) or any of their respective members, subsidiaries or affiliates (as applicable), or a person or other entity controlling or under common control with any such member, partner, supplier or customer, or a member of the immediate family of any such member, officer, director, partner, employee, supplier or customer of SPC Party or Borrower (as applicable). As used herein, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract or otherwise.

 

Instruments ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “instruments” as defined in the UCC.

 

Insurance Gap ” has the meaning set forth in Section 5.1(x)(iv)(F) hereof.

 

Insurance Escrow Account ” has the meaning set forth in Section 2.13(b) .

 

Insurance Premiums ” has the meaning set forth in Section 5.1(x)(iii) .

 

Insurance Proceeds ” means, in the event of a casualty with respect to the Mortgaged Property, the proceeds received under any insurance policy applicable thereto.

 

Insurance Requirements ” means all material terms of any insurance policy required pursuant to this Agreement or the Mortgage and all material regulations, rules and other requirements of the National Board of Fire Underwriters or such other body exercising similar functions applicable to or affecting the Mortgaged Property or any part thereof or any use or condition thereof.

 

Insured Casualty ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Intellectual Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under the trademark licenses, trademarks, rights in intellectual property, trade names, service marks and copyrights, copyright licenses, patents, patent licenses or the license to use intellectual property such as computer software owned or licensed by Borrower or other proprietary business information relating to Borrower’s policies, procedures, manuals and trade secrets with respect to the Mortgaged Property.

 

Interested Parties ” has the meaning set forth in Section 5.1(w) hereof.

 

Inventory ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “inventory” as defined in the UCC and shall include all Documents representing the same.

 

Investment Property ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “investment property” as defined in the UCC.

 

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Land ” means the parcels of real estate described on Exhibit A attached to the Mortgage and made a part hereof.

 

Leases ” means all leases, subleases, lettings, occupancy agreements, tenancies and licenses by Borrower as landlord of the Mortgaged Property or any part thereof now or hereafter entered into, and all amendments, extensions, renewals and guarantees thereof, and all security therefor.

 

Leasing Commissions ” means leasing commissions incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located at the Mortgaged Property.

 

Leasing Costs/TI Costs Account ” has the meaning set forth in Section 2.13(a) .

 

Legal Requirements ” means all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, any of the foregoing relating to zoning, parking or land use, any and all Environmental Laws and the Americans with Disabilities Act) affecting Borrower or any Mortgaged Property or any part thereof or the construction, use, alteration or operation thereof, or any part thereof (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto, at any time in force affecting Borrower or the Mortgaged Property or any part thereof (including, without limitation, any which may require repairs, modifications or alterations in or to the Mortgaged Property or any part thereof).

 

Lender ” has the meaning provided in the first paragraph of this Agreement.

 

Letter of Credit Rights ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “letter of credit rights” as defined in the UCC.

 

Lien ” means any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, assignment, security interest, or any other encumbrance or charge on Borrower or any Mortgaged Property or any portion thereof, or any interest therein (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and mechanic’s, materialmen’s and other similar liens and encumbrances).

 

Loan ” means the loan made by Lender to Borrower pursuant to the terms of this Agreement.

 

Loan Amount ” means an amount equal to $36,300,000.

 

Loan Documents ” means this Agreement, the Note, the Contract Assignment, the Management Agreement, the Manager’s Subordination, the Mortgage, the Assignment of Rents and Leases, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse Obligations, the Crossed Guaranties of the Loan (subject to modification pursuant to Section 2.11(g) hereof) and all other agreements, instruments, certificates and documents delivered by or on behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan, as the same may be amended or modified from time to time.

 

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Local Collection Account ” and “ Local Collection Account Bank ” have the meanings set forth in Section 2.12(a)(i) .

 

Local Collection Account Agreement ” means with respect to the Local Collection Account, the lockbox agreement, dated as of the applicable date and executed by Borrower, Lender and the Local Collection Account Bank.

 

Loss Proceeds ” means Condemnation Proceeds and/or Insurance Proceeds.

 

Loss Proceeds Account ” has the meaning set forth in Section 2.12(e) hereof.

 

Losses ” has the meaning set forth in Section 5.1(j)(i) .

 

Management Agreement ” means with respect to any Mortgaged Property, the property management agreement entered into between the Borrower and the Manager, in such form as may be reasonably approved by Lender, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time, and any management agreement which may hereafter be entered into with respect to any Mortgaged Property in accordance with the terms and conditions hereof, as the same may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time.

 

Manager ” means CB Richard Ellis-N.E. Partners, LP, the current manager of the Mortgaged Property under the current Management Agreement, or such other Person as may hereafter be charged with management of any Mortgaged Property pursuant to a Management Agreement entered into in accordance with the terms and conditions hereof.

 

Manager’s Subordination ” means, with respect to the Mortgaged Property, initially each Manager’s Consent and Subordination of Management Agreement, each executed by the Manager, Borrower and Lender, dated as of the Closing Date, and in the event a successor or assignee Manager is engaged at any Mortgaged Property, a subordination agreement executed by Manager, Borrower and Lender in form and substance satisfactory to Lender, whereby, among other things, the Management Agreement is subordinated to the Indebtedness and to the Lien of the Mortgage so long as the Loan remains outstanding.

 

Material Adverse Effect ” means a material adverse effect upon (i) the business operations, properties, assets or condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or (iii) the aggregate value of the Mortgaged Property.

 

Material Action ” has the meaning set forth in Section 8.1(ee)(A) .

 

Maturity Date ” means the earlier of (a) the Scheduled Maturity Date or (b) such earlier date on which the entire Loan is required to be paid in full, by acceleration or otherwise under this Agreement or any of the other Loan Documents.

 

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Maximum Rate ” has the meaning set forth in Section 2.5(e) hereof.

 

Moody’s ” means Moody’s Investors Services, Inc. and its successors.

 

Money ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “money” as defined in the UCC and (ii) all moneys, cash, or other items of legal tender generated from the use or operation of the Mortgaged Property.

 

Monthly Debt Service Payment ” has the meaning set forth in Section 2.5(a) hereof.

 

Monthly Debt Service Payment Amount ” has the meaning set forth in Section 2.5(a) hereof.

 

Mortgage ” means, with respect to the Mortgaged Property, a first priority (subject to Permitted Encumbrances) Mortgage or Deed of Trust (as applicable), Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date (and, if there are more than one, each and every one of them), granted by the Borrower to or for the benefit of Lender or Deed of Trust Trustee for the benefit of Lender, respectively, with respect to the Mortgaged Property as security for the Loan, as same may thereafter from time to time be supplemented, amended, modified or extended by one or more agreements supplemental thereto.

 

Mortgaged Property ” means, at any time, individually or collectively, as applicable, the Land, the Improvements, the Personalty, the Leases and the Rents, and all rights, titles, interests and estates appurtenant thereto, encumbered by, and more particularly described in, the Mortgage.

 

Multiemployer Plan ” means a multiemployer plan defined as such in Section 3(37) of ERISA and which is covered by Title IV of ERISA (i) to which contributions have been, or were required to have been made by Borrower or any ERISA Affiliate within the past six years or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

Net Proceeds ” means either (x) the purchase price (at foreclosure or otherwise) actually received by Lender from a third party purchaser with respect to any Mortgaged Property, as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default or (y) in the event that Lender (or its nominee) is the purchaser at foreclosure of any Mortgaged Property, the higher of (i) the amount of Lender’s credit bid or (ii) such amount as shall be determined in accordance with applicable law, and in either case minus all reasonable third party, out of pocket costs and expenses (including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable) incurred by Lender (and its nominee, if applicable) in connection with the exercise of such remedies; provided , however , that such costs and expenses shall not be deducted to the extent such amounts previously have been added to the Indebtedness in accordance with the terms of the Loan Documents or applicable law.

 

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Note ” means one or more promissory notes made by Borrower to Lender pursuant to this Agreement, as such note may be modified, amended, supplemented, restated or extended, and any replacement notes therefor.

 

Noteholder ” has the meaning set forth in Section 2.10(b) hereof.

 

O&M Program ” has the meaning set forth in Section 5.1(d)(iv) hereof.

 

OFAC ” has the meaning set forth in Section 4.1(v) hereof.

 

Officer’s Certificate ” means a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower.

 

Operating Budget ” means, with respect to any Fiscal Year, the operating budget for the Mortgaged Property reflecting Borrower’s projections of Gross Revenues and Property Expenses for the Mortgaged Property for such Fiscal Year, prepared on an annual and monthly basis, and submitted by Borrower to Lender in accordance with the provisions of Section 5.1(r)(viii) .

 

Operating Expense Account ” has the meaning provided in Section 2.13(c) .

 

Operating Expenses ” means, for any period of calculation, all expenditures incurred and required to be expensed under GAAP during such period in connection with the ownership, operation, maintenance, repair and/or leasing of the Mortgaged Property, including without limitation (or duplication) Property Expenses. Notwithstanding the foregoing, Operating Expenses shall not include (a) Capital Improvement Costs, (b) any extraordinary items (unless Lender and Borrower approve of the inclusion of such items as Operating Expenses), (c) depreciation, amortization and other non-cash charges or (d) any payments of principal or interest on the Indebtedness or otherwise payable to the holder of the Indebtedness. Operating Expenses shall be calculated on the accrual basis of accounting.

 

Organizational Agreements ” means, with respect to a particular Person, individually or collectively, as applicable: the operating agreements and certificates of organization of any such Person that is a limited liability company, the limited partnership agreement and certificate of limited partnership of any such Person that is a limited partnership, or the bylaws and articles of organization of any such Person that is a corporation, each as in effect on the Closing Date, each as amended or restated from time to time.

 

Other Borrowings ” means, with respect to Borrower, without duplication (but not including the Indebtedness or any interest rate protection agreement entered into pursuant hereto) (i) all indebtedness of Borrower for borrowed money or for the deferred purchase price of property or services, (ii) all indebtedness of Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the face amount of all letters of credit issued for the account of Borrower and, without duplication, all unreimbursed amounts drawn thereunder, and obligations evidenced by bankers’ acceptances, (iv) all indebtedness of Borrower secured by a Lien on any property owned by Borrower (whether or not such indebtedness has been assumed), (v) all Contingent Obligations of Borrower, (vi) liabilities and obligations for the payment of money relating to a capitalized lease obligation or sale/leaseback obligation, (vii) liabilities and obligations

 

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representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of Borrower’s business that would constitute ordinarily a trade payable to trade creditors, and (viii) all payment obligations of Borrower, if any, under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars or similar agreements) and similar agreements.

 

Partial Defeasance ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Amount ” has the meaning set forth in Section 2.7(c) .

 

Partial Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Defeased Note after the Partial Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

Partial Defeasance Date ” has the meaning set forth in Section 2.7(c) .

 

Payment Date ” has the meaning provided in Section 2.5(a) .

 

Payment Intangibles ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under all “payment intangibles” as defined in the UCC.

 

PBGC ” means the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.

 

Permits ” means all licenses, permits, variances and certificates required by Legal Requirements to be obtained by Borrower and used in connection with the ownership, operation, use or occupancy of the Mortgaged Property (including, without limitation, certificates of occupancy, building permits, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority or private Person concerning ownership, operation, use or occupancy of the Mortgaged Property).

 

Permitted Encumbrances ” means, with respect to the Mortgaged Property, collectively, (i) the Lien created by the Mortgage, or any other Loan Documents of record encumbering the Mortgaged Property, (ii) all Liens and other matters disclosed on the Title Insurance Policy concerning the Mortgaged Property, (iii) Liens, if any, for Impositions imposed by any Governmental Authority not yet delinquent or being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, (iv) mechanic’s or materialmen’s Liens, if any, being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof and the Mortgage, provided that no foreclosure has been commenced by the lien claimant, (v) rights of existing and future tenants and residents as tenants only pursuant to Leases, (vi) Liens for public utilities, (vii) Liens, if any, for charges or fees relating to the maintenance of any of the Pledged Accounts, in favor of the depository institution at which such Pledged Accounts are maintained, and (viii) Liens, if any, relating to financing leases and purchase money debt permitted under Section 8.1(e)(iii) , in each

 

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case only on the applicable equipment or other personal property which is the subject of such financing lease or purchase money debt), which Liens and encumbrances referred to in clauses (i)-(viii) above do not materially and adversely affect (1) the ability of Borrower to pay in full the Principal Indebtedness and interest thereon in a timely manner, (2) the use of any Mortgaged Property for the use currently being made thereof, or (3) the operation of any Mortgaged Property as currently being operated.

 

Permitted Investments ” means any one or more of the following obligations or securities acquired at a purchase price of not greater than par:

 

(i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and provided that such obligations are one or more of the following: (A) U.S. Treasury obligations (all direct or fully guaranteed obligations), (B) General Services Administration participation certificates, and (C) Small Business Administration guaranteed participation certificates and guaranteed pool certificates;

 

(ii) the following obligations of the following United States of America government sponsored agencies: (A) Federal Home Loan Mortgage Corp. debt obligations, (B) Farm Credit System consolidated systemwide bonds and notes, (C) Federal Home Loan Banks consolidated debt obligations, and (D) Federal National Mortgage Association debt obligations;

 

(iii) unsecured certificates of deposit and time deposits with maturities of not more than 365 days of any bank, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies;

 

(iv) certificates of deposit, time deposits and demand deposits issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies, which investments are fully insured by the Federal Deposit Insurance Corp.; and

 

(v) any other demand, money market or time deposit, demand obligation or any other obligation, security or investment, which Lender shall have approved in writing and for which Borrower shall have delivered a Rating Confirmation;

 

provided , however , that (A) the investments described in clauses (i) through (vii) above must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (C) such investments must not be subject to liquidation prior to their maturity or have an “r” suffix affixed to its rating by S&P; and provided , further , that, in the judgment of Lender, such instrument continues to qualify as a “cash flow investment” pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no instrument or security shall be a

 

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Permitted Investment if such instrument or security evidences (x) a right to receive only interest payments or (y) the right to receive principal and interest payments derived from an underlying investment at a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.

 

Permitted Transfer ” means (i) so long as Digital Realty Trust remains a publicly traded company, any Transfer of stock in Digital Realty Trust, (ii) any Transfer of any limited partnership interests in DRT Operating Partnership, or (iii) any creation or sale or other conveyance (but not a mortgage, encumbrance, pledge, hypothecation, or grant of a security interest) of other limited partnership interests in DRT Operating Partnership; provided , in the case of each of the foregoing clauses (i), (ii) and (iii), that after giving effect to any such Transfer, (A) DRT Operating Partnership continues to directly or indirectly (through ownership of the SPC Party and each “SPC Party” (as defined in each Crossed Loan Agreement (a “Crossed SPC Party”)) own 100% of the direct or indirect ownership interests in the SPC Party and Borrower, and each Crossed SPC Party and Crossed Borrower, and control the operations and management of each SPC Party and Borrower and each Crossed SPC Party and Crossed Borrower, and (B) Digital Realty Trust continues to be the sole general partner in DRT Operating Partnership, to own directly not less than 30% of the voting and beneficial ownership interests in DRT Operating Partnership, and to control the operations and management of DRT Operating Partnership, and provided further, that under no circumstance shall any Transfer of any direct ownership interest in Borrower constitute a Permitted Transfer hereunder.

 

Person ” means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

Personalty ” means all Equipment, Inventory, Accounts, General Intangibles, Instruments, Investment Property, Receivables, Pledged Accounts, Deposit Accounts, Contracts and Intellectual Property and all other personal property as defined in the relevant UCC, now owned or hereafter acquired by Borrower and now or hereafter affixed to, placed upon, used in connection with, arising from or otherwise related to the Mortgaged Property or which may be used in or relating to the planning, development, financing or operation of such Mortgaged Property, including, without limitation, furniture, furnishings, equipment, machinery, money, insurance proceeds, accounts, contract rights, trademarks, goodwill, chattel paper, documents, trade names, licenses and/or franchise agreements, rights of Borrower under leases of fixtures or other personal property or equipment, inventory, all refundable, returnable or reimbursable fees, deposits or other funds or evidences of credit or indebtedness deposited by or on behalf of Borrower with any governmental authorities, boards, corporations, providers of utility services, public or private, including specifically, but without limitation, all refundable, returnable or reimbursable tap fees, utility deposits, commitment fees and development costs.

 

Plan ” means an employee benefit plan (as defined in Section 3(3) of ERISA), other than a Multiemployer Plan, that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, and (i) was established or maintained by Borrower or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Borrower or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions or (ii) with respect to which Borrower would reasonably be expected to incur liability.

 

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Pledged Accounts ” means the Local Collection Account, the Collection Account, the Reserve Accounts, the Loss Proceeds Account, the Security Deposit Account, any additional accounts now or hereafter maintained by or on behalf of Borrower hereunder and pledged to Lender pursuant to the Loan Documents and any sub-accounts of any of the foregoing and any successor accounts to any of the foregoing.

 

Policies ” has the meaning provided in Section 5.1(x)(iii) .

 

Pre-existing Condition ” has the meaning set forth in Section 5.1(x)(iii)(B) hereof.

 

Prepayment Consideration ” has the meaning set forth in Section 2.6(c) hereof.

 

Principal Indebtedness ” means the principal amount of the Loan outstanding as adjusted by each increase (including advances made by Lender to protect the Collateral), or decrease in such principal amount of the Loan outstanding, whether as a result of prepayment or otherwise, from time to time.

 

Prior Loans ” means the, collectively, the loan or loans made pursuant to the Prior Loan Documents.

 

Prior Loan Documents ” shall mean those documents listed on Schedule 8.1(b) .

 

Proceeds ” shall have the meaning given in the UCC and, in any event, shall include, without limitation, all of Borrower’s right, title and interest in and to proceeds, product, offspring, rents, profits or receipts, in whatever form, arising from the Collateral.

 

Prohibited Person ” has the meaning set forth in Section 4.1(v) hereof.

 

Property Expenses ” means, with respect to the Mortgaged Property (and without duplication), the following costs and expenses but only, in the case of costs and expenses in respect of goods and services, to the extent that they (x) are paid to Persons who are generally in the business of providing such goods and services, (y) are customary for the types of goods or services provided in the geographical area in which such goods or services are provided and (z) do not constitute Capital Improvement Costs:

 

(i) Impositions (other than in the nature of income taxes);

 

(ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents or otherwise maintained by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary course of business with respect to the Mortgaged Property;

 

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(iii) the cost of all electricity, oil, gas, water, steam, heat, ventilation, air conditioning and any other energy, utility or similar item and overtime services with respect to the Mortgaged Property;

 

(iv) payments required under service contracts for any services or items used at the Mortgaged Property or otherwise used in the operation of the Mortgaged Property (including, without limitation, service contracts for heating, ventilation and air conditioning systems, elevators, landscape maintenance, pest extermination, security, furniture, trash removal, answering service and credit checks);

 

(v) wages, benefits, payroll taxes, uniforms, the cost of cleaning supplies and all related expenses for on-site personnel directly involved in the day-to-day operation of the Mortgaged Property (including, without limitation, housekeeping employees, porters and general repair, maintenance and security employees), whether hired by Borrower, Manager or any other Person, except that if such amounts are paid by the Manager using the Manager’s funds, such amounts shall constitute “Property Expenses” only to the extent the Manager is entitled to be reimbursed for such amounts by Borrower or otherwise from revenues of the Mortgaged Property (but without duplication of amounts described in clause (xv) below);

 

(vi) costs required in connection with the enforcement of any Lease (including, without limitation, reasonable attorneys’ fees, charges for lock changes and storage and moving expenses for furniture, fixtures and equipment);

 

(vii) advertising and rent-up expenses (including, without limitation, leasing services, tenant rent concessions, promotions for existing and prospective tenants, banners and signs);

 

(viii) out-of-pocket cleaning, maintenance and repair expenses;

 

(ix) any expense the total cost of which is passed through to tenants pursuant to executed Leases;

 

(x) legal, accounting, auditing and other professional fees and expenses incurred in connection with the ownership, leasing and operation of the Mortgaged Property (including, without limitation, collection costs and expenses), but excluding any such fees and expenses incurred in connection with the closing of the Loan;

 

(xi) permits, licenses and registration fees and costs;

 

(xii) any expense necessary in order to prevent a breach under a Lease;

 

(xiii) any expense necessary in order to prevent or cure a violation of any Legal Requirement (including Environmental Law), regulation, code or ordinance;

 

(xiv) costs and expenses of security and security systems provided to and/or installed and maintained with respect to the Mortgaged Property;

 

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(xv) without duplication of any other expenses enumerated hereunder, fees and expenses of property managers contracted with by Borrower to perform management, administrative, payroll or other services in connection with the operation of the Mortgaged Property (including, without limitation, the fees and expenses owed to Manager under any Management Agreement which the Lender has approved in accordance with this Agreement);

 

(xviii) any other costs and expenses contemplated by the Operating Budget and customarily incurred in connection with operating properties similar in type and character to the Mortgaged Property;

 

(xix) any other category of property expense that is customary for a property of the type and size as the Mortgaged Property and is reasonably approved by Lender; and

 

(xx) any other property expense reasonably approved by Lender.

 

Quarterly Statement ” has the meaning provided in Section 5.1(r)(iv) .

 

Rating Agencies ” means at least two of Fitch, Moody’s and S&P (or, if a Secondary Market Transaction has occurred in which Securities have been issued, each of the foregoing that rated such Securities).

 

Rating Criteria ” with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1” by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by Fitch, if deposits are held by such Person for a period of one month or more.

 

Rating Confirmation ” with respect to any transaction, matter or action in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, the written confirmation of the Rating Agencies that such transaction, matter or action shall not, in and of itself, result in the downgrading, withdrawal or qualification of the then-current ratings assigned to any of the Securities issued in connection with a Securitization; and (ii) if any portion of the Loan has not been the subject of a Securitization, Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which any portion of the Loan reasonably be expected to be securitized) that no rating for any Securities that would be issued in connection with a Securitization involving any of such portion of the Loan would be downgraded, qualified, or withheld by reason of such transaction, matter or action.

 

Real Estate Taxes Escrow Account ” has the meaning provided in Section 2.13(b) .

 

Receivables ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) any Accounts, Chattel Paper, Instruments, Payment Intangibles, Letter of Credit Rights, Documents, insurance policies, drafts, bills of

 

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exchange, trade acceptances, notes or other indebtedness owing to Borrower with respect to the Mortgaged Property, from whatever source arising, (ii) to the extent not otherwise included above, (a) all income, Rents, issues, profits, revenues, deposits and other benefits from the Mortgaged Property and (b) all receivables and other obligations now existing or hereafter arising, or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the Mortgaged Property or other commercial space located at the Mortgaged Property or acquired from others (including, without limiting the generality of the foregoing, from rental of space, halls, stores, and offices, and deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, wholesale and retail sales of food and beverages, merchandise, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance), (iii) all of the books and records (whether in tangible, electronic or other form) now or hereafter maintained by or on behalf of Borrower in connection with the operation of the Mortgaged Property or in connection with any of the foregoing and (iv) all Supporting Obligations and all liens and security interests securing any of the foregoing and all other rights, privileges and remedies relating to any of the foregoing.

 

Register ” has the meaning set forth in Section 9.9(a) .

 

Release ” means any active or passive release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata).

 

REIT ” means a real estate investment trust under Sections 856-860 of the Code.

 

REIT Distribution Requirement ” means distributions reasonably necessary for a Person to maintain its status as a REIT and not be subject to corporate-level tax based on income or to excise tax under Section 4981 of the Code.

 

Remedial Work ” has the meaning set forth in Section 5.1(d)(i) .

 

Rents ” means all income, rents (including base rent), issues, profits, revenues (including all oil and gas or other mineral royalties and bonuses), deposits (other than utility and security deposits) and other benefits from the Mortgaged Property.

 

Replacement Reserve Account ” has the meaning set forth in Section 2.13(a)(i) .

 

Reserve Account(s) ” means the Deferred Maintenance Escrow Account, the Replacement Reserve Account, the Leasing Costs/TI Costs Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account and the Debt Service Reserve Account, collectively, and any successor accounts to any of the foregoing.

 

Restoration ” has the meaning set forth in Section 5.1(x)(iv)(B) .

 

Scheduled Defeasance Payments ” shall mean scheduled payments of interest and principal under the Note in the case of a Total Defeasance and under the Defeased Note in the

 

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case of a Partial Defeasance for all Payment Dates occurring after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), and up to and including the Scheduled Maturity Date (including, in the case of a Total Defeasance, the outstanding principal balance of the Loan as of the Scheduled Maturity Date and, in the case of a Partial Defeasance, the outstanding principal balance of the Defeased Note as of the Scheduled Maturity Date), and all payments required after the Total Defeasance Date (in the case of a Total Defeasance) or Partial Defeasance Date (in the case of a Partial Defeasance), if any, under the Loan Documents for servicing fees, and other similar charges, which shall include (and Borrower shall be required hereby to include in the Defeasance Collateral Lender’s reasonable estimate of the cost and expenses of) reasonable fees and charges associated with the maintenance and administration of the Defeasance Collateral and any Successor Borrower.

 

Scheduled Maturity Date ” mean November 11, 2014.

 

S&P ” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc and its successors.

 

Secondary Market Transaction ” has the meaning set forth in Section 5.1(w) .

 

Second Notice ” has the meaning set forth in Section 5.1(z)(ii) hereof.

 

Security Agreement ” shall mean a security agreement in form and substance that would be satisfactory to a prudent lender pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral.

 

Securities ” means mortgage pass-through certificates or other securities issued in a Secondary Market Transaction and evidencing a beneficial interest in or secured in whole or in part by the Loan in a rated or unrated public offering or private placement.

 

Securitization ” means a Secondary Market Transaction in which any Securities have been issued which have been rated by any Rating Agency.

 

Security Deposits ” shall mean all security (whether cash, letter of credit or otherwise) given to Borrower or any agent or Person acting on behalf of Borrower in connection with the Leases.

 

Security Deposit Account ” has the meaning set forth in Section 2.13(a)(i) .

 

SPC Party ” shall have the meaning set forth in Section 8.1(ee)(A) .

 

SPC Party’s Organizational Documents ” shall mean: (i) the SPC Party’s articles of incorporation, if the SPC Party is a corporation, and (ii) the SPC Party’s limited liability company operating agreement, if the SPC Party is a limited liability company.

 

SPC Single Member ” has the meaning set forth in Section 8.1(ee)(A) .

 

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Successor Borrower ” has the meaning set forth in Section 2.7(e) .

 

Supporting Obligations ” means all of Borrower’s right, title and interest, whether now owned or hereafter acquired, in, to and under (i) all “supporting obligations” as defined in the UCC and (ii) any other guarantee, letter of credit, secondary obligation, right or privilege that supports or pertains to any of the Mortgaged Property.

 

Survey ” means a certified ALTA/ACSM survey of the Mortgaged Property prepared by a registered Independent surveyor, containing the form of survey or certification provided to Borrower by Lender and in form and content reasonably satisfactory to Lender and the company issuing the Title Insurance Policy for the Mortgaged Property.

 

Taking ” means a taking or voluntary conveyance during the term hereof of all or part of any Mortgaged Property, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority affecting the Mortgaged Property or any portion thereof whether or not the same shall have actually been commenced.

 

TI Costs ” means tenant improvement costs and allowances incurred by Borrower in connection with renewing (hereafter) existing Leases or executing new Leases for space located in the Mortgaged Property.

 

Title Insurance Policy ” means a mortgagee’s title insurance policy or policies (i) issued by one or more title companies reasonably satisfactory to Lender which policy or policies shall (unless Lender otherwise requires or consents) be in form ALTA 1992, where available (with waiver of arbitration provisions), naming Lender as the insured party, (ii) insuring the Mortgage as being a first and prior lien (subject to Permitted Encumbrances) upon the Mortgaged Property constituting real property, (iii) showing no encumbrances against any Mortgaged Property constituting real property (whether junior or superior to the Mortgage) which are not reasonably acceptable to Lender (other than Permitted Encumbrances), (iv) in the amount of the Loan Amount, and (v) otherwise in form and content reasonably acceptable to Lender. Such Title Insurance Policy shall include the following endorsements or affirmative coverages in form and substance reasonably acceptable to Lender, to the extent available in the jurisdiction in which the Land is located: variable rate endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage; separate tax parcel coverage; contiguity (if applicable) coverage; and such other endorsements as Lender shall reasonably require with respect to a particular Mortgaged Property in order to provide insurance against specific risks identified by Lender in connection with the Mortgaged Property.

 

Total Defeasance ” shall have the meaning set forth in Section 2.7(a) .

 

Total Defeasance Collateral ” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note and this Agreement after the Total Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates.

 

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Total Defeasance Date ” has the meaning set forth in Section 2.7(a)(i) .

 

Transaction ” means the transactions contemplated by the Loan Documents.

 

Transaction Costs ” means all costs and expenses paid or payable by Borrower relating to the Transaction (including, without limitation, appraisal fees, reasonable legal fees and accounting fees and the costs and expenses described in Section 9.23 ).

 

Transfer ” means the conveyance, assignment, sale, mortgaging, encumbrance (other than a Permitted Encumbrance), pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any direct or indirect (irrespective of the number of tiers of ownership) legal or beneficial interest (a) in all or any portion of the Mortgaged Property; or (b) any stock, partnership interests, membership interests, economic rights to distributions or dividends, or other ownership interests in Borrower or the constituent entities directly or indirectly (irrespective of the number of tiers of ownership) owning any such stock, partnership interests, membership interests or other ownership interests. A Transfer shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower (or any Affiliate of Borrower) agrees to sell the Mortgaged Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower (or any Affiliate of Borrower) leasing all or a substantial part of the Mortgaged Property to one or more Persons pursuant to a single or related transactions (but excluding any Leases permitted under the terms of this Agreement), or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Mortgaged Property to a condominium regime or transferring ownership to a cooperative corporation; and any change of control of Borrower or any SPC Party. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

 

Transfer and Assumption ” and “ Transferee Borrower ” have the respective meanings set forth in Section 6.1(p) .

 

Treasury Rate ” means, on the date on which such rate is calculated, the yield on the ten year “on the run” U.S. Treasury issue (primary issue) with such yield being based on the bid price for such issue as reasonably determined by Lender.

 

UCC ” means with respect to any Collateral, the Uniform Commercial Code as in effect from time to time in the State of New York; provided , that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority. Wherever this agreement refers to terms as defined in the UCC, if such term is defined in more than one Article of the UCC, the definition in Article 9 of the UCC shall control.

 

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UCC Searches ” has the meaning set forth in Section 3.1(v) hereof.

 

Undefeased Note ” has the meaning set forth in Section 2.7(c)(iv) .

 

Underwritten DSCR ” has the meaning set forth in Section 2.7(b) hereof.

 

U.S. Obligations ” shall mean securities that:

 

(i) constitute “government securities” (as defined in section 2(a)(16) of the Investment Company Act of 1940 as amended);

 

(ii) are either:

 

(a) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States of America or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America and that are one or more of the following: (1) U.S. Treasury obligations (all direct or fully guaranteed obligations), (2) General Services Administration participation certificates, and (3) Small Business Administration guaranteed participation certificates and guaranteed pool certificates; or

 

(b) obligations of the following United States of America government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), or the Federal National Mortgage Association (debt obligations);

 

(iii) are rated at “AAA” by S&P, “Aaa” by Moody’s and “AAA” by Fitch, and do not have an “r” suffix affixed to their rating by S&P;

 

(iv) provide for interest at a fixed rate;

 

(v) provide for a predetermined fixed dollar amount of principal due at maturity that cannot vary or change;

 

(vi) are not subject to prepayment, call or early redemption; and

 

(vii) are not subject to liquidation prior to their maturity.

 

Use ” means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance in connection with or affecting Borrower or the Mortgaged Property.

 

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Welfare Plan ” means an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower or any of its subsidiaries or with respect to which Borrower or any of its subsidiaries has an obligation to make contributions and covers any current or former employee of Borrower or any of its subsidiaries.

 

Work Threshold Amount ” meant the lesser of (a) $1,000,000.00, or (b) three percent (3%) of the Loan Amount, provided, however, that in no event shall “Work Threshold Amount” be less than $500,000.00.

 

ARTICLE II.

GENERAL TERMS

 

Section 2.1. The Loan .

 

(a) Subject to the terms and conditions of this Agreement, Lender shall lend to Borrower on the Closing Date the Loan Amount. The proceeds of the Loan shall be used solely for the purposes identified in Section 2.2 hereof. Lender is hereby authorized to fund directly from the proceeds of the Loan advanced at Closing (net of any deposits or payments made by Borrower or its Affiliates prior to Closing) (i) the deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Leasing Costs/TI Costs Account and the Replacement Reserve Account required to be funded from Loan proceeds pursuant to Section 2.13 , (ii) the out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan and (iii) the reasonable fees and expenses of Lender’s and Borrower’s counsel.

 

(b) The Loan shall constitute one general obligation of Borrower to Lender and shall be secured by the security interest in and Liens granted upon all of the Collateral, and by all other security interests and Liens at any time or times hereafter granted by Borrower to Lender as security for the Loan, as well as by the Liens against the Crossed Property created under the Crossed Loan Documents.

 

Section 2.2. Use of Proceeds . Proceeds of the Loan shall be used only for the following purposes: (a) to, with respect to certain of the Mortgaged Property, finance a portion of the acquisition cost of, and, with respect to other of the Mortgaged Property, refinance existing mortgage debt at such Mortgaged Property, (b) to make the required deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Leasing Costs/TI Costs Account and the Replacement Reserve Account, (c) to pay Transaction Costs (including the reasonable out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan) and (d) to pay reasonable fees, expenses and disbursements of Lender’s and Borrower’s counsel. Any proceeds of the Loan in excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(d) may be used by the Borrower for its general purposes.

 

Section 2.3. Security for the Loan . The Note and Borrower’s obligations hereunder and under all other Loan Documents shall, together with the Crossed Indebtedness, be secured by (a) Liens upon the Mortgaged Property pursuant to the Mortgage, (b) the Contract Assignment, (c) the Manager’s Subordination, (d) the Assignment of Rents and Leases, and (e) all other security interests and Liens granted in this Agreement and in the other Loan Documents and under the Crossed Loan Documents.

 

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Section 2.4. Borrower’s Note . Borrower’s obligation to pay the principal of and interest on the Loan and all other amounts due under the Loan Documents shall be evidenced initially by the Note, duly executed and delivered by Borrower on the Closing Date. The Note shall be payable as to principal, interest and all other amounts due under the Loan Documents, as specified in this Agreement, with a final maturity on the Maturity Date. Lender shall have the right to have the Note subdivided, by exchange for promissory notes of lesser denominations in the form of the initial Note, upon written request to Borrower and, in such event, Borrower shall promptly execute additional or replacement Notes. At no time shall the aggregate original principal amount of the Note (or of such replacement Notes) exceed the Loan Amount.

 

Section 2.5. Principal and Interest .

 

(a) Interest on the Loan shall accrue at the rate set forth in Section 2.5(b) below commencing on the Closing Date. Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through the tenth (10 th ) day of November, 2004. Commencing on the eleventh (11 th ) day of December, 2004 (the “ First Payment Date ”) and on the eleventh (11 th ) day of each calendar month thereafter (each, with the First Payment Date, a “ Payment Date ”), Borrower shall make equal monthly payments (each, a “ Monthly Debt Service Payment ”) of principal and interest in the amount of $209,513.65 (the “ Monthly Debt Service Payment Amount ”). The entire outstanding Principal Indebtedness of the Loan and the Note, together with all accrued but unpaid interest thereon and all other amounts due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date. Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed during any month or other accrual period.

 

(b) The Principal Indebtedness shall bear interest at a rate per annum equal to 5.649%, increasing, however, to the Default Rate while an Event of Default has occurred and is continuing.

 

(c) While an Event of Default has occurred and is continuing, Borrower shall pay to Lender interest at the Default Rate on (i) the Principal Indebtedness and (ii) any amount owing to Lender not paid when due, in each case, until such amount is paid in full.

 

(d) If any payment of principal, interest or other sums shall not be made to Lender on the date the same is due hereunder or under any of the other Loan Documents, then Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder (other than the entire principal balance of the Loan due upon acceleration of the Loan or upon Maturity) or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender.

 

(e) Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of

 

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interest permitted by law (“ Excess Interest ”). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this paragraph shall govern and control; (2) Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender’s option, (a) applied as a credit against either or both of the Principal Indebtedness of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law and without payment of any Prepayment Consideration with respect thereto), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the “ Maximum Rate ”), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Indebtedness is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Indebtedness shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Indebtedness had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Maximum Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater than the applicable interest rate, then the foregoing provisions of this paragraph shall apply.

 

Section 2.6. Prepayment .

 

(a) Limitation on Prepayment; Prepayment Consideration Due on Acceleration . Borrower shall have no right to prepay the Loan in whole or part at any time, except as expressly set forth in this Section 2.6(a) . Commencing on the First Open Prepayment Date, Borrower may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) Borrower shall provide to Lender not less than thirty (30) days’ prior written notice of such prepayment, (ii) together with such prepayment Borrower also shall pay all accrued and unpaid interest and all other Indebtedness, and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to (but excluding) the Payment Date following such date of prepayment. Borrower shall not be required to pay any Prepayment Consideration with respect to an application of insurance proceeds or condemnation awards by Lender pursuant to this Agreement or the Mortgage in the absence of an Event of Default.

 

(b) Prepayment Consideration Due . If the Maturity Date shall be accelerated to a date prior to the Scheduled Maturity Date, or if any prepayment of all or any portion of the Principal Indebtedness hereunder occurs, whether in connection with Lender’s acceleration of the unpaid Principal Indebtedness of the Loan or in any other circumstances whatsoever (other than (1) pursuant to and in accordance with Section 2.6(a) above, (2) as a result of an application by Lender of Loss Proceeds pursuant to this Agreement or the Mortgage in the absence of an

 

30


Event of Default, or (3) pursuant to and in accordance with Section 2.5(e)(3)(a) above), or if the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means, then the Prepayment Consideration shall become immediately due and owing and Borrower shall forthwith pay the Prepayment Consideration to Lender. The foregoing shall not create any right of prepayment. Borrower shall have no right whatsoever to prepay all or any portion of the Principal Indebtedness of the Note, except as set forth in Section 2.6(a) above.

 

(c) Definitions . The following terms shall have the meanings indicated:

 

The “ Prepayment Consideration ” shall be the amount equal to the sum of (i) an amount equal to the interest which would have accrued on the Principal Indebtedness for the period from and including (A) the date (the “ Event Date ”) which is the earlier of (x) the date of prepayment of the Loan or (y) such earlier date upon which the entire remaining Principal Indebtedness shall become due and payable, whether as a result of acceleration of the maturity of the Loan or otherwise, to but excluding (B) the next Payment Date following the Event Date, plus (ii) the sum of two percent of the Principal Indebtedness on the Event Date plus an amount equal to the “ Present Value Yield Differential ”, calculated as the excess, if any, of (A) the amount of the monthly interest which would otherwise be payable on the principal balance of the Loan from (1) the date (the “ Yield Determination Date ”) which is the Payment Date following the Event Date through and including (2) the Scheduled Maturity Date, over (B) the amount of the monthly interest Lender would earn if an amount equal to the Principal Indebtedness of the Loan as of the Event Date were invested for the period from the Yield Determination Date through the Scheduled Maturity Date at the Yield Rate (as hereinafter defined), such difference (the “ Yield Differential ”) to be discounted to present value at the Yield Rate using the following formula:

 

Present Value Yield Differential =

 

Yield Differential x [1-(1+r) -n ]


    
  r     

 

     where:     
     r=    Yield Rate, and
     n=   

the remaining Weighted Average Life to Maturity (as defined

below) from the Yield Determination Date.

 

The “ Yield Rate ” shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the then remaining Weighted Average Life to Maturity (as defined below) of the Loan as determined by Lender, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Yield Rate Determination Date (as defined below), converted to a monthly equivalent yield. If yields for such securities of such maturity are not shown in such publication, then the Yield Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities. If said Federal Reserve Statistical Release or any other information necessary for determination of the Yield Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Yield Rate shall be determined by Lender based on comparable data. The term “ Yield Rate Determination Date ” shall mean the date which is five (5) Business Days prior to the Yield

 

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Determination Date. The term “ Weighted Average Life to Maturity ” shall mean, at any date, the number of years (including fractional years, expressed as a decimal (e.g., three years and three months = 3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness on the Event Date into (y) the sum total of the Weighted Amortization Products (as defined below) for each Scheduled Principal Payment (as defined below). The “ Scheduled Principal Payment(s) ” shall mean each then remaining scheduled principal payment (assuming no prepayment or Loan acceleration), including payment of the outstanding principal balance of the Loan on the Scheduled Maturity Date, in respect of the Loan. The “ Weighted Amortization Product ” for each Scheduled Principal Payment shall mean the product of (A) the amount of such Scheduled Principal Payment multiplied by (B) the number of years (including fractional years, expressed as a decimal) which will elapse between the Yield Determination Date and the date on which such Scheduled Principal Payment is to be made under this Agreement.

 

Borrower agrees that the Prepayment Consideration required hereunder is reasonable. Borrower has given individual weight to the consideration in this transaction for this waiver and agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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Borrower hereby expressly waives the benefit of California Civil Code Section 2954.10 and all other statutes, principles, and rules of law of similar effect.

 

BORROWER:

GIP Wakefield, LLC,

a Delaware limited liability company

By:

  GIP Wakefield Holding Company, LLC,
    a Delaware limited liability company,
    its Member and Manager
    By:   Digital Realty Trust, L.P.,
        a Maryland limited partnership,
        its Member and Manager
        By:   Digital Realty Trust, Inc.,
            a Maryland corporation
            its General Partner
            By:  

 


            Print Name:  

 


            Title:  

 


 

[Remainder of Page Intentionally Left Blank]

 

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Section 2.7. Defeasance .

 

(a) Total Defeasance . Borrower shall have the right at any time on or after the First Open Defeasance Date and prior to the First Open Prepayment Date to obtain a release of the Lien of the Mortgage encumbering the Mortgaged Property (a “ Total Defeasance ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Total Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(a) and on which it shall effect the Total Defeasance;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Total Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Total Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(a) and Sections 2.7(d) and (e) hereof;

 

(iv) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Total Defeasance Collateral;

 

(v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Total Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Total Defeasance pursuant to this Section 2.7(a) , and (y) if a Securitization has occurred, a Total Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vi) If a Securitization has occurred, if and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(vii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the release of the Mortgaged Property from the Lien of the Mortgage as contemplated by this Section 2.7(a) and the substitution of the Total Defeasance Collateral will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

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(viii) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(ix) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Total Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(x) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xi) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(b) If a Total Defeasance occurs and all of the requirements of this Section 2.7 have been satisfied, including those set forth in Section 2.7(f) below, and provided no undefeased Crossed Loans remain outstanding (or the Crossed Partial Defeasance Conditions, as defined below, shall have been satisfied with respect to such Crossed Loans), Lender shall execute any and all documents required to release the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases and the Defeasance Collateral, pledged pursuant to the Security Agreement, shall be the sole source of collateral securing the Loan. In connection with any such release of the Lien, Borrower shall submit to Lender, not less than fifteen (15) days prior to the Total Defeasance Date (or such shorter time as permitted by Lender in its sole discretion), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Mortgaged Property is located and contain standard provisions protecting the rights of a releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage and the Assignment of Rents and Leases, including Lender’s reasonable attorneys’ fees. In the event of a Total Defeasance of the Loan while any of the Crossed Loans remain outstanding, Borrower may obtain a release of the Mortgaged Property from the Lien of the Mortgage and the Assignment of Rents and Leases (and related Loan Documents) if the following conditions are satisfied at the time of the Total Defeasance (the “ Crossed Partial Defeasance Conditions ”):

 

(i) No Event of Default shall exist;

 

(ii) Immediately prior to the Total Defeasance of the Loan, the aggregate underwritten debt service coverage ratio (“ Underwritten DSCR ”) for the Crossed Loans, as reasonably determined by Lender based upon Lender’s underwritten net cash flow and assumed debt service calculations as described on Schedule 7 attached hereto and made a part hereof, shall be at least equal to 1.45; and

 

(iii) Each of the Crossed Loans shall be partially defeased by each Crossed Borrower in accordance with, and in satisfaction of the terms and conditions of, the terms and provisions of Section 2.7 of each Crossed Loan Agreement. An amount equal to (A)

 

35


125% of the Loan Amount, less (B) the amount of the Principal Indebtedness of the Loan as of the Total Defeasance Date (the “ Aggregate Amount ”) will be apportioned among each of the Crossed Loans for purposes of such partial defeasance. The amount of the Aggregate Amount to be allocated to each Crossed Loan (the “ Allocated Amount ”) shall be determined by multiplying the Aggregate Amount by a fraction the numerator of which is the then-outstanding principal balance of such Crossed Loan and the denominator of which is the aggregate total of the then-outstanding principal balances of all of the Crossed Loans. Each Crossed Loan shall be partially defeased in the amount of the Allocated Amount for such Crossed Loan.

 

Except as set forth in this Section 2.7(b) , no repayment, prepayment or defeasance of all or any portion of the Loan, including, without limitation, a Partial Defeasance pursuant to Section 2.7(c) , shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Mortgage on the Mortgaged Property.

 

(c) Partial Defeasance . Borrower shall, as a condition to and only in connection with a Crossed Loan Total Defeasance on or after the First Open Defeasance Date and prior to the First Open Prepayment Date, have the right to defease a portion of the Loan (a “ Partial Defeasance ”) equal to the Applicable Crossed Loan Partial Defeasance Amount with respect to such Crossed Loan Total Defeasance (the “ Partial Defeasance Amount ”) upon satisfaction of the following conditions:

 

(i) Borrower shall provide Lender at least thirty (30) days’ prior written notice (or such shorter period of time if permitted by Lender in its sole discretion) specifying a date (the “ Partial Defeasance Date ”) on which Borrower shall have satisfied the conditions in this Section 2.7(c) and on which it shall effect the Partial Defeasance, which date shall be the same date as the Crossed Loan Total Defeasance Date;

 

(ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Partial Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents;

 

(iii) Borrower shall irrevocably deposit the Partial Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(c) and Sections 2.7(d) and (e) hereof;

 

(iv) Lender shall prepare (at Borrower’s expense) all necessary documents to modify this Loan Agreement and to amend and restate the Note and issue two substitute notes, one note having a principal balance equal to the Partial Defeasance Amount (the “ Defeased Note ”), and the other note having a principal balance equal to the excess of (A) the then-outstanding principal amount of the Loan, over (B) the amount of the Defeased Note (the “ Undefeased Note ”). The Defeased Note and Undefeased Note shall have identical terms as the Note except for the principal balance and monthly payments. The Defeased Note and the Undefeased Note shall be cross defaulted and cross collateralized unless the Rating Agencies shall require otherwise or unless a Successor Borrower that is not an Affiliate of Borrower is established pursuant to Section 2.7(e) . A Defeased Note may not be the subject of any further defeasance;

 

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(v) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Partial Defeasance Collateral;

 

(vi) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (w) Lender has a legal and valid perfected security interest in the Defeasance Collateral Account and the Partial Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of the Partial Defeasance pursuant to this Section 2.7(c) , and (y) if a Securitization has occurred, a Partial Defeasance pursuant to this Section 2.7 will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Loan as indebtedness for federal income tax purposes;

 

(vii) If a Securitization has occurred, and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower;

 

(viii) If a Securitization has occurred, Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the Partial Defeasance and related transactions, including the substitution of the Partial Defeasance Collateral, will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding;

 

(ix) Borrower shall deliver an officer’s certificate certifying that the requirements set forth in this Section 2.7 (to the extent applicable) have been satisfied;

 

(x) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Partial Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(xi) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(xii) Borrower shall pay all reasonable costs and expenses of Lender incurred in connection with the defeasance, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(d) Defeasance Collateral Account . On or before the date on which Borrower delivers the Defeasance Collateral, Borrower or Successor Borrower (as applicable) shall open at any Eligible Bank the defeasance collateral account (the “ Defeasance Collateral Account ”) which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied to the monthly installments of principal and interest on the Loan (or, in the case of a Partial Defeasance, the portion thereof

 

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evidenced by the Defeased Note) and, upon Maturity, to accrued interest and the Principal Indebtedness of the Loan (or, in the case of a Partial Defeasance, the portion thereof evidenced by the Defeased Note). Borrower shall cause the Eligible Bank at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Bank shall agree to hold and distribute the Defeasance Collateral in accordance with this Loan Agreement. Borrower (or Successor Borrower, as applicable) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Borrower shall prepay all costs and expenses associated with opening and maintaining the Defeasance Collateral Account. Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.

 

(e) Successor Borrower . In connection with a Defeasance under this Section 2.7 , Borrower shall, if required by the Rating Agencies (if a Securitization has occurred) or if Borrower so elects or Lender requires, establish or designate a successor entity (the “ Successor Borrower ”) which shall be a single purpose bankruptcy remote entity and which shall be approved by the Rating Agencies (if a Securitization has occurred). Any such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the Rating Agencies (if a Securitization has occurred) or Lender shall require otherwise. Borrower shall transfer and assign all obligations, rights and duties under and to the Note, together with the Defeasance Collateral, to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Borrower shall pay all reasonable costs and expenses incurred by Lender, including Lender’s reasonable attorney’s fees and expenses incurred in connection therewith, and (if a Securitization has occurred) all fees, expenses and other charges of the Rating Agencies.

 

(f) Crossed Loans . Notwithstanding anything to the contrary contained herein, if any of the Crossed Loans remains outstanding and in any part undefeased, then, in connection with a Defeasance of the Loan, the Mortgaged Property will be released from the Liens of the Loan Documents if and only if either (i) all of the Crossed Loans have been fully defeased in accordance with the terms and conditions of the Crossed Loan Documents, or (ii) all of the Crossed Loans shall have been partially defeased in an aggregate amount equal to the Aggregate Amount (each Crossed Loan being partially defeased in the Allocated Amount with respect thereto) and the Crossed Loan Defeasance Conditions are satisfied at the time of the Total Defeasance of the Loan, and until such full (as indicated in clause (i) above) or partial (as indicated in clause (ii) above) defeasance of all the Crossed Loans, this Loan Agreement and the other Loan Documents as they relate to the Borrower and the Mortgaged Property shall remain in full force and effect notwithstanding the Total Defeasance of the Loan.

 

Section 2.8. Application of Payments During Event of Default . During the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments at any time thereafter received by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that Lender shall have the continuing exclusive right to apply any and all such payments and any and all proceeds and recoveries from the Pledged Accounts, the Mortgaged Property or Borrower after the occurrence and during the continuance of an Event of Default, in Lender’s sole discretion, to any of the following, in such

 

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order and manner as Lender may determine in its sole and absolute discretion: (a) any debt service or other Indebtedness due under this Loan Agreement or the other Loan Documents (including, without limitation, reasonable out-of-pocket costs and expenses of Lender reimbursable pursuant to the terms of this Agreement and any other Loan Document(s) arising as a result of such repayment, any accrued and unpaid interest then payable with respect to the Loan or the portion thereof being repaid, the Principal Indebtedness, any accrued and unpaid Prepayment Consideration in respect of any such Principal Indebtedness or the portion thereof being repaid, any other sums then due and payable to or for the benefit of Lender pursuant to this Agreement or any other Loan Document(s)); (b) any Crossed Indebtedness, (c) any Reserve Account established under this Loan Agreement; (d) otherwise as a reserve for Property Expenses, Capital Improvement Costs, Impositions and other expenditures relating to the use, management, operation or leasing of the Mortgaged Property; and/or (e) any costs and expenses incurred by Lender in connection with such Event of Default, or expended by Lender to protect or preserve the value of the Mortgaged Property.

 

Section 2.9. Method and Place of Payment . Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 p.m., Eastern time, on the date when due and shall be made in lawful money of the United States of America by wire transfer in federal or other immediately available funds to its account at such bank(s) as Lender may from time to time designate. Any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Lender shall notify Borrower in writing of any changes in the account to which payments are to be made. All payments made by Borrower hereunder, or by Borrower under the other Loan Documents, shall be made irrespective of, and without any deduction for, any defenses, set-offs or counterclaims. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day.

 

Section 2.10. Taxes .

 

(a) All payments made by or on behalf of Borrower under the Note and this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income, franchise or similar taxes (including branch profits taxes or alternative minimum tax) imposed or levied on (A) a Noteholder, as defined below, by the jurisdiction under the laws of which such Noteholder is organized or any political subdivision thereof, or (B) on Lender by the jurisdiction in which Lender’s lending office is located or any political subdivision thereof, and (ii) in the case of any Foreign Lender, as defined below, any taxes that are in effect and that would apply to a payment hereunder or under any other Loan Document made to such Foreign Lender as of the date such Foreign Lender becomes a party to this Agreement, or in the case of any other Lender which changes its lending office with respect to the Loan to an office outside the United States, any taxes that are in effect and would apply to a payment to such Lender as of the date of the change of the lending office.

 

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(b) On or prior to the date that Lender or any other subsequent holder of the Note (collectively, a “ Noteholder ”) becomes a Noteholder hereunder, (i) each such Noteholder that is organized under the laws of a jurisdiction outside of the United States within the meaning of the Code (each a “ Foreign Lender ”) shall deliver to Borrower two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Noteholder and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Noteholder under the Loan Documents) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Noteholder under the Loan Documents) or such other evidence satisfactory to Borrower that such Noteholder is entitled to an exemption from, or reduction of, U.S. withholding tax, or (ii) upon request by Borrower, each such Noteholder that is not a Foreign Lender shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. Thereafter and from time to time, each such Noteholder shall (i) upon request by Borrower, promptly submit to Borrower such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Noteholder pursuant to the Loan Documents, (ii) promptly notify Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Noteholder, and as may be reasonably necessary to avoid any Legal Requirement of Borrower to make any deduction or withholding for taxes from amounts payable to such Noteholder. If such Noteholder fails to deliver the above forms or other documentation as required herein, or if the forms or other documentation delivered by such Noteholder indicate that any payments made to such Noteholder pursuant to the Loan Documents are subject to a reduced rate of tax, then Borrower may withhold from any interest payment to such Noteholder an amount equivalent to the applicable withholding tax imposed by the Code or the applicable treaty (but in any event not in excess of the amount Borrower is required by law to withhold), without reduction, and such Noteholder shall not be entitled to additional amounts or indemnification for such withholding hereunder.

 

Section 2.11. Cross-Collateralization; Contribution; Release of Cross-Collateralization .

 

(a) Borrower acknowledges and agrees (subject to Lender’s election(s) at Lender’s sole discretion from time to time pursuant to Section 2.11(g) below): (i) that the Mortgaged Property shall secure not only the Loan but also the Crossed Loans, and that the Liens of the Loan Documents shall constitute Liens securing not only the Loan but also the Crossed Loans; (ii) that the Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured by such Crossed Properties; and (iii) that Lender would not make the Loans to Borrower or the loans constituting the Crossed Loans unless Borrower and the Crossed Borrowers granted liens on the Mortgaged Property and, in addition, the Crossed Properties of the Crossed Borrowers to secure the payment of the Loan and the Crossed Loans.

 

(b) Borrower (i) until all of the Loan and the Crossed Loans shall have been paid and satisfied in full, hereby waives enforcement of any right of subrogation with respect to the Crossed Loans and (ii) waives any right to enforce any remedy which Lender now has or

 

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may hereafter have against the Crossed Borrowers, any endorser or any guarantor of all or any part of the Crossed Loans or any other individual or entity, and Borrower waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of the Crossed Loans or any other liability of any of the Crossed Borrowers to Lender. Should Borrower have the right, notwithstanding the foregoing, to exercise its subrogation rights, Borrower hereby expressly and irrevocably (1) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that Borrower may have to the payment in full in cash of the Loan and the Crossed Loans and (2) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Loan and the Crossed Loans are paid in full in cash. Borrower acknowledges and agrees that this subordination is intended to benefit Lender and shall not limit or otherwise affect Borrower’s liability hereunder or the enforceability of this Loan Agreement or the Crossed Loan Documents.

 

(c) Borrower agrees that any and all claims of Borrower against any of the Crossed Borrowers or any endorser or any guarantor of all or any part of the Crossed Loans (collectively, the “ Crossed Obligors ”) with respect to any obligations, liabilities or indebtedness now or hereafter owing by the Crossed Obligors, or any of them, to Borrower, or otherwise existing or claimed to be owed or to exist on the part of any of the Crossed Obligors, or against any of their respective properties (collectively, the “ Crossed Party Obligations ”) shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any right of Borrower to ask, demand, sue for, take or receive any payment from any of the Crossed Obligors, all rights, liens and security interests of Borrower, whether now or hereafter arising and howsoever existing, in any assets of any of the Crossed Obligors shall be and are subordinated to the rights of Lender in those assets and otherwise, under the Loan Documents, the Crossed Loan Documents and otherwise, and Borrower shall not, until the date that is ninety-one (91) days after the date that all of the Loan and the Crossed Loans shall have been paid and satisfied in full, (i) assert, collect, sue upon, or enforce all or any part of the Crossed Party Obligations; (ii) commence or join with any other creditors of any of the Crossed Obligors in commencing any bankruptcy, reorganization, receivership or insolvency proceeding against any of the Crossed Obligors; (iii) take, accept, ask for, sue for, receive, set off or demand any payments upon the Crossed Party Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to be created liens, security interests, mortgages, deeds of trust or pledges of or with respect to any of the assets of any of the Crossed Obligors in favor of or for the benefit of Borrower.

 

(d) If all or any part of the assets of any of the Crossed Obligors, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Crossed Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Crossed Obligor is dissolved or if substantially all of the assets of any such Crossed Obligor are sold, then, and in any such event (such events being herein referred to as an “ Crossed Obligor Insolvency Event ”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable to Borrower upon or with respect to any Crossed Party Obligations shall be paid or delivered directly to the Lender for application on the Loan and the Crossed Loans, due or to become due, until such Loan and Crossed Loans shall have first been fully paid and

 

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satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by Borrower upon or with respect to the Crossed Party Obligations after any Crossed Obligor Insolvency Event and prior to the payment in full and satisfaction of all of the Loan and Crossed Loans, Borrower shall receive and hold the same in trust, as trustee, for the benefit of Lender and shall forthwith deliver the same to Lender in precisely the form received (except for the endorsement or assignment of Borrower where necessary), for application to any of the Loan or Crossed Loans, due or not due, and, until so delivered, the same shall be held in trust by Borrower as the property of Lender. If Borrower fails to make any such endorsement or assignment to Lender, Lender or any of its officers or employees is irrevocably authorized to make the same. Borrower agrees that until the Loan and Crossed Loans have been paid in full (in cash) and satisfied, Borrower will not assign or transfer to any individual or entity (other than Lender) any claim Borrower has or may have against any Crossed Obligor.

 

(e) Subject to the provisions of Section 2.11(g) , to the extent that any collection upon any of the Loan or the Crossed Loans is made by Lender from one of the Crossed Borrowers or the Crossed Properties or other assets of the Crossed Borrowers (a “ Crossed Loans Collection ”) which, taking into account all other Crossed Loans Collections then previously or concurrently made by such Crossed Borrower, exceeds the amount which otherwise would have been collected from such Crossed Borrower if each of Borrower and each Crossed Borrower had paid the portion of the Loan and Crossed Loans satisfied by such Crossed Loans Collection in the same proportion as such Crossed Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Crossed Loans Collection) bore to the aggregate Allocable Amounts of each of the Borrower and each Crossed Borrower as determined immediately prior to the making of such Crossed Loans Collection, then , following payment in full in cash of the entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each of Borrower and each of the other Crossed Borrowers for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Crossed Loans Collection. As of any date of determination, the “Allocable Amount” of Borrower or any Crossed Borrower shall be equal to the maximum amount of the claim which could then be recovered from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. The foregoing provision shall be for the benefit of each of the Crossed Borrowers and Lender, but shall be subject to modification as provided in Section 2.11(g) below and to amendment by agreement of Borrower and Lender, in each case without necessity of any agreement, acknowledgment or approval of any Crossed Borrower or any notice to any Crossed Borrower. Section 2.11(e) of each of the Crossed Loan Agreements contains provisions similar to this Section 2.11(e) for the benefit of Lender and (subject to the terms thereof) Borrower. This Section 2.11(e) and Section 2.11(e) of each of the Crossed Loan Agreements are intended only to define the relative rights of the Borrower and Crossed Borrowers, and nothing set forth in this Section 2.11(e) or in Section 2.11(e) of each of the Crossed Loan Agreements is intended to or shall impair the liens and security interests of the Loan Documents and the Crossed Loan Documents or the obligations of the Borrower and the Crossed Borrowers thereunder. Borrower acknowledges that the rights of contribution and indemnification under this Section 2.11(e) and under Section 2.11(e) of the Crossed Loan Agreements constitute assets of the Borrower or Crossed Borrowers to which such

 

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contribution and indemnification is owing, and any such right of contribution and indemnification owing to Borrower under Section 2.11(e) of any of the Crossed Loan Agreements shall constitute additional Crossed Party Obligations for all purposes under this Section 2.11 .

 

(f) Borrower hereby consents and agrees to each of the following, and agrees that Borrower’s obligations under this Loan Agreement and the other Loan Documents and the Liens created under this Loan Agreement and the other Loan Documents securing the Loan and the Crossed Loans shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice, except as expressly provided in the Loan Documents) that Borrower might otherwise have as a result of or in connection with any of the following:

 

(i) Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Crossed Loans, the Crossed Loan Documents, or other document, instrument, contract or understanding between the Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed Loans, or any failure of Lender to notify Borrower of any such action, except as expressly provided in the Loan Documents.

 

(ii) Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to the Crossed Borrowers with respect to the Crossed Loans.

 

(iii) The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any of the Crossed Borrowers or any other party at any time liable for the payment of all or part of the Crossed Loans; or any dissolution of any of the Crossed Borrowers, or any sale, lease or transfer of any or all of the assets of any of the Crossed Borrowers, or any changes in the shareholders, partners or members of any of the Crossed Borrowers; or any reorganization of any of the Crossed Borrowers.

 

(iv) The invalidity, illegality or unenforceability of all or any part of the Crossed Loans, or any document or agreement executed in connection therewith, for any reason whatsoever, including without limitation the fact that (A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law, (B) the act of creating the Crossed Loans or any part thereof is ultra vires , (C) the officers or representatives executing the Crossed Loan Documents or otherwise creating the Crossed Loans acted in excess of their authority, (D) the Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Crossed Loans wholly or partially uncollectible from the Crossed Borrowers, (F) the creation, performance or repayment of the Crossed Loans (or the execution, delivery and performance of any document or instrument representing part of the Crossed Loans or executed in connection with the Crossed Loans, or given to secure the repayment of the Crossed Loans) is illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Borrower shall remain liable hereon regardless of whether the Crossed Borrowers or any other person be found not liable on the Crossed Loans or any part thereof for any reason.

 

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(v) Any full or partial release of the liability of the Crossed Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Crossed Loans, or any part thereof, it being recognized, acknowledged and agreed by Borrower that Borrower has not been induced to enter into this Loan Agreement or the other Loan Documents on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Loan or Borrower’s obligations under the Loan Agreement or the other Loan Documents, or that Lender will look to other parties to pay or perform the Crossed Loans.

 

(vi) The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Crossed Loans.

 

(vii) Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Crossed Loans.

 

(viii) The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (A) to take or prosecute any action for the collection of any of the Crossed Loans, (B) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (C) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Crossed Loans.

 

(ix) The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Crossed Loans, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Borrower that Borrower is not entering into this Loan Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Crossed Loans.

 

(x) Any payment by any of the Crossed Borrowers to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to any of the Crossed Borrowers or someone else.

 

(xi) Any other action taken or omitted to be taken with respect to the Crossed Loan Documents, the Crossed Loans, or the security and collateral therefor.

 

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(g) Notwithstanding anything to the contrary set forth in this Loan Agreement, Lender may, at its sole option and in its sole discretion, from time to time (one or more times) deliver written notice to Borrower stating that this Loan Agreement and the other Loan Documents shall no longer secure one or more (at Lender’s sole election) of the Crossed Loans (each a “ Cross Release Notice ”), whereupon (i) this Loan Agreement and the other Loan Documents shall no longer secure any of the Crossed Loans for which a Cross Release Notice is given (the “ Excluded Loan(s) ”; each Crossed Borrower which is the borrower with respect to an Excluded Loan is herein referred to as an “ Excluded Borrower ”, and the Crossed Loan Agreement and other Crossed Loan Documents executed and delivered by an Excluded Borrower with respect to the Excluded Loan made to it are herein referred to as the “ Excluded Loan Agreement ” and “ Excluded Loan Documents ”, respectively, and the Crossed Property encumbered by the Excluded Loan Documents is herein referred to as the “ Excluded Property ”), (ii) each Cross Guaranty of the Loan executed by each Excluded Borrower, together with each Cross Guaranty of an Excluded Loan executed by Borrower (herein collectively referred to as the “ Excluded Guaranties ”) shall be deemed automatically terminated and of no further force or effect, (iii) each reference herein and in the other Loan Documents to the “Crossed Loans” shall be deemed to exclude the Excluded Loans, (iv) each reference herein and in the other Loan Documents to the “Crossed Loan Agreements”, “Crossed Loan Documents”, “Crossed Properties” and “Cross Guaranties” shall be deemed to exclude the Excluded Loan Agreement, the Excluded Loan Documents, the Excluded Property and the Excluded Guaranties, respectively, (v) each reference herein and in the other Loan Documents to the “Crossed Borrower” and the “Crossed Obligors” shall be deemed to exclude each Excluded Borrower, (vi) the provisions of Section 2.11(e) of this Loan Agreement shall not apply to any Crossed Loans Collection from any Excluded Borrower or its Excluded Property and Borrower shall have no obligation or liability on account thereof; and (vii) Borrower shall no longer be a beneficiary of the covenants and agreements set forth in Section 2.11(e) of each Excluded Loan Agreement, and Borrower shall have no rights or claims on account of any contribution or indemnification obligations of any Excluded Borrower under Section 2.11(e) of any Excluded Loan Agreement. In addition to and without limiting the foregoing, Borrower hereby agrees to fully cooperate with Lender, at Borrower’s expense, provided that Borrower shall not be obligated to incur unreasonable cost or expense, if Lender is considering the termination of the cross collateralization and cross default of the Loan and Loan Documents with any of the Crossed Loans, including, but not limited to (x) amending this Loan Agreement and the other Loan Documents as may be required by Lender to effectuate such termination of the cross collateralization and cross default provisions thereof, and (y) updating and/or endorsing the title insurance policies (at Borrower’s cost as to additional premium charges, if any) to reflect the continuation of the first priority lien of this Loan Agreement.

 

Section 2.12. Central Cash Management .

 

(a) Local Collection Account; Collection Account; Deposits to and Withdrawals from the Collection Account .

 

(i) On or before the Closing Date, Lender shall (1) establish on behalf of the Borrower and maintain with the Collection Account Bank a collection account (the “ Collection Account ”), which shall be an Eligible Account with a separate and unique identification number in the name of Lender, as secured party, or, at Lender’s option, in

 

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the name of Borrower for the benefit of Lender, as secured party, and (2) cause the Collection Account Bank to deliver to Lender the Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Collection Account. On or before the Closing Date, Borrower shall (x) establish and maintain with a financial institution acceptable to Lender in its sole reasonable discretion (the “ Local Collection Account Bank ”), one or more local collection accounts for the Mortgaged Property (the “ Local Collection Account ”), which shall be an Eligible Account with a separate and unique identification number and entitled in the same name as the Collection Account and (y) cause the Local Collection Account Bank to deliver to Lender a Local Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender’s security interest in and sole dominion and control over the Local Collection Account. Not later than the Closing Date, Borrower shall deliver to each tenant under a Lease an irrevocable direction letter in a form approved by Lender requiring the tenant to pay all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and Proceeds thereof owed to Borrower directly to the Local Collection Account. Borrower shall provide to Lender proof of such delivery. In addition, Borrower shall deliver an irrevocable direction letter in such form to each tenant under a new Lease entered into after the date hereof prior to the commencement of such Lease. If a tenant under a Lease forwards such Rents, Money or Proceeds to Borrower rather than directly to the Local Collection Account, Borrower shall (i) deliver an additional irrevocable direction letter to the tenant and make other commercially reasonable efforts to cause the tenant to forward such Rents, Money or Proceeds directly to the Local Collateral Account and (ii) immediately deposit or cause the Manager to deposit in the Local Collection Account such Rents, Money or Proceeds. At all times during this Agreement, Borrower shall deposit or cause Manager to deposit in the Security Deposit Account all cash Security Deposits received from tenants at the applicable Mortgaged Property, by no later than the fifth (5 th ) Business Day following the collection and receipt thereof. Subject to Section 2.12(a)(ii) , Borrower shall sweep or cause to be swept on each Business Day during a calendar month all Money on deposit in the Local Collection Account to the Collection Account. Borrower shall not have any right to withdraw Money from the Local Collection Account, the Security Deposit Account or the Collection Account, which shall be under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Any such Rents, Money or Proceeds held by Borrower or the Manager prior to deposit into the Local Collection Account shall be held in trust for the benefit of Lender. Borrower shall be responsible for the payment of all costs and expenses in connection with establishing and maintaining the Collection Account, the Local Collection Account, the Security Deposit Account and the Reserve Accounts (including, without limitation, Collection Account Bank’s and Local Collection Account Bank’s customary fees and charges) and shall reimburse Lender upon demand for any such costs or expenses incurred by Lender.

 

(ii) In the event that any Event of Default has occurred and is continuing,

 

(A) all Rents and Money received from Accounts or under Leases and derived from the Mortgaged Property and all Proceeds thereof shall be payable to Lender or as otherwise directed by Lender,

 

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(B) Borrower shall not have any right to direct Lender or any other Person to make any withdrawals from the Collection Account or the Reserve Accounts without the prior written consent of Lender, and

 

(C) proceeds on deposit in the Collection Account and the Reserve Accounts may be applied by Lender for the payment of the Indebtedness pursuant to Section 2.8 of this Agreement.

 

(iii) Borrower shall deposit in the Collection Account all Loss Proceeds received by Borrower.

 

(b) Distribution of Cash . So long as an Event of Default has not occurred and is not continuing, Lender shall apply funds on deposit in the Collection Account (to the extent not held in Reserve Accounts constituting sub-accounts of the Collection Account, if any, and with the exception of Loss Proceeds, which shall be applied as provided in Section 2.12(e) and Section 5.1(x) of this Agreement) on each Payment Date as follows:

 

(i) first , to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in that order, in the respective amounts required to be deposited therein as described in Section 2.13(b) ;

 

(ii) second , to the payment to Lender of any expenses then due and payable to Lender or its servicer(s) pursuant to this Agreement or the other Loan Documents;

 

(iii) third , to the payment to Lender of the Monthly Debt Service Payment due upon such Payment Date;

 

(iv) fourth , to the Replacement Reserve Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(v) fifth , to the Leasing Costs/TI Costs Account in the amount required to be deposited therein as described in Section 2.13(a) ;

 

(vi) sixth , to the payment of any outstanding indemnification payment to which an Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j) , and any other amounts then due and payable to Lender or its servicer pursuant to this Agreement and the other Loan Documents which are not paid from applications under clause (iii) above;

 

(vii) seventh , if no Event of Default exists, to Borrower in an amount equal to remaining available funds, if any; provided , that if any Event of Default exists, no disbursement shall be made under this clause seventh ; and

 

(viii) eighth , if any Event of Default exists, then to the extent Lender has not made other application of such remaining available funds in Lender’s discretion as provided hereunder, all remaining available funds shall be allocated as determined by Lender in Lender’s sole and absolute discretion (and re-allocated from time to time as Lender may elect) and retained in the Debt Service Reserve Account and/or the Operating Expense Account.

 

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(c) Permitted Investments . So long as no Event of Default has occurred and is continuing, Borrower shall direct Lender in writing to invest and reinvest any balance in the Collection Account from time to time in Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank); provided , however , that

 

(i) the maturity of the Permitted Investments on deposit therein shall be at the discretion of Borrower, but in any event no later than the Business Day of or immediately preceding the date on which such funds are reasonably expected to be required to be withdrawn therefrom pursuant to Section 2.12(a) or 2.12(b) of this Agreement,

 

(ii) after an Event of Default has occurred and for so long as such Event of Default is continuing, Borrower shall not have any right to direct investment of the balance in the Collection Account,

 

(iii) all such Permitted Investments shall be held in the name of Lender or its servicer and shall be credited to the Collection Account, and

 

(iv) if no written investment direction is provided to Lender by Borrower, Lender may at Lender’s option invest any balance in the Collection Account in such Permitted Investments as may be selected by Lender.

 

Lender shall have no liability for any loss in investments of funds in the Collection Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Collection Account. All interest paid or other earnings on funds deposited into the Collection Account made hereunder shall be deposited into the Collection Account. Borrower shall include all earnings on the Collection Account as income of Borrower for federal and applicable state tax purposes.

 

(d) Intentionally Omitted .

 

(e) Loss Proceeds . In the event of a casualty or Taking with respect to the Mortgaged Property, all of Borrower’s interest in Loss Proceeds with respect thereto shall be paid directly to the Collection Account. Subject to the provisions of Section 5.1(x) of this Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of the terms and conditions set forth in Section 5.1(x) be made available for Restoration, Loss Proceeds may, at Lender’s option exercised in Lender’s sole discretion, be applied to the Indebtedness and, upon payment in full of the Indebtedness, to any Crossed Indebtedness or, if an Event of Default exists, in any manner determined by Lender in Lender’s sole discretion in accordance with Section 2.8 hereof. If the Loss Proceeds are to be made available for Restoration pursuant to Section 5.1(x) of this Agreement, such Loss Proceeds shall be held by Lender in a segregated interest-bearing Eligible Account in the name of Lender and under the sole dominion and control of Lender to be opened (if not previously opened and maintained by the Collection Account Bank under the Collection Account Agreement by the Lender) by Lender at a financial institution selected by Lender (the “ Loss Proceeds Account ”). Funds on deposit in the Loss Proceeds Account shall be invested in Permitted Investments (subject to the availability of such

 

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Permitted Investments with the Collection Account Bank) in the same manner and subject to the same restrictions as set forth in Section 2.12(c) with respect to the Collection Account (except that the maturity shall be not later than as reasonably necessary to satisfy any schedule of distributions for Restoration required or approved by Lender). If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid to Lender to the extent necessary to comply with this Agreement.

 

Section 2.13. Reserve Accounts .

 

(a) Deferred Maintenance Escrow Account, Replacement Reserve Account and Leasing Costs/TI Costs Account .

 

(i) On or before the Closing Date, Lender shall establish on behalf of Borrower and maintain with the Collection Account Bank four separate accounts for deferred maintenance, replacement reserves, cash Security Deposits and leasing costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account, for the benefit of Lender, until the Loan is paid in full. The four accounts shall be designated the “Deferred Maintenance Escrow Account” (the “ Deferred Maintenance Escrow Account ”), the “Leasing Costs/TI Costs Account” (the “ Leasing Costs/TI Costs Account ”), the “Replacement Reserve Account” (the “ Replacement Reserve Account ”) and the “ Security Deposit Account ” (the “ Security Deposit Account ”). On the Closing Date, Lender shall deposit out of the Loan proceeds $0.00 in the Deferred Maintenance Escrow Account, $52,246.00 in the Leasing Costs/TI Costs Account and $8,083.33 in the Replacement Reserve Account. On each Payment Date, Borrower shall deposit from the Collection Account (or if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions) to the Replacement Reserve Account, of an amount equal to $8,083.33 per month, and to the Leasing Costs/TI Costs Account an amount equal to $52,246.00 per month. Borrower may request withdrawals from the Replacement Reserve Account pursuant to the procedure set forth in Section 2.13(a)(iii) below. Borrower may request withdrawals from the Leasing Costs/TI Costs Account pursuant to the procedure set forth in Section 2.13(a)(iv) below.

 

(ii) Any and all Moneys remitted to the Deferred Maintenance Escrow Account, together with any interest, earnings or income earned thereon, shall be held in the Deferred Maintenance Escrow Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for repairs set forth on Schedule 1 attached hereto (the “ Immediate Repairs ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof. Within the applicable time period(s) for completion set forth on Schedule 1 , Borrower shall complete such Immediate Repairs and shall provide to Lender such documentation, and other evidence of compliance with law as Lender may reasonably require. The funds contained in the Deferred Maintenance Escrow Account shall be utilized by Borrower solely for performance of the Immediate Repairs in accordance with the Property Condition Assessments and Environmental Reports, and shall not be used by Borrower for purposes

 

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for which any other Reserve Account is established. Upon written application of Borrower (which may be done by electronic mail or e-mail), Borrower shall be entitled to obtain disbursements by Lender from the Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such Immediate Repairs, provided that (a) no Event of Default has occurred and is continuing, (b) Borrower shall provide to Lender (including electronic mail or e-mail) such documentation and certifications as Lender may reasonably request to substantiate the requirement for and entitlement to such disbursement, (c) Borrower shall provide to Lender (including by electronic mail or e-mail) with all invoices, receipts, lien waivers and other documentation of lawful and workmanlike progress or completion, lien-free status, and availability of sufficient funds, all as may be reasonably requested by Lender, and (d) Borrower shall provide Lender such evidence as may be reasonably satisfactory to Lender that after payment of any draw for Immediate Repairs, the funds remaining in the Deferred Maintenance Escrow Account shall be sufficient to pay for the remainder of such Immediate Repairs. In the event Borrower completes the repairs for which funds were reserved in the Deferred Maintenance Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse any and all amounts then on deposit in the Deferred Maintenance Escrow Account to the Collection Account.

 

(iii) Any and all Moneys remitted to the Replacement Reserve Account, together with any interest, earnings or income thereon, shall be held in the Replacement Reserve Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Capital Improvement Costs (other than those for Immediate Repairs) reasonably approved by Lender for disbursements from the Replacement Reserve Account (“ Approved Capital Expenditures ”) upon satisfaction of the disbursement conditions listed on Schedule 6 hereof, provided that funds in the Replacement Reserve Account shall not be used by Borrower for purposes for which any other Reserve Account is established.

 

(iv) Any and all Moneys remitted to the Leasing Costs/TI Costs Account, together with any interest, earnings or income thereon, shall be held in the Leasing Costs/TI Costs Account to be withdrawn by Lender upon written request by Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for Leasing Commissions and TI Costs (other than those for Immediate Repairs) reasonably approved by Lender (it being acknowledged that Leasing Commissions and TI Costs expressly set forth in any Lease approved by Lender in accordance with this Agreement shall be deemed to be reasonable) for disbursements from the Leasing Costs/TI Costs Account incurred in connection with leasing activities relating to the Mortgaged Property after the Closing Date as specified by Borrower in such written request (“ Approved Leasing Costs ”) upon satisfaction, in the case of TI Costs disbursements, of the disbursement conditions listed on Schedule 6 hereof relating to work for which TI Costs disbursements are requested.

 

(b) Real Estate Taxes Escrow Account and Insurance Escrow Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two separate accounts for Basic Carrying Costs, each of which shall be

 

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an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Real Estate Taxes Escrow Account” (the “ Real Estate Taxes Escrow Account ”) and the “Insurance Escrow Account” (the “ Insurance Escrow Account ”). On the Closing Date, the Lender shall deposit out of the Loan proceeds $207,000.00 in the Real Estate Taxes Escrow Account and $0.00 in the Insurance Escrow Account (i.e. the amount necessary to meet the first insurance and real property tax bills due and payable after the Closing Date with credit for existing monthly escrow payments made prior to the applicable due date). With respect to each Payment Date, Borrower shall deposit from the Collection Account (or, if the funds for such deposit are not available pursuant to Section 2.12(b) , shall make an additional deposit of Borrower’s funds sourced from equity capital contributions),

 

(1) in the Real Estate Taxes Escrow Account, an amount equal to (1/12 th ) one-twelfth of the annual real estate taxes and assessments and any other Impositions that if not paid in a timely manner will result in a Lien on a Mortgaged Property,

 

(2) in the Insurance Escrow Account, an amount equal to one-twelfth (1/12 th ) of the annual insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents.

 

Any and all Moneys remitted to the Real Estate Taxes Escrow Account or Insurance Escrow Account (which shall not bear interest for the benefit of Borrower) shall be held in the Real Estate Taxes Escrow Account or Insurance Escrow Account, respectively, to be withdrawn from the Real Estate Taxes Escrow Account or Insurance Escrow Account, as applicable, by Lender or its servicer upon written request of Borrower delivered to Lender and its servicer together with documentation and other evidence (including invoices and, in the case of a reimbursement of Borrower, evidence that the related costs have been paid) with respect to the respective Basic Carrying Costs towards which such funds are to be applied, and applied to pay directly (or reimburse Borrower, in the case of insurance premiums only) for (x) any Impositions (in the case of the Real Estate Taxes Escrow Account) or (y) any insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents (in the case of the Insurance Escrow Account). Borrower shall provide Lender or its servicer with bills and other documents necessary for payment of Impositions and insurance premiums at least ten (10) Business Days prior to the due date therefor (in the case of insurance premiums) and at least ten (10) Business Days prior to the first date upon which the same will become delinquent if unpaid (in the case of Impositions). In the event the amount on deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow Account exceeds the amount due for Impositions by more than one-twelfth (1/12 th ) of the annual real estate taxes (in the case of the Real Estate Taxes Escrow Account) or the amount due for insurance premiums (in the case of the Insurance Escrow Account), respectively, Lender or its servicer shall in its sole discretion credit such excess against future payment obligations to the Real Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.

 

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(c) Operating Expense Account and Debt Service Reserve Account . On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two accounts for the remittance of funds by Lender or its servicer in its sole discretion after an Event of Default has occurred and is continuing, each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the “Operating Expense Account” (the “ Operating Expense Account ”) and the “Debt Service Reserve Account” (the “ Debt Service Reserve Account ”). On any Business Day after the occurrence and during the continuance of an Event of Default, Lender or its servicer may in its sole discretion deposit into the Operating Expense Account or the Debt Service Reserve Account any funds then on deposit in the Local Collection Account or the Collection Account. Any and all Moneys remitted to the Operating Expense Account or the Debt Service Reserve Account shall, until otherwise applied by Lender from time to time at Lender’s sole discretion during the existence of any Event of Default, be held in the Operating Expense Account or the Debt Service Reserve Account, as applicable, and applied, if Lender elects in its sole discretion to make such funds available for such application,

 

(x) with respect to the Operating Expense Account only, to pay Property Expenses provided for in the Operating Budget approved by Lender, or for other Property Expenses approved by Lender, and

 

(y) with respect to the Debt Service Reserve Account only, applied to pay the Indebtedness or the Crossed Indebtedness at the sole election of Lender;

 

provided , that (1) notwithstanding the foregoing, Lender may at any time, in its sole discretion, elect to apply the funds on deposit in the Operating Expense Account to pay the Indebtedness (including without limitation any Prepayment Consideration and other amounts due Lender in connection with such prepayment) and the Crossed Indebtedness while any Event of Default exists, and (2) in the event Lender accepts in writing a proposed cure of the Event of Default which precipitated the deposits to the Operating Expense Account and the Debt Service Reserve Account and no other Event of Default exists, then the funds on deposit in the Operating Expense Account and the Debt Service Reserve Account shall be released to Borrower.

 

(d) Security Deposits . In the case of letters of credit or other non-cash collateral given by tenants or others as security for the performance of the obligations of tenants under any Leases, Borrower shall deliver such letters of credit or other collateral to Lender and at Lender’s request execute such endorsements, instruments and documents and take such actions as are necessary to create a perfected security interest in favor of Lender in such letters of credit and other collateral and the proceeds thereof, as determined by Lender, including without limitation, if Lender requires, causing the Lender or its designee to become the beneficiary under such letters of credit; provided, that so long as no Event of Default exists and Borrower delivers such letters of credit or other collateral to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as the beneficiary under such letters of credit or take other of the foregoing actions, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to transfer or re-issue any such letter of credit to Lender or its designee as beneficiary and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender,

 

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during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing such letters of credits to be transferred or re-issued to Lender as beneficiary. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. So long as an Event of Default has not occurred and is not continuing (or if an Event of Default has occurred and is continuing but Borrower is required to return the Security Deposit in accordance with applicable Lease or Lender elects to return the Security Deposit in accordance with such Lease), Lender shall promptly authorize disbursement of any Security Deposits then held in the Security Deposit Account in order to satisfy Borrower’s obligations to return the same to tenants entitled to them under and in accordance with the Leases. In the event of a Lease default or other occurrence whereby Borrower, as landlord, shall become entitled to retain any Security Deposits or apply the same to amounts owed under the applicable Lease, any such Security Deposits, together with any other recoveries from such defaulted tenants in connection with such default, whether by draw upon any letter of credit or other security for such tenant’s obligations, exercise of remedies or settlement of claims, shall be transferred to the Leasing Costs/TI Costs Account as additional deposits therein (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property. Any termination payments paid by tenants under any Leases in connection with any early or scheduled termination of such Leases shall also be deposited as additional deposits into the Leasing Costs/TI Costs Account (without limiting the Borrower’s requirement to make monthly deposits into such account) for purposes of disbursement for TI Costs and Leasing Commissions for reletting of space at the Mortgaged Property.

 

(e) Investment of Funds . All or a portion of any Moneys in the Reserve Accounts (other than the Real Estate Tax Escrow Account, the Insurance Escrow Account, the Operating Expense Account and the Debt Service Reserve Account, none of which shall bear interest for the benefit of Borrower) shall, so long as no Event of Default has occurred and is continuing, be invested and reinvested by Lender in accordance with written instructions delivered by Borrower, or after an Event of Default has occurred and is continuing, by Lender, in one or more Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank). If no written investment direction is provided to Lender by Borrower, Lender may at its option invest such Moneys in a Permitted Investment selected by Lender. All interest paid or other earnings on funds deposited into the Reserve Accounts made hereunder shall be deposited into the Reserve Accounts (other than with respect to the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account or the Debt Service Reserve Account, for which Lender and its servicer shall not have any obligation to deposit such interest or earnings into such accounts). Lender shall have no liability for any loss in investments of funds in any Reserve Account that are invested in Permitted Investments and no such loss shall affect Borrower’s obligation to fund, or liability for funding, the Reserve Accounts. Unless and until title to the funds therein shall have vested in any Person other than Borrower, Borrower shall include all such income or gain on any account of the Reserve Account as income of Borrower for federal and applicable state tax purposes.

 

(f) Event of Default . After an Event of Default has occurred and is continuing, Borrower shall not be permitted to direct Lender or any other Person to make any withdrawal(s) from any Pledged Accounts and Lender, in Lender’s sole and absolute discretion,

 

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may liquidate any Permitted Investments of the amount on deposit in such accounts and/or withdraw and use such amounts on deposit in the Pledged Accounts to make payments in accordance with Section 2.8 . Nothing contained in Section 2.8 or this Section 2.13(f) shall in any way limit any rights and remedies otherwise available to Lender under this Agreement, the other Loan Documents or applicable law upon an Event of Default.

 

Section 2.14. Additional Provisions Relating to the Pledged Accounts .

 

(a) Borrower covenants and agrees that: (i) all securities or other property underlying any financial assets credited to any Pledged Account shall be registered in the name of Lender, indorsed to Lender or indorsed in blank or credited to another securities account maintained in the name of Lender and in no case will any financial asset credited to any Pledged Account be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower except to the extent the foregoing have been specially indorsed to Lender or in blank; and (ii) all Permitted Investments and all other property delivered to Lender pursuant to this Agreement will be promptly credited to one of the Pledged Accounts.

 

(b) Borrower hereby agrees that each item of property (whether investment property, financial asset, security, instrument, cash or otherwise) credited to any Pledged Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.

 

(c) Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with all “entitlement orders” (i.e. an order directing transfer or redemption of any financial asset relating to a Pledged Account, and any “entitlement order” as defined in Section 8-102(a)(8) of the UCC) and instructions (including any “instruction” within the meaning of Section 9-104 of the UCC) originated by Lender without further action or consent by Borrower, Manager or any other Person. Lender shall deliver any such order or instruction in accordance with the terms of this Agreement.

 

(d) Regardless of any provision in any other agreement, for purposes of the UCC, with respect to each Pledged Account, New York shall be deemed to be the bank’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC).

 

(e) Except for the claims and interest of Lender and of Borrower in the Pledged Accounts, Borrower represents and warrants that it does not know of any Lien on or claim to, or interest in, any Pledged Account or in any “financial asset” (as defined in Section 8-102(a) of the UCC) credited thereto. If any Person (other than Lender, Collection Account Bank, as agent for Lender, or Local Collection Account Bank, as agent for Lender) asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Accounts or in any financial asset carried therein, Borrower will promptly notify Lender thereof and shall indemnify, defend and hold Lender and each of the Indemnified Parties harmless from and against any such Lien, encumbrance or claim.

 

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Section 2.15. Security Agreement .

 

(a) Pledge of Pledged Accounts . To secure the full and punctual payment and performance of all of the Indebtedness and Crossed Indebtedness, Borrower hereby assigns, conveys, pledges and transfers to Lender, as secured party, and grants Lender a first priority and continuing security interest in and to, the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (collectively, the “ Account Collateral ”):

 

(i) all of Borrower’s right, title and interest in the Pledged Accounts and all Money and Permitted Investments, if any, from time to time deposited or held in the Pledged Accounts or purchased with funds or assets on deposit in the Pledged Accounts;

 

(ii) all of Borrower’s right, title and interest in interest, dividends, Money, Instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any of the foregoing until such time as such items are disbursed from the Pledged Accounts; and

 

(iii) to the extent not covered by clause (i) or (ii) above, all Proceeds of any or all of the foregoing until such time as such items are disbursed from the Pledged Accounts.

 

Lender and Collection Account Bank and Local Collection Account Bank, each as agent for Lender, shall have with respect to the foregoing collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein.

 

(b) Covenants; Sole Dominion and Control . Borrower shall not have any right to withdraw Money from the Pledged Accounts. Borrower acknowledges and agrees that the Pledged Accounts are and shall at all times continue to be subject to and under the sole dominion and control, and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender. Notwithstanding anything set forth herein to the contrary, neither Borrower nor Manager nor any other person or entity, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Pledged Accounts, and Borrower acknowledges that the Collection Account Bank and the Local Collection Account Bank shall comply with all instructions originated by Lender without further consent by Borrower. Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with the instructions of Lender with respect to the Pledged Accounts without the further consent of Borrower or Manager. The Account Collateral shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other banking authority or Governmental Authority, as may now or hereafter be in effect, and to the rules, regulations and procedures of the financial institution where the Account Collateral is maintained relating to demand deposit accounts generally from time to time in effect.

 

(c) Financing Statements; Further Assurances . Borrower hereby irrevocably authorizes Lender at any time and from time to time to file any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are necessary or advisable to

 

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perfect the security interests granted to Lender in connection herewith. Such financing statements may describe the collateral in the same manner as described in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the collateral granted to Lender in connection herewith, including, without limitation, describing such property as “all assets” or “all personal property” of Borrower whether now owned or hereafter acquired. From time to time, at the expense of Borrower, Borrower shall promptly execute and deliver all further instruments, and take all further action, that Lender may reasonably request, in order to continue the perfection and protection of the pledge and security interest granted or purported to be granted hereby.

 

(d) Transfers and Other Liens . Borrower shall not sell or otherwise dispose of any of the Account Collateral other than pursuant to the terms of this Agreement and the other Loan Documents, or create or permit to exist any Lien upon or with respect to all or any of the Account Collateral, except for the Lien granted to Lender under or as contemplated by this Agreement.

 

(e) No Waiver . Every right and remedy granted to Lender under this Agreement or by law may be exercised by Lender at any time and from time to time, and as often as Lender may deem it expedient. Any and all of Lender’s rights with respect to the pledge of and security interest in the Account Collateral granted hereunder shall continue unimpaired, and to the extent permitted by law, Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (i) any proceeding of Borrower under the United States Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state, (ii) the release or substitution of Account Collateral at any time, or of any rights or interests therein or (iii) any delay, extension of time, renewal, compromise or other indulgence granted by Lender in the event of any Default with respect to the Account Collateral or otherwise hereunder. No delay or extension of time by Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon Borrower by Lender, shall constitute a waiver thereof, or limit, impair or prejudice Lender’s right, without notice or demand, to take any action against Borrower or to exercise any other power of sale, option or any other right or remedy.

 

(f) Lender Appointed Attorney-In-Fact . Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power of substitution, at any time after the occurrence and during the continuation of an Event of Default, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Account Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower with respect to the Account Collateral, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for herein with respect to the Account Collateral and to accomplish the purposes of this Agreement. The foregoing powers of attorney are irrevocable and coupled with an interest and shall terminate upon repayment of the Indebtedness and (subject to Section 2.11(g) ) Crossed Indebtedness in full.

 

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(g) Continuing Security Interest; Termination . This Section 2.15 shall create a continuing pledge of and security interest in the Account Collateral and shall remain in full force and effect until payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) the payment in full of all Crossed Indebtedness. Upon payment in full by Borrower of the Indebtedness and (subject to Section 2.11(g) ) payment in full of all Crossed Indebtedness, Lender shall return to Borrower such of the Account Collateral as shall not have been applied pursuant to the terms hereof, and shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the pledge and lien hereof.

 

Section 2.16. Mortgage Recording Taxes . The Lien to be created by the Mortgage is intended to encumber the Mortgaged Property to the full extent of the Indebtedness. On the Closing Date, Borrower shall have paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage, if any.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.1. Conditions Precedent to Closing . The obligation of the Lender to make the Loan is subject to the satisfaction by Borrower (and Guarantor, where applicable) or waiver by Lender of the following conditions no later than the Closing Date:

 

(a) Loan Agreement . Borrower and Lender shall have executed and delivered this Agreement.

 

(b) Note . Borrower shall have executed and delivered to Lender the Note.

 

(c) Environmental Indemnity Agreement; Guaranty of Non-Recourse Obligations . Borrower and Guarantor shall have executed and delivered the Environmental Indemnity Agreement to Lender. Guarantor shall have executed and delivered the Guaranty of Non-Recourse Obligations.

 

(d) Opinions of Counsel . Lender shall have received from counsel to Borrower and the Guarantor, legal opinions in form and substance acceptable to Lender, with respect to corporate matters and with respect to substantive non-consolidation of either Guarantor or the Manager, on the one hand, and either Borrower or any SPC Party, on the other, in the event of the bankruptcy of either Guarantor or the Manager. Such legal opinions shall be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(e) Organizational Documents . Lender shall have received with respect to each of Borrower and the Guarantor its certificate of formation, certificate of limited partnership or certificate of incorporation, as applicable, as amended, modified or supplemented to the Closing Date, as filed with the Secretary of State in the jurisdiction of organization and in effect on the Closing Date and certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than thirty (30) days prior to the Closing Date, together with a good standing certificate from such Secretary of State dated not more than thirty (30) days prior to the Closing Date and, for Borrower to the extent required by applicable law, a good standing

 

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certificate from the Secretaries of State (or the equivalent thereof) of each other State in which Borrower is required to be qualified to transact business, each dated not more than thirty (30) days prior to the Closing Date.

 

(f) Certified Resolutions, etc . Lender shall have received a certificate of each of Borrower and the Guarantor dated the Closing Date, certifying (i) the names and true signatures of its incumbent officers authorized to sign the Loan Documents to which Borrower or the Guarantor is a party, (ii) the Organizational Agreement of each of Borrower and Guarantor, in each case as in effect on the Closing Date, (iii) the resolutions of each of Borrower and the Guarantor, approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and (iv) that there have been no changes in any Organizational Agreement since the date of execution or preparation thereof.

 

(g) Additional Matters . Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender. All corporate and other organizational proceedings, all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender.

 

(h) Transaction Costs . Borrower shall have paid all Transaction Costs for which bills have been submitted in accordance with the provisions of Section 8.23 .

 

(i) No Default or Event of Default . No event which would constitute either a Default or Event of Default under this Agreement or the other Loan Documents shall have occurred and be continuing on the Closing Date.

 

(j) No Injunction . No law or regulation shall have been adopted, no order, judgment or decree of any Governmental Authority shall have been issued, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction.

 

(k) Representations and Warranties . The representations and warranties herein and in the other Loan Documents shall be true and correct in all material respects on the Closing Date.

 

(l) Survey; Appraisal . Lender shall have received the Survey and the Appraisal with respect to the Mortgaged Property, which shall be in form and substance reasonably satisfactory to Lender.

 

(m) Property Condition Assessment . Lender shall have received the Property Condition Assessment with respect to the Mortgaged Property prepared by the Engineer or another Person acceptable to the Lender, which Property Condition Assessment shall be reasonably acceptable to Lender.

 

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(n) Environmental Matters . Lender shall have received an Environmental Report prepared by an Environmental Auditor with respect to the Mortgaged Property, which Environmental Report shall be reasonably acceptable to Lender.

 

(o) Financial Information . Lender shall have received financial information relating to the Guarantor, Borrower and the Mortgaged Property reasonably satisfactory to Lender. Such information shall include the following, to the extent reasonably available:

 

(i) operating statements for the current year (including actual to date information, an annual budget and trailing twelve month data in hard copy and on diskette) and for not less than the three preceding years (including tenant improvements costs, leasing commissions, capital reserves, major repairs, replacement items and occupancy rates in hard copy and on diskette);

 

(ii) copies of Leases with respect to the tenants of the Mortgaged Property, a copy of the standard lease form, if any, and tenant lease abstracts, if available;

 

(iii) current property rent roll data on a tenant by tenant basis in hard copy (including name, square footage, lease term, expiration date, renewal options, base rent per square foot, sales volume psf (if applicable), percentage rent terms (if applicable), additional rent clauses (including stops, offsets, and other special provisions), escalation clauses for increase in operating expense, maintenance, insurance, real estate taxes and utilities, assignment, sublet and cancellation provisions and purchase options);

 

(iv) current real estate tax bills and historical real estate tax bills of record for the Mortgaged Property for not less than the three preceding years; and

 

(v) the most recent annual financial statements and unaudited quarterly financial statements (if any).

 

The annual financial statements relating to the Mortgaged Property and Borrower shall be either (x) audited by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender or (y) prepared in accordance with agreed upon procedures reasonably acceptable to Lender to be performed by a “Big Four” accounting firm or another firm of certified public accountants reasonably acceptable to Lender to create similar information.

 

(p) Pro-Forma Financial Statement; Operating Budget . Lender shall have received (i) the initial pro-forma financial statement and Operating Budget for the Mortgaged Property for the following twelve months (including on an annual and monthly basis a break-down of projected Gross Revenues, Property Expenses, Capital Improvement Costs (including Leasing Commissions and TI Costs), replacement reserve costs and average occupancy level (expressed as a percentage)), (ii) a financial statement that forecasts projected revenues and operating expenses for not less than three years (including the assumptions used in such forecast), and (iii) any local market study and/or research and demographics report prepared for Borrower and/or commercially available.

 

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(q) Site Inspection . Borrower shall have provided to Lender the opportunity to perform, or cause to be performed on its behalf, an on-site due diligence review of the Mortgaged Property, which inspection is reasonably satisfactory to Lender.

 

(r) Mortgaged Property Documents .

 

(i) Mortgage; Assignment of Rents and Leases . Borrower shall have executed and delivered to Lender the Mortgage and the Assignment of Rents and Leases with respect to the Mortgaged Property and such Mortgage and Assignment of Rents and Leases shall have been filed of record in the appropriate filing office in the jurisdiction in which the Mortgaged Property is located or irrevocably delivered to a title agent for such recordation.

 

(ii) Financing Statements . Borrower shall have executed and delivered to Lender all financing statements required by Lender pursuant hereto and such financing statements shall have been filed of record in the appropriate filing offices in each of the appropriate jurisdictions or irrevocably delivered to a title agent for such recordation.

 

(iii) Management Agreement and Manager’s Subordination . Lender shall have received the executed Management Agreement for the Mortgaged Property and the Manager shall have executed and delivered the Manager’s Subordination to Lender.

 

(iv) Contract Assignment . Borrower shall have executed and delivered to Lender a Contract Assignment with respect to the Mortgaged Property.

 

(s) Opinions of Counsel . Lender shall have received from counsel to Borrower reasonably acceptable to Lender in each state in which any Mortgaged Property is located its legal opinion, as to (i) the enforceability of the Mortgage, Assignment of Rents and Leases and any other Loan Documents governed by the law of such jurisdiction, (ii) perfection of Liens and security interests and (iii) other matters referred to therein with respect to the Mortgaged Property. The legal opinions will be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel.

 

(t) Insurance . Lender shall have received certificates of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement. Such certificates shall indicate that Lender is a named additional insured and shall contain a loss payee endorsement in favor of Lender with respect to the property policies required to be maintained under this Agreement.

 

(u) Title Insurance Policy . Lender shall have received countersigned pro forma title policies or marked binders constituting the unconditional commitment (in form and substance reasonably satisfactory to Lender) to issue the Title Insurance Policy covering the Mortgaged Property with an aggregate amount at least equal to the Loan Amount.

 

(v) Lien Search Reports . Lender shall have received satisfactory reports of UCC (collectively, the “ UCC Searches ”), tax lien, judgment and litigation searches and title

 

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updates conducted by the companies issuing the Title Insurance Policy with respect to the Collateral, Guarantor and Borrower, such searches to be conducted in each of the locations required by Lender.

 

(w) Consents, Licenses, Approvals, etc . Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower and Guarantor and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect.

 

(x) Additional Real Estate Matters . Lender shall have received such other real estate related certificates and documentation relating to the Mortgaged Property as Lender may have reasonably requested. Such documentation shall include the following as requested by Lender and to the extent reasonably available:

 

(i) certificates of occupancy issued by the appropriate Governmental Authority of the jurisdiction in which the Mortgaged Property is located reflecting, and consistent with, the use of the Mortgaged Property as of the Closing Date;

 

(ii) letters from the appropriate local Governmental Authorities of the jurisdiction in which the Mortgaged Property is located, certifying that the Mortgaged Property is in compliance with all applicable zoning laws, rules and regulations, and a zoning endorsement to the applicable Title Insurance Policy with respect to the Mortgaged Property or an opinion of zoning counsel to such effect;

 

(iii) copies of the Leases in effect at the Mortgaged Property as Lender may request (in addition to the copies delivered above); and

 

(iv) estoppel certificates in form and substance acceptable to Lender in respect of at least 75% of the rentable square footage rented to commercial tenants and every commercial tenant that rents more than 5% of the rentable square footage at the Mortgaged Property or such other percentages as shall be acceptable to Lender.

 

(y) Closing Statement . Lender and Borrower shall have agreed upon a detailed closing statement in a form reasonably acceptable to Lender, which includes a complete description of Borrower’s sources and uses of funds on the Closing Date.

 

(z) Crossed Loan Documents . The Crossed Loan Documents shall have been executed and delivered by the Crossed Borrower and other Persons party thereto.

 

Section 3.2. Execution and Delivery of Agreement . The execution and delivery of this Agreement by each party to this Agreement shall be deemed to constitute the satisfaction or waiver of the conditions set forth in Section 3.1 ; provided , that any such deemed satisfaction or waiver shall be solely for the purposes of Section 3.1 and shall not be deemed or construed to constitute a waiver of any other provision of this Agreement or of any provisions of any of the other Loan Documents, including, without limitation, any undelivered items undertaking or agreement or other post-closing agreement or undertaking entered into by Borrower and/or Guarantor.

 

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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.1. Representations and Warranties as to Borrower . Borrower represents and warrants that, as of the Closing Date:

 

(a) Organization . Borrower (i) is a duly organized and validly existing limited liability company or limited partnership, as applicable, in good standing under the laws of the State of Delaware, (ii) has the requisite power and authority to own its properties (including, without limitation, the Mortgaged Property) and to carry on its business as now being conducted and is qualified to do business in the jurisdiction in which the Mortgaged Property is located, and (iii) has the requisite power to execute and deliver, and perform its obligations under, this Agreement, the Note and all of the other Loan Documents to which it is a party.

 

(b) Authorization; No Conflict; Consents and Approvals . The execution and delivery by Borrower of this Agreement, the Note and each of the other Loan Documents to which it is a party, Borrower’s performance of its obligations hereunder and under such other Loan Documents and the creation of the security interests and liens provided for in this Agreement and the other Loan Documents to which it is a party (i) have been duly authorized by all requisite action on the part of Borrower, (ii) will not violate any provision of any Legal Requirements, any order of any court or other Governmental Authority, the Organizational Agreement or any indenture or agreement or other instrument to which Borrower is a party or by which Borrower is bound, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any Lien of any nature whatsoever upon the Mortgaged Property pursuant to, any such indenture or agreement or material instrument other than the Loan Documents. Other than those obtained or filed on or prior to the Closing Date, Borrower is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the other Loan Documents executed and delivered by Borrower.

 

(c) Enforceability . This Agreement, the Note and each other Loan Document executed by Borrower in connection with the Loan (including, without limitation, any Collateral Security Instrument), is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles. This Agreement, the Note and such other Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower (including the defense of usury), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

 

(d) Litigation . There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending and served or, to the best knowledge of Borrower, threatened against Borrower, Guarantor or any Collateral, which actions, suits or proceedings, if determined against Borrower, Guarantor or such Collateral, are reasonably likely to result in a Material Adverse Effect.

 

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(e) Agreements . Borrower is not in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any Collateral is bound which default is reasonably likely to have a Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor is a party to any agreement or instrument or subject to any restriction that is reasonably likely to have a Material Adverse Effect.

 

(f) No Bankruptcy Filing . Neither Borrower nor, to Borrower’s knowledge, Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a material portion of its assets or property. To the best knowledge of Borrower, no Person is contemplating the filing of any such petition against Borrower.

 

(g) Solvency . Giving effect to the transactions contemplated hereby, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities (including, without limitation, subordinated, unliquidated, disputed and contingent liabilities). The present fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities (including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured). Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including, without limitation, contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

 

(h) Other Debt . Borrower has not borrowed or received other debt financing (whether unsecured or secured by the Mortgaged Property or any part thereof) which is outstanding as of the Closing Date. As of the Closing Date, Borrower has no Other Borrowings other than trade debt expressly permitted under Article VIII of this Agreement and the Crossed Loans.

 

(i) Full and Accurate Disclosure . No statement of fact made by or on behalf of Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. To the best knowledge of Borrower, there is no fact that has not been disclosed to Lender that is reasonably likely to result in a Material Adverse Effect.

 

(j) Financial Information . All financial statements and other data concerning Borrower, the Mortgaged Property and, to Borrower’s knowledge, Guarantor, that has been delivered by or on behalf of Borrower or Guarantor to Lender is true, complete and correct in all material respects and, except as disclosed on Schedule 4 attached hereto, has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Lender, there has been no change in the financial position of Borrower, the Mortgaged Property or, to Borrower’s knowledge, Guarantor, or in the results of operations of Borrower or, to Borrower’s knowledge, Guarantor, which change results or is reasonably likely to result in a

 

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Material Adverse Effect. Neither Borrower nor, to Borrower’s knowledge, Guarantor has incurred any obligation or liability, contingent or otherwise, not reflected in such financial data, which is likely to have a Material Adverse Effect upon its business operations or the Mortgaged Property.

 

(k) Investment Company Act; Public Utility Holding Company Act . Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money in accordance with this Agreement.

 

(l) Compliance . Borrower is in compliance with all applicable Legal Requirements, except for noncompliance that is not reasonably likely to have a Material Adverse Effect. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority except for defaults or violations which are not reasonably likely to have a Material Adverse Effect.

 

(m) Use of Proceeds; Margin Regulations . Borrower will use the proceeds of the Loan for the purposes described in Section 2.2 . No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements.

 

(n) Organizational Chart . The organizational chart set forth as Schedule 2 accurately sets forth the direct and indirect ownership structure of Borrower as of the Closing Date.

 

(o) No Defaults . No Default or Event of Default exists under or with respect to any Loan Document.

 

(p) Plans and Welfare Plans . The assets of Borrower do not constitute “plan assets” under regulations currently promulgated under ERISA. Neither Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is required to contribute to any Plan or Multiemployer Plan nor has the Borrower or any ERISA Affiliate sponsored, maintained, contributed to or been required to contribute to any Plan or Multiemployer Plan within the past six years. There are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan that would reasonably be expected to result in a material liability to Borrower. There have been no violations of Section 4980B of the Code or Section 601, et seq. of ERISA by Borrower or any of its ERISA Affiliates that would reasonably be expected to result in a material liability to Borrower. No event has occurred, and there exists no condition or set of circumstances, in connection with any Plan or Welfare Plan under which Borrower or, to the best knowledge of Borrower, any ERISA Affiliate, directly or indirectly (through an indemnification agreement or

 

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otherwise), is reasonably likely to be subject to any material risk of material liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide any retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower, or, to the best knowledge of Borrower, any ERISA Affiliate other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by fully paid up insurance or (iii) severance benefits.

 

(q) Additional Borrower UCC Information . Borrower’s organizational identification number is 3793500 and the full legal name of Borrower is as set forth on the signature pages hereof and Borrower has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name).

 

(r) Not Foreign Person . Borrower is not a “foreign person” within the meaning of § 1445(f)(3) of the Code.

 

(s) Labor Matters . Borrower is not a party to any collective bargaining agreements.

 

(t) Pre-Closing Date Activities . Borrower has not conducted any business or other activity on or prior to the Closing Date, other than in connection with the acquisition, management and ownership of the Mortgaged Property.

 

(u) No Bankruptcies or Criminal Proceedings Involving Borrower or Related Parties . No bankruptcy, insolvency, reorganization or comparable proceedings have ever been instituted by or against Borrower, any Guarantor, any SPC Party, any other owner of any direct ownership interest in Borrower (each such Person being herein referred to as a “Principal”), and no such proceeding is now pending or contemplated. None of Borrower, any Principal, or to Borrower’s knowledge, any other individual or entity directly or indirectly owning or controlling, or the family members of which own or control, any direct or indirect beneficial ownership interest in Borrower or in the Manager or asset manager for the Mortgaged Property, have been charged, indicted or convicted, or are currently under the threat of charge, indictment or conviction, for any felony or crime punishable by imprisonment.

 

(v) No Prohibited Persons . Neither Borrower nor, to Borrower’s knowledge, any Guarantor or any other Principal or nor any of their respective officers, directors, shareholders, partners or members is or will be an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive` Order 13224 issued on September 24, 2001 (“ EO13224 ”); (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“ OFAC ”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf)(the “ OFAC List ”); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “ Prohibited Person ”).

 

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Section 4.2. Representations and Warranties as to the Mortgaged Property . Borrower hereby represents and warrants to Lender that, as to the Mortgaged Property and the Mortgage, as of the Closing Date:

 

(a) Title to the Mortgaged Property . Borrower owns good, marketable and insurable fee simple title to the Mortgaged Property (other than Personalty), free and clear of all Liens, other than the Permitted Encumbrances. Borrower owns the Personalty free and clear of any and all Liens, other than Permitted Encumbrances. There are no outstanding options to purchase or rights of first refusal or restrictions on transferability affecting any Mortgaged Property or any portion thereof or interest therein.

 

(b) Utilities and Public Access . Except as disclosed on Schedule 4, (i) the Mortgaged Property has adequate rights of access to public ways and is served by public water, electric, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary to the continued use and enjoyment of the Mortgaged Property as presently used and enjoyed are located in the public right-of-way abutting the premises, and all such utilities are connected so as to serve the Mortgaged Property without passing over other property except for land or easement areas of or available to the utility company providing such utility service; and (iii) all roads necessary for the full utilization of the Mortgaged Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities or are the subject of access easements for the benefit of the Mortgaged Property.

 

(c) Condemnation . No Taking has been commenced or, to the best of Borrower’s knowledge, is contemplated with respect to all or any portion of any Mortgaged Property or for the relocation of roadways providing access to any Mortgaged Property.

 

(d) Compliance . The Mortgaged Property and the current use thereof is in compliance with all applicable Legal Requirements (including, without limitation, building, parking, subdivision, land use, health, fire, safety and zoning ordinances and codes) and all applicable Insurance Requirements, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Mortgaged Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by Borrower with respect to the Mortgaged Property without Lender’s prior written consent.

 

(e) Environmental Compliance . Except for matters set forth in the Environmental Reports delivered to Lender in connection with the Loan (true, correct and complete copies of which have been provided to Lender by Borrower):

 

(i) Borrower and the Mortgaged Property are in full compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by Borrower or the Manager of all environmental, health and safety permits, licenses and other governmental authorizations required in connection with their ownership and operation of the Mortgaged Property under all Environmental Laws), except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

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(ii) There is no Environmental Claim pending or, to the actual knowledge of Borrower, threatened, and no penalties arising under Environmental Laws have been assessed against Borrower, to Borrower’s knowledge, the Manager or any Mortgaged Property, or, to the actual knowledge of Borrower, against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law which is reasonably likely to result in a Material Adverse Effect.

 

(iii) No investigation or review is pending or, to the actual knowledge of Borrower, threatened by any Governmental Authority, citizens group, employee or other Person with respect to any alleged failure by Borrower or the Manager or any Mortgaged Property to have any environmental, health or safety permit, license or other authorization required under, or to otherwise comply with, any Environmental Law or with respect to any alleged liability of Borrower or the Manager for any Use or Release of any Hazardous Substances which is reasonably likely to result in a Material Adverse Effect.

 

(iv) There are no present and, to the best knowledge of the Borrower, there have been no past Releases of any Hazardous Substances that are reasonably likely to form the basis of any Environmental Claim against Borrower, the Manager, any Mortgaged Property or against any Person whose liability for any Environmental Claim Borrower or the Manager has or may have retained or assumed either contractually or by operation of law (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) and which are reasonably likely to result in a Material Adverse Effect.

 

(v) Without limiting the generality of the foregoing, to the best knowledge of the Borrower, there is not present at, on, in or under any Mortgaged Property, any Hazardous Substances (including, without limitation, PCB-containing equipment, asbestos or asbestos containing materials, underground storage tanks or surface impoundments for Hazardous Substances, lead in drinking water or lead based paint) (other than Hazardous Substances being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and the respective tenants thereof in the ordinary course of business and in all cases are utilized in compliance with Environmental Law in all material respects) or any fungus, mold, mildew or biological agent the presence of which is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property.

 

(vi) No liens are presently recorded with the appropriate land records under or pursuant to any Environmental Law with respect to the Mortgaged Property and no Governmental Authority has been taking or, to the actual knowledge of Borrower, is in the process of taking any action that could subject the Mortgaged Property to Liens under any Environmental Law.

 

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(vii) There have been no environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession of Borrower in relation to any Mortgaged Property which have not been made available to Lender.

 

(f) Mortgage and Other Liens . Each Mortgage creates a valid and enforceable first priority Lien on the applicable Mortgaged Property described therein, as security for the repayment of the Indebtedness, subject only to the Permitted Encumbrances applicable to such Mortgaged Property. This Agreement creates a valid and enforceable first priority Lien on all Account Collateral (subject to Permitted Encumbrances). Each Collateral Security Instrument establishes and creates a valid, subsisting and enforceable Lien on and a security interest in, or claim to, the rights and property described therein. All property covered by any Collateral Security Instrument in which a security interest can be perfected by the filing of a financing statement is subject to a UCC financing statement filed and/or recorded, as appropriate (or irrevocably delivered to an agent for such recordation or filing) in all places necessary to perfect a valid first priority (subject to Permitted Encumbrances) Lien with respect to the rights and property that are the subject of such Collateral Security Instrument to the extent governed by the UCC.

 

(g) Assessments . Except as disclosed on the Title Insurance Policy, there are no pending or, to the best knowledge of Borrower, proposed special or other assessments for public improvements or otherwise affecting any Mortgaged Property, nor are there any contemplated improvements to any Mortgaged Property that may result in such special or other assessments.

 

(h) No Joint Assessment; Separate Lots . Borrower has not suffered, permitted or initiated the joint assessment of the Mortgaged Property (i) with any other real property constituting a separate tax lot, and (ii) with any portion of the Mortgaged Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Mortgaged Property as a single lien. The Mortgaged Property is comprised of one or more parcels, each of which constitutes a separate tax lot and none of which constitutes a portion of any other tax lot.

 

(i) No Prior Assignment . Lender is the collateral assignee of Borrower’s interest under the Leases. There are no prior assignments of the Leases or any portion of the Rent due and payable or to become due and payable which are presently effective.

 

(j) Permits; Certificate of Occupancy . Borrower has obtained all Permits necessary to the use and operation of the Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. The use being made of the Mortgaged Property is in conformity with the certificate of occupancy and/or such Permits for such Mortgaged Property and any other restrictions, covenants or conditions affecting such Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

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(k) Flood Zone . Except as shown on the Survey, no Mortgaged Property or any portion thereof is located in a flood hazard area as defined by the Federal Insurance Administration.

 

(l) Physical Condition . Except as set forth in the Property Condition Assessment, to the best knowledge of Borrower, the Mortgaged Property is free of structural defects and all Improvements, including the building systems contained therein are in good working order subject to ordinary wear and tear.

 

(m) Security Deposits . Borrower and the Manager are in compliance with all Legal Requirements relating to all Security Deposits with respect to the Mortgaged Property except for noncompliance which is not reasonably expected to result in a Material Adverse Effect.

 

(n) Intellectual Property . All material Intellectual Property that Borrower owns or has pending, or under which it is licensed, is in good standing and, to Borrower’s knowledge, uncontested. There is no right under any Intellectual Property necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business. Borrower has not received notice of infringement with respect to asserted Intellectual Property of others. To Borrower’s knowledge, there is no infringement by others of material Intellectual Property of Borrower.

 

(o) No Encroachments . Except as shown on the Survey, to the best knowledge of Borrower, (i) all of the Improvements which were included in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, (ii) no improvements on adjoining properties encroach upon any Mortgaged Property, (iii) no Improvements encroach upon any easements or other encumbrances affecting the Mortgaged Property in a manner that is reasonably expected to materially and adversely affect the value or marketability of the Mortgaged Property, and (iv) all of the Improvements comply with all material requirements of any applicable zoning and subdivision laws and ordinances.

 

(p) Management Agreement . The Management Agreement is in full force and effect in accordance with its terms. There is no default, breach or violation existing thereunder by Borrower or, to the best knowledge of Borrower, any other party thereto and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation by Borrower or, to the best knowledge of Borrower, any other party thereunder or entitle Borrower or, to the best knowledge of Borrower, any other party thereto to terminate any such agreement.

 

(q) Leases . No Mortgaged Property is subject to any Leases other than the Leases described in the rent rolls delivered to Lender in connection with the making of the Loan. No person has any possessory interest in any Mortgaged Property or right to occupy the same except under and pursuant to the provisions of the Leases. The current Leases are in full force and effect in accordance with their respective terms and, except as disclosed on Schedule 4 , there are no monetary or other material defaults thereunder by either party and no conditions which with the passage of time and/or notice would constitute monetary or other material defaults thereunder. Except as disclosed on Schedule 4 , no portion of the Mortgaged Property is leased to or occupied by any Affiliate of Borrower.

 

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Section 4.3. Survival of Representations . Borrower agrees that (i) all of the representations and warranties of Borrower set forth in Section 4.1 and 4.2 and in the other Loan Documents delivered on the Closing Date are made as of the Closing Date, and (ii) all representations and warranties made by Borrower shall survive the delivery of the Note and making of the Loan and continue for so long as any amount remains owing to Lender under this Agreement, the Note or any of the other Loan Documents; provided , however , that the representations set forth in Section 4.2(e) shall survive in perpetuity. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on Lender’s behalf.

 

ARTICLE V.

AFFIRMATIVE COVENANTS

 

Section 5.1. Affirmative Covenants . Borrower covenants and agrees that, from the date hereof and until payment in full of the Indebtedness:

 

(a) Existence; Compliance with Legal Requirements: Insurance . Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a limited liability company or limited partnership, as applicable, and any rights, licenses, Permits and franchises necessary for the conduct of its business and will comply with all Legal Requirements and Insurance Requirements applicable to it and to the Mortgaged Property in all material respects. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property necessary for the continued conduct of its business and keep the Mortgaged Property in good repair, working order and condition, except for reasonable wear and use (and except for casualty losses as to which other provisions hereof shall govern), and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto.

 

(b) Basic Carrying Costs and Other Claims; Contest .

 

(i) Subject to Borrower’s contest rights set forth in Section 5.1(b)(ii) below, Borrower will pay prior to delinquency (A) all Basic Carrying Costs with respect to Borrower and the Mortgaged Property; (B) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of the Mortgaged Property or its other properties or assets (hereinafter referred to as the “ Lien Claims ”); and (C) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. Borrower’s obligation to pay Basic Carrying Costs pursuant to this Agreement shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes on the Mortgaged Property or other Impositions.

 

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(ii) Borrower shall not be required to pay, discharge or remove any Imposition or Lien Claim so long as Borrower contests in good faith such Imposition or Lien Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Mortgaged Property or any portion thereof, so long as:

 

(A) the Indebtedness shall not have been accelerated, if an Event of Default shall have occurred and be continuing;

 

(B) prior to the date on which such Imposition or Lien Claim would otherwise have become delinquent, Borrower shall have given Lender prior written notice of its intent to contest said Imposition or Lien Claim deposited with Lender (or with a court of competent jurisdiction or other appropriate body approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount equal to at least one hundred twenty five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Lien Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon, together with such other security as may be required in the proceeding, or as may be reasonably required by Lender, to insure the payment of any such Imposition or Lien Claim and all interest and penalties thereon; provided , that notwithstanding the foregoing, with respect to Impositions or Lien Claims in an amount not in excess of $100,000, Borrower shall not be required to deposit such amounts with the Lender, so long as Borrower demonstrates to the reasonable satisfaction of the Lender that Borrower has otherwise reserved such funds or such funds are otherwise available to the Borrower;

 

(C) no reasonable risk of sale, forfeiture or loss of any interest in the Mortgaged Property or any part thereof arises, in Lender’s reasonable judgment, during the pendency of such contest;

 

(D) such contest does not, in Lender’s determination, have a Material Adverse Effect;

 

(E) such contest is based on bona fide , material, and reasonable claims or defenses;

 

(F) such proceeding shall be permitted under and be conducted in accordance with the provisions of any documents evidencing any Permitted Encumbrances to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; and

 

(G) Borrower shall have obtained such endorsements to the Title Insurance Policy with respect to such Imposition or Lien Claim as Lender may require (or escrowed with a title insurance company funds sufficient to obtain such endorsements pursuant to escrow arrangements reasonably satisfactory to Lender).

 

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Any such contest shall be prosecuted with due diligence, and Borrower shall promptly pay the amount (if any determined to be due) of such Imposition or Lien Claim as finally determined, together with all interest and penalties payable in connection therewith (if any). Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Lien Claim for which a deposit was made shall be promptly repaid to Borrower unless an Event of Default shall have occurred and be continuing, in which case said surplus may be retained by Lender to be applied in accordance with Section 2.8 .

 

(c) Litigation . Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower, any of the constituent members or partners of Borrower, any Guarantor or the Mortgaged Property (or any portion thereof) which is reasonably likely to have a Material Adverse Effect.

 

(d) Environmental Remediation .

 

(i) If Borrower is required to undertake any investigation, site monitoring, cleanup, removal, restoration or other remedial work of any kind or nature pursuant to an order or directive of any Governmental Authority or under any applicable Environmental Law, because of or in connection with the current or future presence, suspected presence, Release or suspected Release of a Hazardous Substance on, under or from any Mortgaged Property or any portion thereof (collectively, the “ Remedial Work ”), Borrower shall promptly commence and diligently prosecute to completion all such Remedial Work, and shall conduct such Remedial Work in accordance with all applicable Environmental Laws. If any fungus, mold, mildew or other biological agent is present at any Mortgaged Property in a manner or at a level that is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property or that poses a significant health risk, the Borrower shall promptly commence and diligently prosecute to completion the remediation of such condition to the reasonable satisfaction of the Lender or its servicer, which shall also constitute Remedial Work. In all events, such Remedial Work shall be commenced within such period of time as required under any applicable Environmental Law; provided , however , that Borrower shall not be required to commence such Remedial Work within the above specified time periods: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time periods would result in Borrower or such Remedial Work violating any Environmental Law or (z) if Borrower, at its expense and after prior notice to Lender, is contesting by appropriate legal, administrative or other proceedings conducted in good faith and with due diligence the need to perform Remedial Work, as long as (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Mortgaged Property nor any part thereof or interest therein shall be sold, forfeited or lost if Borrower does not perform the

 

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Remedial Work being contested, and Borrower would have the opportunity to do so, in the event of Borrower’s failure to prevail in the contest, (3) the Lenders would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Mortgaged Property nor any interest therein would be subject to the imposition of any lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to the Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower’s failure to prevail in such contest in such amount as may be reasonably requested by the Lender.

 

(ii) If requested by Lender, all Remedial Work under clause (i) above shall be performed by contractors, and under the supervision of a consulting Engineer, each approved in advance by Lender which approval shall not be unreasonably withheld or delayed. Borrower shall pay all costs and expenses reasonably incurred in connection with such Remedial Work. If Borrower does not timely commence and diligently prosecute to completion the Remedial Work, Lender may (but shall not be obligated to), upon 30 days prior written notice to Borrower of its intention to do so, cause such Remedial Work to be performed. Borrower shall pay or reimburse Lender on demand for all expenses (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to or incurred by Lender in connection with monitoring, reviewing or performing any Remedial Work in accordance herewith.

 

(iii) Borrower shall not commence any Remedial Work under clause (i) above, nor enter into any settlement agreement, consent decree or other compromise relating to any Hazardous Substances or Environmental Laws without providing notice to Lender as provided in Section 5.1(f) . Notwithstanding the foregoing, if the presence or threatened presence of Hazardous Substances on, under, about or emanating from the Mortgaged Property poses an immediate threat to the health, safety or welfare of any Person or the environment, or is of such a nature that an immediate response is necessary or required under applicable Environmental Law, Borrower may complete all necessary Remedial Work. In such events, Borrower shall notify Lender as soon as practicable and, in any event, within three (3) Business Days, of any action taken.

 

(iv) In the event the Environmental Report recommends the development of an operation and maintenance program for any recognized environmental condition at a Mortgaged Property (including, without limitation, underground storage tanks asbestos and asbestos containing materials, lead-based paints and lead in water supplies) (“ O & M Program ”), Borrower shall develop an O & M Program, as approved by Lender, in Lender’s reasonable discretion, and shall, during the term of the Loan, comply in all respects with the terms and conditions of the O & M Program.

 

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(e) Environmental Matters: Inspection .

 

(i) Borrower shall not permit any Hazardous Substances to be present on or under or to emanate from the Mortgaged Property, or migrate from adjoining property onto or into the Mortgaged Property, except under conditions permitted by applicable Environmental Laws (such as cleaning materials and other items used at the Mortgaged Property by Borrower, Manager or tenants thereof in each case in the ordinary course of business and in each case in compliance with, and in amounts not in excess of that permitted under, Environmental Laws) and, in the event that such Hazardous Substances are present on, under or emanate from the Mortgaged Property, or migrate onto or into the Mortgaged Property, Borrower shall cause the removal or remediation of such Hazardous Substances as required by applicable Environmental Laws, either on its own behalf or by causing a tenant or other party legally responsible therefor to perform such removal and remediation.

 

(ii) Upon reasonable prior written notice, Lender shall have the right, except as otherwise provided under Leases, at all reasonable times during normal business hours to enter upon and inspect environmental conditions with respect to all or any portion of any Mortgaged Property, provided that such inspections shall not unreasonably interfere with the operation or the tenants, residents or occupants of any Mortgaged Property. If Lender has reasonable grounds to suspect that Remedial Work may be required, Lender shall notify Borrower and, thereafter, may select a consulting Engineer to conduct and prepare reports of such inspections (with notice to Borrower prior to the commencement of such inspection). Borrower shall be given a reasonable opportunity to review any reports, data and other documents or materials reviewed or prepared by the Engineer, and to submit comments and suggested revisions or rebuttals to same. The inspection rights granted to Lender in this Section 5.1(e) shall be in addition to, and not in limitation of, any other inspection rights granted to Lender in this Agreement, and shall expressly include the right (if Lender reasonably suspects that Remedial Work may be required) to conduct soil borings, establish ground water monitoring wells and conduct other customary environmental tests, assessments and audits.

 

(iii) Borrower agrees to bear and shall pay or reimburse Lender on demand for all sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to, or incurred by Lender in connection with, the inspections and reports described in this Section 5.1(e) (to the extent such inspections and reports relate to any Mortgaged Property) in the following situations:

 

(x) If Lender has reasonable grounds to believe, at the time any such inspection is ordered, that there exists an occurrence or condition that could lead to a material Environmental Claim;

 

(y) If any such inspection reveals an occurrence or condition that is reasonably likely to lead to a material Environmental Claim with respect to such Mortgaged Property; or

 

(z) If an Event of Default with respect to such Mortgaged Property exists at the time any such inspection is ordered, and such Event of Default relates to any representation, covenant or other obligation pertaining to Hazardous Substances, Environmental Laws or any other environmental matter.

 

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(f) Environmental Notices . Borrower shall promptly provide notice to Lender of:

 

(i) a material Environmental Claim asserted by any Governmental Authority with respect to any Hazardous Substance on, in, under or emanating from any Mortgaged Property;

 

(ii) any proceeding, investigation or inquiry commenced or threatened in writing by any Governmental Authority, against Borrower or with respect to any Mortgaged Property concerning the presence, suspected presence, Release or threatened Release of Hazardous Substances from or onto, in or under any property not owned by Borrower (including, without limitation, proceedings under CERCLA;

 

(iii) a material Environmental Claim asserted or threatened against any Mortgaged Property, against Borrower or against any other party occupying any Mortgaged Property or any portion thereof, in each case which becomes known to Borrower;

 

(iv) the discovery by Borrower of a material occurrence or condition giving rise to an obligation of the Borrower to the Lender hereunder on any Mortgaged Property or on any real property adjoining any Mortgaged Property;

 

(v) the commencement or completion of any Remedial Work; and

 

(vi) any of the foregoing clauses (i) – (v) as to which a tenant notifies Borrower under a Lease with respect to such tenant.

 

(g) Copies of Notices . Borrower shall transmit to Lender copies of any citations, orders, notices or other written communications received from any Person and any notices, reports or other written communications submitted to any Governmental Authority with respect to the matters described in Section 5.1(f) .

 

(h) Environmental Claims . Lender may join and participate in, as a party if Lender so determines, any legal or administrative proceeding or action concerning the Mortgaged Property or any portion thereof under any Environmental Law, if, in Lender’s reasonable judgment, the interests of Lender shall not be adequately protected by Borrower; provided , however , that Lender shall not participate in day-to-day decision making with respect to environmental compliance. Borrower shall pay or reimburse Lender on demand for all reasonable sums advanced and reasonable expenses incurred (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) by Lender in connection with any such action or proceeding.

 

(i) Environmental Indemnification . Borrower shall indemnify, reimburse, defend, and hold harmless Lender, and each of its respective parents, subsidiaries, Affiliates, shareholders, directors, officers, employees, representatives, agents, successors, assigns and

 

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attorneys (collectively, the “ Indemnified Parties ”) for, from, and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses (including, without limitation, interest, penalties, reasonable attorneys’ fees, disbursements and expenses, and reasonable consultants’ fees, disbursements and expenses (but excluding internal overhead, administrative, lost opportunity and similar costs of Lender)), asserted against, resulting to, imposed on, or incurred by any Indemnified Party, directly or indirectly, in connection with any of the following (except to the extent same are directly and solely caused by the gross negligence or willful misconduct of any Indemnified Party, and excepting matters resulting from actions taken or events occurring with respect to the Mortgaged Property or any portion thereof after the Lender forecloses its Lien upon the Mortgaged Property or any portion thereof or accepts a deed in lieu of foreclosure or acquires possession of the Mortgage Property upon an Event of Default as a so-called “mortgagee-in-possession” in which Borrower relinquishes possession of the Mortgaged Property unless and to the extent such matters relate to any of the following which occurred prior thereto):

 

(i) events, circumstances, or conditions which form the reasonable basis for an Environmental Claim;

 

(ii) any pollution or threat to human health or the environment that is related in any way to Borrower’s or any previous owner’s or operator’s management, use, control, ownership or operation of any Mortgaged Property (including, without limitation, all on-site and off-site activities involving Hazardous Substances), and whether occurring, existing or arising prior to or from and after the date hereof, and whether or not the pollution or threat to human health or the environment is described in the Environmental Reports;

 

(iii) any Environmental Claim against any Person whose liability for such Environmental Claim Borrower has or may have assumed or retained either contractually or by operation of law; or

 

(iv) the breach of any representation, warranty or covenant set forth in Section 4.2(e) and Sections 5.1(d) through 5.1(i) , inclusive.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(i) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(j) General Indemnity .

 

(i) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), administrative and judicial actions and proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, and litigation costs, of whatever kind or nature and whether or not incurred in connection with any judicial or administrative proceedings (including, but not limited to, reasonable attorneys’ fees and other reasonable costs of defense) (the “ Losses ”) imposed upon or incurred by or asserted against any Indemnified Parties (except as to any Indemnified

 

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Party to the extent same are directly and solely caused by the gross negligence or willful misconduct of such Indemnified Party) and directly or indirectly arising out of or in any way relating to any one or more of the following:

 

(A) ownership of the Note or any of the other Loan Documents or otherwise related to the Mortgaged Property or any interest therein or receipt of any Rents or Accounts;

 

(B) any untrue statement of any material fact provided by Borrower, its Affiliates or their respective officers, employees, representatives or agents and contained in any information concerning Borrower, the Mortgaged Property or the Loan or the omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information or in light of the circumstances under which they were made not misleading;

 

(C) any and all lawful action that may be taken and is taken by the Lender in connection with the enforcement of the provisions of this Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Borrower, any Guarantor, the SPC Party or any other holder of any direct ownership interest in Borrower becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding;

 

(D) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

(E) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;

 

(F) any failure on the part of Borrower to perform or be in compliance with any of the terms of this Agreement or any of the other Loan Documents;

 

(G) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof pursuant to provisions of this Agreement;

 

(H) the failure of Borrower to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement;

 

(I) any failure of the Mortgaged Property to be in compliance with any Legal Requirement;

 

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(J) the enforcement by any Indemnified Party of the provisions of this Section 5.1(j) ; and

 

(K) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease.

 

Any amounts payable to an Indemnified Party by reason of the application of this Section 5.1(j)(i) shall become due and payable ten (10) Business Days after written demand and shall bear interest at the Default Rate from the tenth (10th) Business Day after demand until paid.

 

(ii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any of the Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Agreement, the Note or any of the other Loan Documents.

 

(iii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs) that the Indemnified Parties may incur, directly or indirectly, as a result of a default under Borrower’s covenants with respect to ERISA and employee benefits plans contained herein, including, without limitation, any costs or expenses incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in the Lender’s reasonable discretion).

 

(iv) Promptly after receipt by an Indemnified Party under this Section 5.1(j) of notice of the making of any claim or the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made by such Indemnified Party against Borrower under this Section 5.1(j) , notify Borrower in writing, but the omission so to notify Borrower will not relieve Borrower from any liability which it may have to any Indemnified Party under this Section 5.1(j) or otherwise unless and to the extent that Borrower did not otherwise possess knowledge of such claim or action and such failure resulted in the forfeiture by Borrower of substantial rights and defenses. In case any such claim is made or action is brought against any Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from Borrower, Borrower will be entitled to participate in, and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party; and, upon receipt of notice from Borrower to such Indemnified Party of its election so to assume the defense of such claim or action and only upon approval by the Indemnified Party of such counsel (such approval not to be unreasonably withheld or delayed), Borrower will not be liable to such Indemnified Party under this Section 5.1(j) for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof. Notwithstanding the preceding sentence, each Indemnified Party will be entitled to employ counsel separate from such counsel for Borrower and from any other party in

 

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such action if such Indemnified Party reasonably determines that a conflict of interest exists which makes representation by counsel chosen by Borrower not advisable. In such event, Borrower shall pay the reasonable fees and disbursements of such separate counsel. Borrower shall not, without the prior written consent of an Indemnified Party, which consent shall not be unreasonably withheld or delayed, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding. Each Indemnified Party shall not enter into a settlement of or consent to the entry of any judgment with respect to any action, claim, suit or proceeding as to which an Indemnified Party would be entitled to indemnification hereunder without the prior written consent of Borrower, which consent shall not be unreasonably withheld or delayed.

 

The provisions of and undertakings and indemnification set forth in this Section 5.1(j) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement.

 

(k) Access to Mortgaged Property . Borrower shall permit agents, representatives and employees of Lender to inspect the Mortgaged Property or any part thereof at such reasonable times as may be requested by Lender upon reasonable advance written notice (except during an Event of Default, in which case advance notice shall not be required), subject, however, to the rights of Borrower and of the tenants of the Mortgaged Property.

 

(l) Notice of Default . Borrower shall promptly advise Lender in writing of any change in Borrower’s condition, financial or otherwise, that is reasonably likely to have a Material Adverse Effect, or of the occurrence of any Default or Event of Default.

 

(m) Cooperate in Legal Proceedings . Except with respect to any claim by Borrower or the Guarantor against Lender, Borrower shall reasonably cooperate with Lender with respect to any proceedings before any Governmental Authority that are reasonably likely to in any way materially affect the rights of Lender hereunder or any rights obtained by Lender under any of the Loan Documents and, in connection therewith, shall not prohibit Lender, at its election, from participating in any such proceedings.

 

(n) Perform Loan Documents . Borrower shall observe, perform and satisfy in all material respects all of the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Loan Documents.

 

(o) Insurance Benefits . Borrower shall reasonably cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Borrower or Lender in connection with any Mortgaged Property. Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including reasonable attorneys’ fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) out of such Insurance Proceeds, all as more specifically provided in this Agreement.

 

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(p) Further Assurances . Borrower shall, at Borrower’s sole cost and expense:

 

(i) upon Lender’s reasonable request therefor given from time to time (but no more frequently than annually unless and Event of Default exists), pay for (a) reports of UCC, tax lien, judgment and litigation searches with respect to Borrower, and (b) searches of title to the Mortgaged Property, each such search to be conducted by search firms designated by Lender in each of the locations designated by Lender;

 

(ii) furnish to Lender all instruments, documents, certificates, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished pursuant to the terms of the Loan Documents;

 

(iii) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary, to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Note, as Lender may reasonably require (including, without limitation, tenant estoppel certificates, an amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments); and

 

(iv) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time.

 

(q) Management of Mortgaged Property .

 

(i) The Mortgaged Property shall be managed at all times by the current Manager or another manager reasonably satisfactory to Lender, pursuant to a Management Agreement. Any such Manager may be an Affiliate of Borrower, provided that: (a) the terms and conditions of such Manager’s engagement are at arm’s length, reasonable, competitive and customary in the applicable marketplace; and (b) Lender has approved such Manager and such terms, which approval shall not be unreasonably withheld or delayed. The Management Agreement, dated as of the date hereof, between the Borrower and the Manager is deemed approved by Lender in all respects. Borrower shall cause the Manager of the Mortgaged Property to agree that such Management Agreement is subject and subordinate in all respects to the Indebtedness and to the Lien of the Mortgage. A Management Agreement may be terminated or assigned by the Manager (1) by Borrower at any time in accordance with the provisions of such Management Agreement so long as a successor or assignee Manager as specified below shall have been appointed and approved and such successor Manager has (i) entered into (or assumed) a Management Agreement in form and substance approved by Lender, which approval shall not be unreasonably denied, conditioned or delayed, and (ii) has executed and delivered a Manager’s Subordination to Lender, and (2) by Lender upon thirty (30) days’ prior written notice to Borrower and the Manager (a) upon the occurrence and continuation of an Event of Default or (b) if the Manager commits any act which would permit termination under the Management Agreement (subject to any

 

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applicable notice, grace and cure periods provided in the Management Agreement). Notwithstanding the foregoing, any successor manager selected hereunder by Lender or Borrower to manage the Mortgaged Property shall be a reputable management company having substantial experience in the management of real property of a similar type, size and quality in the state in which the Mortgaged Property is located. Borrower may from time to time appoint a successor manager to manage the Mortgaged Property with Lender’s prior written consent, such consent not to be unreasonably withheld. Borrower acknowledges and agrees that any consent or approval requested of Lender under this Section may (if a Securitization has occurred) be conditioned by Lender, at Lender’s discretion, upon Borrower first obtaining a Rating Confirmation with respect to such change in management, and Lender shall not be deemed to be acting unreasonably in requiring such a Rating Confirmation. Borrower further covenants and agrees that any manager of Mortgaged Property shall at all times while any Indebtedness is outstanding maintain worker’s compensation insurance as required by Governmental Authorities.

 

(ii) Borrower further covenants and agrees that the Mortgaged Property shall be operated pursuant to the Management Agreement and that Borrower shall: (w) promptly perform and/or observe all of the material covenants and agreements required to be performed and observed by it under the Management Agreement and do all things reasonably necessary to preserve and to keep unimpaired its material rights thereunder; (x) promptly notify Lender of any material default under the Management Agreement of which it is aware; (y) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice and report received by it under the Management Agreement, including, but not limited to, financial statements; and (z) promptly enforce the performance and observance of the covenants and agreements required to be performed and/or observed by the Manager under the Management Agreement.

 

(r) Financial Reporting .

 

(i) Borrower shall keep and maintain or shall cause to be kept and maintained on a Fiscal Year basis in accordance with GAAP consistently applied, books, records and accounts reflecting in reasonable detail all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Mortgaged Property and ownership of the Mortgaged Property and in connection with any services, equipment or furnishings provided in connection with the operation of the Mortgaged Property, whether such income or expense may be realized by Borrower or by any other Person whatsoever. Lender shall have the right from time to time at all times during normal business hours upon reasonable prior written notice to Borrower to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. During the continuation of an Event of Default (including, without limitation, an Event of Default resulting from the failure of Borrower to deliver any of the financial information required to be delivered pursuant to this Section 5.1(r)) , Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower’s accounting records, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lender’s interest.

 

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(ii) Borrower shall furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year, a complete copy of Borrower’s and Guarantor’s financial statements, each audited by a “Big Four” accounting firm or such other Independent certified public accountant acceptable to Lender, in accordance with GAAP consistently applied, covering Borrower’s and Guarantor’s respective financial position and results of operations, for such Fiscal Year and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s or Guarantor’s (as applicable) equity, all of which shall be in form and substance reasonably acceptable to Lender. Lender shall have the right from time to time to review and consult with respect to the auditing procedures used in the preparation of such annual financial statements. Together with Borrower’s and Guarantors’ annual financial statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender an Officer’s Certificate certifying as of the date thereof (x) that the annual financial statements present fairly in all material respects the results of operations and financial condition of Borrower or Guarantor, as applicable, all in accordance with GAAP consistently applied, and (y) whether there exists an Event of Default or Default, and if such Event of Default or Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy same.

 

(iii) Borrower shall furnish to Lender, within forty-five (45) days following the end of each Fiscal Year quarter, quarterly unaudited financial statements (including statements of cash flow) prepared in accordance with GAAP consistently applied, with respect to Borrower and Guarantor for the portion of the Fiscal Year then ended.

 

(iv) No later than forty-five (45) days following the end of each of the months of December, March, June, and September, Borrower shall prepare and deliver to Lender a statement (each a “ Quarterly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property,

 

(A) a rent roll dated as of the last day of such quarter identifying the name of each tenant and the associated premises, Security Deposit, amount due at the beginning of the month, charges in the current month, payments made during the month, amount due at the end of the month, and the occupancy level expressed as a percentage;

 

(B) quarterly and year-to-date operating statements, each of which shall include an itemization of budgeted and actual (not pro forma) capital expenditures during the applicable period; and

 

(C) a quarterly and year-to-date comparison of the budgeted income and expenses with the actual income and expenses for such quarter and year to date, together with, if requested by Lender, a detailed explanation of any variances between budgeted and actual amounts that are in excess of five percent (5%) for each line item therein.

 

(v) Within thirty (30) days after the end of each calendar month (and as to rent rolls requested by Lender on an interim basis, within thirty (30) days after Lender’s

 

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request therefor), Borrower shall provide to Lender and its servicer a statement (each a “ Monthly Statement ”) in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property

 

(A) a certified rent roll for the Mortgaged Property containing the information referred to in Section 5.1(r)(iv)(A) , and

 

(B) monthly operating financial statements for the last twelve (12) months, including a comparison on a year-to-date basis to budget and prior year, for the Mortgaged Property and Borrower.

 

(vi) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information with respect to the operation of the Mortgaged Property and the financial affairs of Borrower as may be reasonably requested by Lender, including all business plans prepared for Borrower.

 

(vii) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information regarding any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA as may be reasonably requested by Lender in writing.

 

(viii) At least thirty (30) days prior to the end of each of Borrower’s Fiscal Years, Borrower shall submit or cause to be submitted to Lender for its approval, such approval not to be unreasonably withheld or delayed, an Operating Budget for Gross Revenues, Property Expenses, Capital Improvement Costs, Leasing Commissions, and replacement reserve costs for the next Fiscal Year for the Mortgaged Property. Such Operating Budget may allow for a five percent (5%) line item variance. Until so approved by Lender for the subsequent Fiscal Year in accordance with the procedure set forth in Section 5.1(r)(ix) below, the Operating Budget approved by Lender for the preceding Fiscal Year shall remain in effect for purposes of Section 2.12 ; provided , that for so long as such prior Operating Budget remains in effect, amounts set forth in the prior Operating Budget with respect to Property Expenses shall be deemed increased on a percentage basis by an amount equal to the greater of (x) actual increases then known to Borrower and (y) the increase in the Consumer Price Index (expressed as a percentage) as measured over the calendar year that the prior Operating Budget was in effect.

 

(ix) Together with the financial statements, rent rolls, operating statements and other documents and information provided to Lender by or on behalf of Borrower under this Section 5.1(r) , Borrower also shall deliver to Lender a certification in form and substance reasonably satisfactory to Lender, executed on behalf of Borrower by its chief executive officer or chief financial officer stating that, to such officer’s or individual’s knowledge, such financial statements, rent rolls, operating statements and other documents and information delivered on behalf of Borrower are true and complete in all material respects.

 

(s) Operation of Mortgaged Property . Borrower shall cause the operation of the Mortgaged Property to be conducted at all times in a manner consistent with at least the level of operation of such Mortgaged Property as of the Closing Date, including, without limitation, the following:

 

(i) to maintain or cause to be maintained the standard of the Mortgaged Property at all times at a level not lower than that maintained by prudent managers of similar facilities or land in the region where the Mortgaged Property is located;

 

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(ii) to operate or cause to be operated the Mortgaged Property in a prudent manner in compliance in all material respects with applicable Legal Requirements and Insurance Requirements relating thereto and maintain or cause to be maintained all material licenses, Permits and any other agreements necessary for the continued use and operation of the Mortgaged Property; and

 

(iii) to maintain or cause to be maintained sufficient Inventory and Equipment of types and quantities at the Mortgaged Property to enable Borrower to operate the Mortgaged Property and to comply in all material respects with all Leases affecting the Mortgaged Property.

 

(t) Material Agreements . Except for (i) Leases and any Management Agreement complying with the Loan Documents, (ii) agreements evidencing financing leases and purchase money debt expressly permitted under Section 8.1(e)(iii) , and (iii) extensions, renewals or replacements (on then-current market terms) of the existing operating and maintenance agreements relating to the elevators and HVAC system at the Mortgaged Property, Borrower shall not enter into or become obligated under any material agreement pertaining to the Mortgaged Property, including without limitation brokerage agreements, unless the same may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days’ prior written notice. Borrower will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, (B) maintain all material licenses and permits now held or hereafter acquired by Borrower, and (C) perform, observe, comply and fulfill all of its obligations, covenants and conditions contained in any material agreement pertaining to the Mortgaged Property.

 

(u) ERISA . Borrower shall deliver to Lender as soon as possible, and in any event within ten days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to such event or condition):

 

(i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required

 

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installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan;

 

(ii) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

 

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

 

(iv) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate of Borrower that results in material liability to Borrower or such ERISA Affiliate under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

 

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

 

(vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate of Borrower fails to timely provide security to the Plan in accordance with the provisions of said Sections; and

 

(vii) the imposition of a lien or a security interest in connection with a Plan.

 

(v) Intentionally Omitted .

 

(w) Secondary Market Transaction . Borrower acknowledges that Lender and its successors and assigns may (i) sell the Loan to one or more investors as a whole loan, (ii) participate the Loan to one or more investors, (iii) deposit the Loan with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interests therein to investors (the transactions referred to in clauses (i) through (iv) above are hereinafter each referred to as a “ Secondary Market Transaction ”). Borrower shall cooperate with Lender in attempting to effect or effecting any such Secondary Market Transaction and shall cooperate in attempting to implement or implementing all requirements imposed by any Rating Agency involved in any Secondary Market Transaction, including but not limited to,

 

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(i) providing Lender an estoppel certificate and such information, legal opinions and documents (including updated non-consolidation opinions) relating to Borrower, the Guarantor, the Mortgaged Property and any tenants of the Mortgaged Property as Lender or the Rating Agencies, may reasonably request in connection with such Secondary Market Transaction, including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I’s and, if appropriate, Phase II’s), Mortgaged Property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants, as of the closing date of the Secondary Market Transaction,

 

(ii) amending the Loan Documents and Organizational Agreement of Borrower and any SPC Party, updating and/or restating officer’s certificates, title insurance and other closing items, and providing updated representations and warranties in Loan Documents and such additional representations and warranties, as may be required by the Rating Agencies,

 

(iii) participating during reasonable hours upon reasonable advance written notice in bank, investors and Rating Agencies’ meetings if requested by Lender,

 

(iv) upon Lender’s request, amending the Loan Documents (and updating and/or restating officer’s certificates, title insurance and other closing items in connection therewith) to divide the Loan into first and a second mortgage loan, or into one or more loans secured by mortgages and by ownership interests in Borrower in whatever proportion Lender determines, or into two or more notes in such order of priority and secured by such mortgages as Lender determines, which separated loans and/or notes may have different principal amounts, interest rates, amortization schedules and other financial terms (but with aggregated financial terms which are equivalent to that of the Loan prior to such separation) and thereafter to engage in separate Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation, and

 

(v) reviewing the offering documents relating to any Secondary Market Transaction to ensure that all information concerning Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct in all material respects, and certifying to the accuracy thereof.

 

Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, purchasers, transferees, assignees, participants, servicers and actual or potential investors involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction (collectively, “ Interested Parties ”). Lender and all of the aforesaid Interested Parties who become parties to the Secondary Market Transaction shall be entitled to rely on the information supplied by, or on behalf of, Borrower. Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development. Borrower shall provide such reasonable access, upon reasonable advance written notice, to the Mortgaged Property and personnel of the Manager and of Borrower’s constituent members and the business and operations of all of the foregoing as

 

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Lender or other Interested Parties may request in connection with any such Secondary Market Transaction, subject to the rights of tenants. Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Without limiting the foregoing, after having a reasonable opportunity to review the same, Borrower and Guarantor shall provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the “ Disclosure Documents ”), an agreement certifying that Borrower and Guarantor have examined such Disclosure Documents specified by Lender and that each such Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the Mortgaged Property and Manager, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (a “ Disclosure Certificate ”). Borrower and Guarantor shall indemnify, defend, protect and hold harmless Lender, its Affiliates, directors, employees, agents and each Person, if any, who controls Lender or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, from and against any losses, claims, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) that arise out of or are based upon any untrue statement of any material fact contained in any Disclosure Certificate or other information or documents furnished by Borrower, Guarantor or their Affiliates or in any representation or warranty of any Borrower contained herein or in the other Loan Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Indebtedness), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a “Lender” hereunder. The holders from time to time of the Loan and/or any other interest of the “Lender” under this Loan Agreement and the other Loan Documents may from time to time enter into one or more co-lender or similar agreements in their discretion. Borrower acknowledges and agrees that such agreements, as the same may from time to time be amended, modified or restated, may govern the exercise of the powers and discretionary authority of the Lender hereunder and under the other Loan Documents, but Borrower shall be entitled to rely upon any actions taken by Lender or the designated servicer(s) or agent(s) for Lender, whether or not within the scope of its power and authority under such other agreements.

 

Borrower shall not be obligated to pay Lender’s costs and expenses incurred in connection with any Secondary Market Transaction; Borrower shall, however, pay the costs and expenses of Borrower’s counsel in the event Borrower engages counsel in connection with any Secondary Market Transaction or in responding to Lender’s requests for cooperation hereunder.

 

(x) Insurance .

 

(i) Borrower, at its sole cost and expense, shall keep the Improvements and Equipment insured (including, but not limited to, any period of renovation, alteration

 

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and/or construction) during the term of the Loan with the coverage and in the amounts required under this Agreement for the mutual benefit of Borrower and Lender against loss or damage by fire, lightning, wind and such other perils as are customarily included in a standard “all-risk” or “special cause of loss” form and against loss or damage by other risks and hazards covered by a standard extended coverage insurance policy (including, without limitation, fire, lightning, hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism, riot and civil commotion, vandalism, malicious mischief, strike, water damage, sprinkler leakage, collapse, burglary, theft, mold and microbial matter coverage arising as a result of covered perils under the standard “all risk” policy and such other coverages as may be reasonably required by Lender on the special form (formerly known as an all risk form)). Such insurance shall be in an amount (i) equal to then full replacement cost of the Improvements and Equipment (exclusive of the cost of foundations and footings), without deduction for physical depreciation, and (ii) such that the insurer would not deem Borrower a co-insurer under said policies. The policies of insurance carried in accordance with this Section 5.1(x) shall be paid not less than ten (10) days in advance of the due date thereof and shall contain the “Replacement Cost Endorsement” with a waiver of depreciation. If terrorism coverage is excluded on an “all-risk” basis, then Borrower shall obtain coverage for terrorism and similar acts in the stand alone terrorism market. Notwithstanding the foregoing, Lender shall not unreasonably withhold its consent to reductions in the stated amounts and types of coverage required to be maintained by Borrower hereunder if such levels of coverage or types of insurance, as determined by Lender in its sole discretion, (A) are not available at commercially reasonable rates and (B) are not at the time commonly maintained for properties similar to the Mortgaged Property and located in or around the region in which the Mortgaged Property is located.

 

(ii) Borrower, at its sole cost and expense, for the mutual benefit of Borrower and Lender, shall also obtain and maintain or cause to be obtained and maintained during the entire term of the Loan the following policies of insurance:

 

(A) flood insurance, if any part of the Improvements on any part of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (and any amendment or successor act thereto) in an amount at least equal to the maximum limit of coverage available with respect to the Improvements and Equipment under said Act;

 

(B) Comprehensive General Liability or Commercial General Liability insurance, including a broad form comprehensive general liability endorsement and coverage for broad form property damage, contractual damages, personal injuries (including death resulting therefrom) and a liquor liability endorsement if liquor is sold on the Mortgaged Property, containing minimum limits of liability of $1 million for both injury to or death of a person and for property damage per occurrence and $2 million in the aggregate for the Mortgaged Property, and such other liability insurance reasonably requested by Lender; in addition, at least $25

 

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million excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including all legal liability imposed upon Borrower and all court costs and attorneys’ fees incurred in connection with the ownership, operation and maintenance of the Mortgaged Property;

 

(C) business interruption insurance (including rental value) in an annual aggregate amount equal to the estimated gross revenues from the Leases of the Mortgaged Property (including, without limitation, the loss of all Rents and additional Rents payable by all of the lessees under the Leases (whether or not such Leases are terminable in the event of a fire or casualty)), such insurance to cover losses for a period of the longer of (x) eighteen (18) months after the date of the fire or casualty in question, or (y) the period from the time of loss until all repairs are fully completed with reasonable diligence and dispatch, plus an extended period of indemnity commencing at the time repairs are completed for a period of not less than 365 days and to be increased or decreased, as applicable, from time to time during the term of the Loan if, and when, the gross revenues from the Leases of the Mortgaged Property materially increase or decrease, as applicable (including, without limitation, increases from new Leases and renewal Leases entered into in accordance with the terms of this Agreement), to reflect all increased Rent and increased additional Rent payable by all of the lessees under such renewal Leases and all Rent and additional Rent payable by all of the lessees under such new Leases;

 

(D) insurance against loss or damage from (x) leakage of sprinkler systems and (y) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), covering all boilers or other pressure vessels, machinery and equipment located in, on, or about the Improvements; coverage is required in an amount at least equal to the full replacement cost of such equipment and the building or buildings housing same and shall extend to electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping;

 

(E) to the extent required by an applicable Governmental Authority with jurisdiction thereover, worker’s compensation insurance coverage (covering, and in amounts not less than the statutory minimums for, all persons employed by Borrower at the Mortgaged Property and subject to worker’s compensation laws in the state where the Mortgaged Property is located and in compliance with all other requirements of applicable local, state and federal law) and “Employers Liability” insurance in amounts not less than required by statute;

 

(F) during any period of repair or restoration, builder’s “all risk” insurance in an amount equal to not less than the full insurable value of the Mortgaged Property against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may request, in form and substance acceptable to Lender;

 

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(G) ordinance or law coverage to compensate for the cost of demolition, increased cost of construction, and loss to any undamaged portions of the Improvements, if the current use of the Mortgaged Property or the Improvements themselves are or become “nonconforming” pursuant to the applicable zoning regulations or full rebuildability following casualty is not otherwise permitted under such zoning regulations;

 

(H) if reasonably required by Lender as a result of any Mortgaged Property being located in an area with a high degree of seismic activity, earthquake damage insurance in an amount and form reasonably acceptable to Lender; and

 

(I) such other insurance as may from time to time be reasonably required by Lender in order to protect its interests with respect to the Loan and the Mortgaged Property and to conform such requirements to then current standards for a Securitization.

 

(iii) All policies of insurance (the “ Policies ”) required pursuant to this Section 5.1(x) :

 

(A) shall be issued by (1) an insurer approved by Lender which has a claims paying ability rating of not less than “A” (or the equivalent) by Rating Agencies satisfactory to Lender (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best, or (2) an insurer within the CB Richard Ellis Insurance Program which has a claims paying ability rating of not less than “BBB” or “BBB(pi)”(as applicable) (or the equivalent) by Rating Agencies satisfactory to Agent (one of which shall be Standard & Poor’s Ratings Group) and A:VIII or better as to claims paying ability by AM Best; provided, however, if any of the Policies shall be delivered in accordance with this subsection 5.1(x)(iii)(A)(2) , then Lender shall have the right, to be exercised at anytime during the term of the Loan, at Lender’s sole and absolute discretion, to require Borrower to replace the Policies under this subsection 5.1(x)(iii)(A)(2) with Policies that conform with subsection 5.1(x)(iii)(A)(1) above.

 

(B) shall name Lender as an additional insured under all liability policies and contain a standard noncontributory mortgagee clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender (and/or such other party as may be designated by Lender) as the party to which all payments made by such insurance company shall be paid (except general public liability and excess liability, as to which Lender shall be named as additional insured, but not as loss payee),

 

(C) shall be maintained throughout the term of the Loan without cost to Lender,

 

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(D) shall contain such provisions as Lender deems reasonably necessary or desirable to protect its interest (including, without limitation, endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under said Policies and that Lender shall receive at least thirty (30) days prior written notice of any modification, reduction or cancellation),

 

(E) shall contain a waiver of subrogation against Lender,

 

(F) shall be for a term of not less than one year,

 

(G) shall provide for claims to be made on an occurrence basis,

 

(H) shall contain an agreed value clause updated annually (if the amount of coverage under such policy is based upon the replacement cost of the Mortgaged Property),

 

(I) shall be issued by an insurer licensed in the state in which the Mortgaged Property is located,

 

(J) shall provide that Lender may, but shall not be obligated to, make premium payments to prevent any cancellation, endorsement, alteration or reissuance, and such payments shall be accepted by the insurer to prevent same, and

 

(K) shall be reasonably satisfactory in form and substance to Lender and reasonably approved by Lender as to amounts, form, risk coverage, deductibles, loss payees and insureds to the extent not otherwise specified in this Section 5.1(x) . All property damage insurance policies (except for flood and earthquake policies) must automatically reinstate after each loss.

 

Copies of said Policies, certified as true and correct by Borrower, or insurance certificates thereof, shall be delivered to Lender. Not later than ten (10) days prior to the expiration date of each of the Policies, Borrower shall deliver to Lender satisfactory evidence of the renewal of each Policy. The insurance coverage required under this Section 5.1(x) may be effected under a blanket policy or policies covering the Mortgaged Property and other property and assets not constituting a part of the Collateral; provided that any such blanket policy shall provide at least the same amount and form of protection as would a separate policy insuring the Mortgaged Property individually, which amount shall not be less than the amount required pursuant to this Section 5.1(x) and which shall in any case comply in all other respects with the requirements of this Section 5.1(x) . Upon demand therefor, Borrower shall reimburse Lender for all of Lender’s or its designee’s reasonable costs and expenses incurred in obtaining any or all of the Policies or otherwise causing the compliance with the terms and provisions of this Section 5.1(x) , including (without limitation) obtaining updated flood hazard certificates and replacement of any so-called “forced placed” insurance coverages to the extent Borrower was required to obtain and maintain any such Policy or Policies hereunder and failed to do so. Borrower shall pay the premiums for such Policies (the “ Insurance Premiums ”) as the same become due and payable and shall furnish to Lender evidence of the renewal of each of the Policies with

 

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receipts for the payment of the Insurance Premiums or other evidence of such payment reasonably satisfactory to Lender (provided, however, that Borrower is not required to furnish such evidence of payment to Lender in the event that such Insurance Premiums have been paid by Lender). If Borrower does not furnish such evidence and receipts at least ten (10) days prior to the expiration of any expiring Policy, then Lender may procure, but shall not be obligated to procure, such insurance and pay the Insurance Premiums therefor, and Borrower agrees to reimburse Lender for the cost of such Insurance Premiums promptly on demand. Within thirty (30) days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, based on then industry-standard amounts of coverage then being obtained by prudent owners of properties similar to the Mortgaged Property in the same applicable market region as the Mortgaged Property. Borrower shall give Lender prompt written notice if Borrower (or any Affiliate) receives from any insurer any written notification or threat of any actions or proceedings regarding the non-compliance or non-conformity of the Mortgaged Property with any insurance requirements. In addition to the foregoing, Borrower shall monitor, in a commercially reasonable manner on a monthly basis, the status of, and the delivery of evidence to Borrower of, each tenant’s insurance coverage carried with respect to such tenant’s property, fixtures and equipment at the Mortgaged Property, and give Lender prompt written notice if Borrower (or, to Borrower’s knowledge, any Affiliate) receives from any insurance carrier which insures such property, any notice that such tenant’s coverage is being cancelled, terminated, has expired or is being materially modified. Borrower shall not agree or acquiesce to any such cancellation, termination, expiration or material modification of tenant insurance coverage without the prior consent of Lender (not to be unreasonably withheld or delayed). In the event of the cancellation, termination or expiration of such tenant’s insurance coverage, Borrower shall cause such tenant to promptly replace such lapsed coverage with comparable coverage, or, to the extent the same is available, purchase and “force-place” such coverage on such tenant’s behalf, at Borrower’s expense, within five (5) days following such lapse. Borrower’s covenants and obligations set forth in the previous two (2) sentences are hereinafter collectively referred to as the “ Force-Place Obligation .”

 

(iv) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender.

 

(A) In case of loss covered by Policies, Lender may either (a) jointly with Borrower settle and adjust any claim and agree with the insurance company or companies on the amount to be paid on the loss or (b) allow Borrower to agree with the insurance company or companies on the amount to be paid upon the loss; provided , that Borrower may settle and adjust losses without participation by Lender with respect to a single loss aggregating not in excess of an amount equal to two percent (2%) of the Loan Amount, agree with the insurance company or companies on the amount to be paid upon the loss and collect and receive any such Insurance Proceeds; provided , further , that if (x) at the time of the settlement of such claim an Event of Default has occurred and is continuing or (y) Lender and Borrower are unable to agree upon a joint settlement (other than with respect to claims which Borrower may settle and adjust in accordance with the first

 

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proviso in this Section 5.1(x)(iv)(A) ) or (z) Lender disapproves of Borrower’s proposed settlement with the insurance company (other than with respect to claims which Borrower may settle and adjust in accordance with the first proviso in this Section 5.1(x)(iv)(A)), then Lender shall settle and adjust such claim without the consent of Borrower. In any such case Lender shall and is hereby authorized to collect and receipt for any such Insurance Proceeds subject to and to the extent provided for in this Agreement. The reasonable out-of-pocket expenses incurred by Lender in the adjustment and collection of Insurance Proceeds shall become part of the Indebtedness and be secured by the Mortgage and shall be reimbursed by Borrower to Lender upon demand therefor.

 

(B) In the event of any insured damage to or destruction of the Mortgaged Property or any part thereof (herein called an “ Insured Casualty ”) where (1) the aggregate amount of the loss, as reasonably determined by an Independent insurance adjuster, is less than thirty percent (30%) of the Lender’s reasonable estimate of the fair market value of the Mortgaged Property, (2) in the reasonable judgment of Lender, the Mortgaged Property can be restored, replaced and/or rebuilt (collectively, the “ Restoration ”) by not later than the first to occur of (a) twelve (12) months of settlement of the claim and (b) the expiration of the business interruption insurance and, in any case, not later than six (6) months prior to the Maturity Date to an economic unit not materially less valuable (including an assessment of the impact of the termination of any Leases due to such Insured Casualty) and not less useful than the same was prior to the Insured Casualty, (3) Lender reasonably determines that the rental income of the Mortgaged Property, after the Restoration thereof, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Loan and satisfy a debt service coverage ratio (as reasonably determined by Lender) of 1.30:1.00, and (4) tenant leases requiring payment of annual rent equal to at least seventy-five percent (75%) of the gross revenues from the Mortgaged Property during the twelve (12) month period immediately preceding the date of such fire or other casualty remain in full force and effect during and after the Restoration of the Property (subject to the rent abatement provisions thereof applicable as a result of the casualty, so long as such abatement will end, and full rental payments shall resume, upon completion of the Restoration in a manner such that the applicable tenant premises are habitable and available for occupancy by the applicable tenants for the conduct of their respective businesses therefrom), or if Lender otherwise elects to allow a Borrower to restore the Mortgaged Property, then, if no Event of Default shall have occurred and be continuing, the Insurance Proceeds (after reimbursement of any reasonable out-of-pocket expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds) shall be made available to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or part thereof subject to the Insured Casualty, as provided for below. Borrower hereby covenants and agrees to commence and diligently to prosecute such Restoration of the affected Mortgaged Property. Borrower shall pay all out-of-pocket costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Insurance Proceeds made available pursuant to the terms hereof.

 

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(C) Except as provided above, the Insurance Proceeds collected upon any Insured Casualty shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing) or applied to the cost of Restoration of the affected Mortgaged Property or part thereof subject to the Insured Casualty, in the manner set forth below.

 

(D) In the event that Insurance Proceeds (after reimbursement of any reasonable expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds), if any, shall be made available to Borrower for the Restoration of any portion of the affected Mortgaged Property, Borrower covenants to complete such Restoration of the affected Mortgaged Property to be of at least comparable value as prior to such damage or destruction, all to be effected in accordance with Legal Requirements and plans and specifications approved in advance by Lender, such approval not to be unreasonably withheld or delayed.

 

(E) In the event Borrower is entitled to reimbursement out of Insurance Proceeds, such proceeds shall be held by Lender in the Loss Proceeds Account and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to the Insurance Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing Restoration as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review Borrower’s request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work). No funds other than Insurance Proceeds shall be disbursed prior to disbursement of such proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds remaining in the Loss Proceeds Account, together with funds deposited therein to

 

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pay the costs of the Restoration by or on behalf of Borrower, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration free and clear of all liens or claims for lien, except for Permitted Encumbrances. Any surplus which may remain out of Insurance Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

(F) Notwithstanding the foregoing, if: (1) an Insured Casualty occurs as to which Borrower is required pursuant to the terms of this Section 5.1(x) to pay the Insurance Proceeds to the Lenders for application to the Indebtedness; and (2) the amount of such Insurance Proceeds is less than 125% of the Indebtedness as to which such Insured Casualty occurred (such deficiency being the “ Insurance Gap ”), then Borrower and Guarantor shall be fully liable to the Lender (for application to the remaining Indebtedness and Crossed Indebtedness) in an amount equal to such Insurance Gap.

 

(v) Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement that would be considered “co-insurance” or adversely affect the ability to collect under a policy of insurance required hereunder.

 

(y) Condemnation .

 

(i) Borrower shall promptly give Lender written notice of the actual or threatened commencement of any proceeding for a Taking and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Condemnation Proceeds for said Taking. With respect to any compromise or settlement in connection with such proceeding, Lender shall jointly with Borrower compromise and reach settlement unless at the time of such Taking an Event of Default has occurred and is continuing and the Indebtedness has been accelerated, in which event Lender shall compromise and reach settlement without the consent of Borrower. Notwithstanding the foregoing provisions of this Section 5.1(y) , Borrower is authorized to negotiate, compromise and settle, without participation by Lender, Condemnation Proceeds of up to $100,000 in connection with any Taking. Notwithstanding any Taking, Borrower shall continue to pay the Indebtedness at the time and in the manner provided for in this Agreement and the other Loan Documents and the Indebtedness shall not be reduced except in accordance herewith.

 

(ii) Borrower shall cause the Condemnation Proceeds to be paid directly to Lender. Lender may, in its sole discretion, apply any such Condemnation Proceeds to the reduction or discharge of the Indebtedness (whether or not then due and payable) (without payment of any Prepayment Consideration in connection therewith, provided no Event of Default is then continuing).

 

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(iii) With respect to a Taking in part, which shall mean any Taking which does not render the affected Mortgaged Property physically or economically unsuitable in the reasonable judgment of Lender for the use to which it was devoted prior to the Taking, Borrower shall cause the Condemnation Proceeds to be paid to Lender as described above, and if Lender does not elect to apply the same to the Indebtedness as provided in Section 5.1(y)(ii) above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds Account and the same shall be made available for application to the cost of Restoration of the affected Mortgaged Property and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to Lender that such funds are available and sufficient in addition to the Condemnation Proceeds to complete the proposed Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing repair, restoration, replacement or rebuilding as Lender may reasonably require and approve.

 

(iv) Provided that Condemnation Proceeds shall be made available to Borrower for Restoration of the affected Mortgaged Property, Borrower hereby covenants to complete the Restoration of the affected Mortgaged Property to be of at least comparable value and, to the extent commercially practicable, of substantially the same character as prior to the Taking, all to be effected in accordance with applicable law and plans and specifications reasonably approved in advance by Lender. Borrower shall pay all costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Condemnation Proceeds made available pursuant to the terms hereof. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review any request by Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the construction work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work); funds other than Condemnation Proceeds shall be disbursed prior to disbursement of such proceeds; and at all times, the undisbursed balance of such proceeds remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the repayment of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens or claims for lien. Any surplus which may remain out of Condemnation Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its sole discretion, be applied to the payment of the Indebtedness or be paid to Borrower so long as no Event of Default has occurred and is continuing.

 

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(v) If the affected Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of any such Condemnation Proceeds to which it is entitled hereunder, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to have reserved in any foreclosure decree a right to receive said award or payment, or a portion thereof sufficient to pay the Indebtedness. In no case shall any such application reduce or postpone any payments otherwise required pursuant to this Agreement, other than the final payment on the Note.

 

(z) Leases and Rents .

 

(i) Borrower absolutely and unconditionally assigns to Lender, Borrower’s right, title and interest in all current and future Leases and Rents as collateral for the Loan, it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Lender shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon Lender. Borrower shall execute and deliver to Lender such additional instruments, in form and substance reasonably satisfactory to Lender, as may hereafter be reasonably requested in writing by Lender to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section 5.1(z) , Lender grants to Borrower a license to lease, maintain, operate and manage the Mortgaged Property and to collect, use and apply the Rents in accordance with the terms hereof and otherwise act as the landlord under the Leases. Any portion of the Rents held by Borrower shall be held in trust for the benefit of Lender for use in the payment of the Indebtedness. Upon the occurrence of an Event of Default and during the continuance thereof, the license granted to Borrower herein shall automatically be revoked, and Lender shall immediately be entitled to possession of all Rents, whether or not Lender enters upon or takes control of the Mortgaged Property. Lender is hereby granted and assigned by Borrower the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Any Rents collected after the revocation of the license shall be applied toward payment of the Indebtedness as set forth in Section 2.8 hereof.

 

(ii) All Leases entered into by Borrower shall provide for rental rates comparable to (or more favorable to Borrower than) then-existing local market rates and terms and conditions commercially reasonable and consistent with (or more favorable to Borrower than) then-prevailing local market terms and conditions for similar type properties. With respect to any Lease for more than 15% of the rentable square footage of the Mortgaged Property, Borrower shall not enter into such Lease without the prior written consent of Lender. Borrower shall furnish Lender with (1) detailed term sheets in advance in the case of any Leases, modifications, amendments or renewals for which Lender’s consent is required and (2) in the case of any other Leases, executed copies of such Leases upon written request. All renewals or amendments or modifications of

 

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Leases that do not satisfy the requirements of the first sentence of this Section 5.1(z)(ii) shall be subject to the prior approval of Lender. All Leases shall be written on the standard lease form previously approved by Lender which form shall not be materially changed without Lender’s prior written consent which consent shall not be unreasonably withheld. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage, and that the lessee agrees to attorn to Lender upon Lender’s non-disturbance of such tenant so long as such tenant is not in default under its Lease. Borrower,

 

(A) shall observe and perform all of the material obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Indebtedness;

 

(B) shall promptly send copies to Lender of all written notices of default which Borrower shall send or receive thereunder;

 

(C) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed and shall effect a termination or diminution of the obligations of tenants under leases, only in a manner that a prudent owner of a similar property to the Mortgaged Property would enforce such terms covenants and conditions or effect such termination or diminution in the ordinary course of business;

 

(D) shall not collect any of the Rents more than one (1) month in advance;

 

(E) shall not execute any other assignment of lessor’s interest in Leases or Rents; and

 

(F) shall not convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder.

 

Borrower shall submit any Lease, modification, amendment or renewal for which Lender’s consent is required (together with all applicable information and documents, if any, relating thereto as Lender may reasonably require in connection with its determination) to Lender in writing sent by recognized overnight delivery service or by registered or certified mail (and simultaneously shall contact the Lender by telephone and by electronic mail) in accordance with the terms of this Agreement (the “ First Notice ”), requesting Lender’s approval of such Lease, modification, amendment or renewal. Lender shall use reasonable efforts to deliver to Borrower its written approval or disapproval of the proposed Lease, modification, amendment or renewal within ten (10) Business Days after Lender shall have received the First Notice. Unless Lender shall have approved the Lease, modification, amendment or renewal contained in the First Notice, Lender’s approval shall be deemed to be withheld. If Borrower does not receive Lender’s response by the end of such ten (10) Business Days period, Borrower may

 

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resubmit its written request to Lender (the “Second Notice”). The Second Notice shall make reference to the First Notice and shall bear the following legend in capital letters: “LENDER’S FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN FIVE (5) BUSINESS DAYS FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE [LEASE] [MODIFICATION] [AMENDMENT] [RENEWAL] DESCRIBED HEREIN.” If Lender does not approve or disapprove the proposed Lease, modification, amendment or renewal within five (5) Business Days after Lender shall have received Borrower’s Second Notice, Lender shall be deemed to have approved the proposed Lease, modification, amendment or renewal.

 

(iii) Borrower shall within five Business Days of receipt deposit cash Security Deposits of lessees which are turned over to or for the benefit of Borrower or otherwise collected by or on behalf of Borrower, into the Security Deposit Account and shall not commingle such funds with any other funds of Borrower, and shall deliver all instruments evidencing non-cash Security Deposits and all related documents to Lender. Any bond or other instrument which Borrower is permitted to hold in lieu of cash Security Deposits under any applicable Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall, if permitted pursuant to Legal Requirements, name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender) and shall, in all respects, comply with any applicable Legal Requirements and otherwise be reasonably satisfactory to Lender; provided, however, that so long as no Event of Default exists and Borrower delivers such bond or other instrument to Lender to hold under this Agreement, Lender may elect not to require Borrower to cause the Lender to be named as payee thereunder, in which event if an Event of Default occurs, Borrower shall take all actions as are necessary in order to cause Lender or to be named as payee thereunder and take such other actions as Lender may reasonably require with respect thereto, and Borrower hereby constitutes and appoints Lender, during the continuance of an Event of Default, its true and lawful attorney-in-fact with full power of substitution to take in the name of Borrower any and all actions necessary to take such actions, including causing Lender to be named as payee thereunder. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance with the foregoing. Upon the occurrence and during the continuance of any Event of Default, to the extent permitted by applicable Legal Requirements, Borrower shall, upon Lender’s request, turn over to Lender any Security Deposits (and any interest theretofore earned thereon) not yet deposited into the Security Deposit Account or delivered to Lender with respect to all or any portion of the Mortgaged Property, to be held by Lender subject to the terms of the Leases.

 

(aa) Maintenance of Mortgaged Property . Borrower shall cause the Mortgaged Property to be maintained in a good and safe condition and repair, subject to wear and tear and damage caused by casualty or condemnation. The Improvements and the Equipment shall not be removed, demolished or altered (except for (1) normal replacement of the Equipment, (2) Improvements contemplated in an approved Operating Budget or pursuant to Leases in effect from time to time, or (3) removals, demolition or alterations that do not cost more than $100,000) without the consent of Lender which consent shall not be unreasonably withheld or

 

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delayed. Except with respect to an Insured Casualty which shall be governed by the terms and conditions provided herein, Borrower shall, or shall cause any tenants obligated under their respective Leases to, promptly repair, replace or rebuild any part of the Mortgaged Property that becomes damaged, worn or dilapidated. Borrower shall complete and pay for any structure at any time in the process of construction or repair on the Land. Borrower shall not initiate, join in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of any Mortgaged Property or any part thereof without the written consent of Lender. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Borrower will not cause or permit such nonconforming use to be discontinued or abandoned if such discontinuance of abandonment would cause such nonconforming use to no longer be permitted without the express written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall not (i) change the use of any of the Land or Improvements in any material respect, (ii) permit or suffer to occur any waste on or to any Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever to convert any Mortgaged Property, or any portion thereof, to a condominium or cooperative form of management.

 

(bb) Taxes on Security . Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Lien created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law (1) deducting the Loan from the value of the Collateral for the purpose of taxation, (2) affecting Lender’s Lien on the Collateral or (3) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by realty, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof; provided , however , if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable.

 

ARTICLE VI.

NEGATIVE COVENANTS

 

Section 6.1. Negative Covenants . Borrower covenants and agrees that, until payment in full of the Indebtedness, it will not do, directly or indirectly, any of the following unless Lender consents thereto in writing:

 

(a) Liens on the Mortgaged Property . Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, except as permitted by Section 5.1(b) above, any Lien with respect to any Mortgaged Property or any portion thereof, except: (i) Liens in favor of Lender and (ii) the Permitted Encumbrances.

 

(b) Ownership . Except as expressly permitted by or pursuant to this Agreement or the other Loan Documents, own any property of any kind other than the Mortgaged Property.

 

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(c) Other Borrowings . Incur, create, assume, become or be liable in any manner with respect to Other Borrowings, other than the Crossed Loans.

 

(d) Dissolution; Merger or Consolidation . Dissolve, terminate, liquidate, merge with or consolidate into another Person.

 

(e) Change In Business . Make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.

 

(f) Debt Cancellation . Cancel or otherwise forgive or release any material claim or debt owed to Borrower by any Person, except for adequate consideration or in the ordinary course of Borrower’s business.

 

(g) Affiliate Transactions . (i) Enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Borrower or with any director, officer or employee of any Affiliate of Borrower, except transactions in the ordinary course of business of Borrower and upon terms which are no less favorable to Borrower than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate of Borrower, or (ii) make any payment or permit any payment to be made to any Affiliate of Borrower (other than the Independent Director’s fees for acting such capacity) when or as to any time when any Event of Default shall exist, provided , however , that Borrower shall be able to make distributions to its owner(s) as reasonably necessary for Digital Realty Trust to meet the REIT Distribution Requirement in any taxable year, but in no event shall such distributions, in the aggregate, exceed Borrower’s taxable income, as determined under Section 703(a) of the Code, for such taxable year.

 

(h) Creation of Easements . Except as expressly permitted by or pursuant to the Mortgage or this Agreement, create, or permit any Mortgaged Property or any part thereof to become subject to, any easement, license or restrictive covenant, other than a Permitted Encumbrance, provided , that the consent of Lender shall not be unreasonably withheld or delayed to the extent that any such easement, license or restrictive covenant is reasonably necessary for the continued use, enjoyment, access to or operation of the applicable Mortgaged Property.

 

(i) Misapplication of Funds . Distribute any Rents or Moneys received from Accounts in violation of the provisions of Section 2.12 , or fail to deposit into the Security Deposit Account or deliver to Lender and pledge to Lender any Security Deposit, or misappropriate any Security Deposit or portion thereof.

 

(j) Certain Restrictions . Enter into any agreement that expressly restricts the ability of Borrower to enter into amendments, modifications or waivers of any of the Loan Documents.

 

(k) Assignment of Licenses and Permits . Assign or transfer any of its interest in any Permits pertaining to any Mortgaged Property, or assign, transfer or remove or permit any other Person to assign any records pertaining to any Mortgaged Property.

 

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(l) Place of Organization . Change its jurisdiction of organization, creation or formation, as applicable, without giving Lender at least fifteen (15) days’ prior written notice thereof and promptly providing Lender such information as Lender may reasonably request in connection therewith.

 

(m) Leases . Enter into, amend or cancel (or permit the same to occur) Leases, except as permitted by or pursuant to or would not result in a violation of this Agreement.

 

(n) Management Agreement . Except in accordance with this Agreement, (i) terminate or cancel the Management Agreement, (ii) consent to either the reduction of the term of or the assignment of the Management Agreement, (iii) increase or consent to the increase of the amount of any charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.

 

(o) Plans and Welfare Plans . Knowingly engage in or permit any transaction in connection with which Borrower or any subsidiary could be subject to either a material civil penalty or material tax assessed pursuant to Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide retiree or post-employment medical, disability or life insurance benefits with respect to any current or former employee of Borrower other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (iii) severance benefits (unless such coverage is provided after notification of and with the reasonable approval of Lender), permit the assets of Borrower to become “plan assets”, whether by operation of law or under regulations promulgated under ERISA or adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, or permit any subsidiary to adopt, amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, any Plan, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower or any subsidiary.

 

(p) Transfer of Ownership Interests . Permit any Transfer to occur, other than a Permitted Transfer. Notwithstanding the foregoing, in the event that Borrower desires to transfer all of the Mortgaged Property to another party (the “ Transferee Borrower ”) and have the Transferee Borrower assume all of the Borrower’s obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of Guarantor under the Loan Documents from and after such transfer (collectively, a “ Transfer and Assumption ”), the Borrower may make a written application to Lender for Lender’s consent to the Transfer and Assumption, subject to the conditions set forth below in this Section; provided that no more than one Transfer and Assumption shall be permitted during the term of the Loan. Together with such written application, Borrower shall pay to Lender the reasonable review fee then required by Lender. Borrower also shall pay on demand all of the reasonable costs and expenses incurred by Lender, including reasonable attorneys’ fees and expenses, and including the fees and expenses of Rating Agencies and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs. Lender may grant or withhold its consent to a Transfer and Assumption in its reasonable discretion. Completion of any Transfer and Assumption shall be subject, in addition to such other conditions as Lender reasonably may determine to impose, to satisfaction of the following conditions:

 

(i) No Default or Event of Default shall have occurred and be continuing at the time of the proposed Transfer and Assumption;

 

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(ii) Borrower shall have submitted to Lender true, correct and complete copies of information and documents reasonably requested by Lender concerning the Mortgaged Property, the Transferee Borrower and any replacement guarantors and indemnitors;

 

(iii) Evidence satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall be designated by Lender comply with Article VIII, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates;

 

(iv) If a Securitization has occurred, Borrower shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Transfer and Assumption and all related transactions;

 

(v) The identity, experience, and financial condition of the Transferee Borrower and the replacement guarantors and indemnitors shall be acceptable to Lender in its sole and absolute discretion;

 

(vi) Borrower shall deliver to Lender at the closing of the Transfer and Assumption an assumption fee in the amount of one percent (1%) of the then unpaid principal balance of the Loan;

 

(vii) Borrower, Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver such documents as Lender may require, in form and substance satisfactory to Lender, to evidence the Transfer and Assumption, including replacement guaranties and indemnities and Loan Document modifications;

 

(viii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance satisfactory to Lender as to substantially the same matters for which opinions were required in connection with the origination of the Loan (and as to such additional matters as the Lender and (if a Securitization has occurred) Rating Agencies may require), including, without limitation, a bankruptcy non-consolidation opinion;

 

(ix) Borrower shall cause to be delivered to Lender an endorsement to Lender’s policy of title insurance in form and substance acceptable to Lender, in Lender’s reasonable discretion, relating to, among other things, the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents and the continuing priority of the Mortgage and the continuing effect of the title insurance and all endorsements thereto (in each case subject to Permitted Encumbrances);

 

(x) under no circumstance shall any Transfer and Assumption be permitted hereunder unless after giving effect to such Transfer and Assumption the Transferee

 

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Borrower and each Crossed Borrower (or each “Borrower Transferee” as defined in each Crossed Loan Agreement, pursuant to a “Transfer and Assumption”, as defined in each Crossed Loan Agreement, occurring simultaneously with the Transfer and Assumption hereunder) is under 100% common ownership (direct and indirect) and control; and

 

(xi) Borrower or Borrower Transferee shall deliver to Lender a payment in the amount of all reasonable costs and expenses incurred by Lender in connection with the Transfer and Assumption, including but not limited to, Lender’s reasonable attorneys’ fees and expenses, all recording fees, Rating Agency fees and expenses, and all fees payable to the title company in connection with the Transfer and Assumption.

 

(q) Equipment and Inventory . Except pursuant to the Management Agreement, permit any Equipment owned by Borrower or any of its Affiliates to be removed at any time from any Mortgaged Property unless the removed item is consumed or sold in the usual and customary course of business, removed temporarily for maintenance and repair or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any Lien (other than Permitted Encumbrances).

 

(r) Management Fees . Pay Borrower or any Affiliate of Borrower any management fees with respect to the Mortgaged Property except for management fees paid to Manager under the Management Agreement.

 

(s) Prohibited Persons . With respect to Borrower, Guarantor and any of their respective officers, directors, partners, members or majority-owned Affiliates: (i) conduct any business, or engage in any transaction or dealing, with any known Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a known Prohibited Person; or (ii) knowingly and intentionally engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224.

 

ARTICLE VII.

EVENT OF DEFAULT

 

Section 7.1. Event of Default . The occurrence of one or more of the following events shall be an “ Event of Default ” hereunder:

 

(a) if on any Payment Date Borrower fails to pay any Monthly Debt Service Payment due and payable on such Payment Date, or if Borrower fails to make any scheduled deposits into the Reserve Accounts when due and payable in accordance with the provisions hereof;

 

(b) if Borrower fails to pay the outstanding Indebtedness on the Maturity Date;

 

(c) if Borrower fails to pay or deposit any other amount payable or required to be deposited pursuant to this Agreement or any other Loan Document when due and payable in accordance with the provisions hereof or thereof, as the case may be, and such failure continues for ten (10) Business Days after Lender delivers written notice thereof to Borrower;

 

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(d) if any representation or warranty made herein or in any other Loan Document, or in any report, certificate, financial statement or other Instrument, agreement or document furnished by Borrower or Guarantor in connection with this Agreement, the Note or any other Loan Document executed and delivered by Borrower or Guarantor shall be false or misleading in any material respect as of the date such representation or warranty was made (or if such representation or warranty relates to an earlier date, then as of such earlier date);

 

(e) if Borrower, any SPC Party or the Guarantor makes a general assignment for the benefit of creditors;

 

(f) if a receiver, liquidator or trustee shall be appointed for Borrower, any SPC Party or the Guarantor or if Borrower, any SPC Party or the Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, any SPC Party or the Guarantor, or if any proceeding for the dissolution or liquidation of Borrower or the Guarantor shall be instituted; provided , however , that if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, any SPC Party or the Guarantor, upon the same not being discharged, stayed or dismissed within ninety (90) days, or if Borrower, any SPC Party or the Guarantor shall generally not be paying its debts as they become due;

 

(g) if Borrower attempts to delegate its obligations or assign its rights under this Agreement, any of the other Loan Documents or any interest herein or therein, or if any Transfer occurs, other than in accordance with or as permitted under this Agreement;

 

(h) if any breach or failure to perform any of the covenants in Article VI hereof shall occur, which breach or failure to perform, in the case of Section 6.1(o) or (q) only, shall remain uncured for a period of thirty (30) days after the occurrence of such breach or failure to perform, or if any material breach or failure to perform any of the covenants in Article VIII hereof shall occur;

 

(i) if an Event of Default as defined or described in the Note or any other Loan Document occurs, whether as to Borrower or the Mortgaged Property or any portion thereof;

 

(j) if Borrower fails (i) to maintain any insurance required to be maintained pursuant to Section 5.1(x) hereof; or (ii) to satisfy the Force-Place Obligation;

 

(k) if any Crossed Loan Default shall occur under any of the Crossed Loan Documents; and

 

(l) if Borrower shall fail to perform any of the terms, covenants or conditions of this Agreement, the Note, the Mortgage or the other Loan Documents, other than as specifically otherwise referred to above in this definition of “Event of Default,” for ten (10) Business Days after notice to Borrower from Lender or its successors or assigns, in the case of any Default which can be cured by the payment of a sum of money (other than Events of Default pursuant to Sections 7.1(a) and 7.1(b) above, as to which the grace period, if any, set forth therein is applicable), or for thirty (30) days after notice from Lender or its successors or assigns,

 

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in the case of any other Default (unless a longer notice period is otherwise provided herein or in such other Loan Document); provided , however , that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and such Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) days;

 

then, upon the occurrence of any such Event of Default and at any time thereafter, Lender or its successors or assigns, may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents, or under the Crossed Loan Documents, or at law or in equity, take such action, without further notice or demand, as Lender or its successors or assigns, deems advisable to protect and enforce its rights against Borrower and in and to all or any portion of the Collateral and in and to the Crossed Properties, and may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and/or the Collateral (including, without limitation, all rights or remedies available at law or in equity), and any and all rights or remedies provided in the Crossed Loan Documents against the Crossed Borrowers and/or the Crossed Properties. In addition to and without limiting the foregoing, upon the occurrence of any Event of Default described in any of Sections 7.1(e) , (f) , or (g) , the unpaid principal amount of and accrued interest and fees on the Loan and all other Indebtedness shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Indebtedness shall immediately become due and payable.

 

Section 7.2. Remedies .

 

(a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed by or with respect to Borrower, or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any portion of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral, and under any of the Crossed Loan Documents with respect to all or any portion of the Crossed Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents or in the Crossed Loan Documents.

 

(b) In the event of the foreclosure or other action by Lender to enforce Lender’s remedies in connection with all or any portion of the Collateral, Lender shall apply all Net Proceeds received to repay the Indebtedness and Crossed Indebtedness in accordance with Section 2.8 , the Indebtedness or Crossed Indebtedness (as selected by Lender in its sole

 

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discretion) shall be reduced to the extent of such Net Proceeds and the remaining portion of the Indebtedness and Crossed Indebtedness shall remain outstanding and secured by the Loan Documents, it being understood and agreed by Borrower that Borrower is liable for the repayment of all the Indebtedness; provided , however , that the Loan shall be deemed to have been repaid only to the extent of the Net Proceeds actually received by Lender with respect to the Collateral and applied in reduction of the Indebtedness evidenced by the Note in accordance with the provisions of this Agreement (rather than application to the Crossed Indebtedness or other obligations other than the Loan), after payment by Borrower of all Transaction Costs and costs of enforcement.

 

(c) Upon and during the continuation of an Event of Default, Lender shall have the right, but not the obligation, with respect to any and all bankruptcy proceedings that are now or hereafter commenced in connection with the Mortgaged Property, to (i) vote to accept or reject any plans of reorganization, (ii) vote in any election of a trustee, (iii) elect the treatment of secured claims as specified in Section 1111(b) of the Bankruptcy Code, and (iv) make any other decisions requested of holders of claims or interests that Borrower would have had the right to do in such bankruptcy proceedings in the absence of an Event of Default.

 

Section 7.3. Remedies Cumulative . The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents executed by or with respect to Borrower, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of any Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in connection with the foreclosure of any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on other parts of the Collateral.

 

Section 7.4. Intentionally Omitted .

 

Section 7.5. Curative Advances . If any Event of Default occurs and is not cured by Borrower after notice from Lender, then Lender may expend such sums as either shall reasonably deem appropriate to cure or attempt to cure such Event of Default. Borrower shall immediately repay all such sums so advanced, which sums shall immediately become part of the Indebtedness, bear interest at the Default Rate from the date advanced until the date repaid, and be secured by all Collateral.

 

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ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS

 

Section 8.1. Applicable to Borrower and any SPC Party . Borrower hereby acknowledges that, as a condition of Lender’s agreements and performance of its obligations hereunder, Lender is relying on the status of Borrower and any SPC Party as a legal entity separate and apart from any Affiliate or other entity and has required that Borrower and any SPC Party maintain such status, and Lender hereby acknowledges such reliance and requirement. Accordingly, Borrower hereby represents, warrants and covenants as of the Closing Date, at all times prior to the Closing Date and until such time as the Loan is paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender’s sole discretion, Borrower and each SPC Party (if applicable):

 

(a) was and will be organized solely for purpose of owning and operating the Mortgaged Property, or in the case of any SPC Party, owning the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(b) has not owned, does not own and will not own any assets other than the Mortgaged Property (including incidental personal property necessary for the operation thereof and proceeds therefrom) or, in the case of any SPC Party, its general partnership interest (if Borrower is a limited partnership) sole member interest (if Borrower is a Delaware limited liability company) in Borrower;

 

(c) was not engaged, is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Mortgaged Property;

 

(d) has not entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of Borrower or any SPC Party except in the ordinary course of its business pursuant to written agreements upon terms and conditions that are no less favorable than those that would be available on an arm’s-length basis with third parties other than such Affiliate;

 

(e) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (in each case in the case of Borrower only): (i) the Loan and the Crossed Loans, (ii) trade payables not evidenced by a promissory note incurred in the ordinary course of business with trade creditors in connection with owning, operating and maintaining the Mortgaged Property, and customarily paid by Borrower within 60 days of incurrence and in fact not more than 60 days outstanding (other than those being disputed or contested in good faith by the Borrower in the same manner and with the same deposits as Lien Claims set forth in Section 5.1(b)(ii) of this Agreement), and (iii) equipment financing leases and purchase money debt for equipment, in each case incurred in the ordinary course of business in connection with the financing or purchase of equipment used on the Mortgaged Property, the payments upon which are made

 

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currently and in any event prior to delinquency, provided, (A) that the aggregate capitalized amount of all such permitted financing leases plus the aggregate amount of all such permitted purchase money debt shall not at any time be in excess of one percent (1%) of the Loan Amount or require payments aggregating in excess of $100,000 in any one calendar year, and (b) the aggregate outstanding amount of (1) all trade payables described in clause (ii) above, plus (2) the aggregate capitalized amount of all permitted financing leases plus the aggregate amount of all permitted purchase money debt described in clause (iii) above, shall not at any time be in excess of two percent (2%) of the Loan Amount.

 

(f) (i) has not made and will not make any loan or advance to any Person (including any of its Affiliates), (ii) has not pledged and will not pledge its assets for the benefit of any other Person (other than to Lender for the indirect benefit of the Crossed Borrowers to secure the Crossed Loans), (iii) has not sought or obtained and will not seek or obtain credit, and has not incurred and will not incur any obligation to any third party, based upon the assets of any other Person, and (iv) has not induced and will not induce any third party to rely on the creditworthiness of any other Person in extending benefits to Borrower;

 

(g) has remained and as of the Closing Date reasonably expects to remain, solvent, and has maintained, and as of the Closing Date reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

 

(h) has not acquired and will not acquire obligations or securities of any Person;

 

(i) has not failed and will not fail to correct any known misunderstanding or misrepresentation regarding its separate identity;

 

(j) has done or caused to be done and will do all things necessary to preserve its existence;

 

(k) has continuously maintained and shall continuously maintain its existence and good standing and has been and will be qualified to do business in all states necessary to carry on its business, including the state in which the Mortgaged Property is located;

 

(l) has conducted and operated and will conduct and operate its business solely in its own name, with all oral and written communications from Borrower or SPC Party, as applicable, including, without limitation, correspondence, invoices, purchase orders, billing statements, applications and business forms, made solely in the name of Borrower or SPC Party, as applicable;

 

(m) has accurately maintained and will continue to accurately maintain books, records, bank accounts, accounting records, financial statements and other entity documents separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person, with such accounting records and financial statements having been prepared and kept in accordance with reasonable accounting practices applied on a consistent basis, and such financial statements of Borrower (and any SPC Party, if applicable) have been and shall be prepared in a manner that indicates (through appropriate footnotes if

 

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necessary) the existence of Borrower (and any SPC Party, if applicable) and its assets and liabilities separate and apart from any other Person; moreover, Borrower (and any SPC Party, if applicable) has indicated and shall indicate in its financial statements that the assets of Borrower are not available to satisfy the claims of creditors of any Affiliate of Borrower (or any SPC Party, if applicable) and that the assets of any Affiliate of Borrower (or any SPC Party, if applicable) have not been and are not available to satisfy the claims of creditors of Borrower (or any SPC Party, if applicable) and, except with appropriate designation as set forth above, Borrower has not authorized and shall not authorize its assets or liabilities to be listed on the financial statement of any other Person;

 

(n) has been and will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person;

 

(o) has filed and will file such tax returns with respect to itself as may be required under applicable law and has prepared and will prepare separate tax returns and financial statements, or if part of a consolidated group, has been shown and will be shown as a separate member of such group;

 

(p) has paid and shall pay its own liabilities, indebtedness, and obligations of any kind, as the same shall become due, from its own separate assets, rather than from those of other Persons, and Borrower has not consented and shall not consent to any Person operating the Mortgaged Property to incur expenses as agent or on behalf of Borrower, unless such Person agreed or agrees, prior to incurring such expense, to clearly indicate that such expenses were or are the sole responsibility of, and any payment will come from, Borrower;

 

(q) has not entered into and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person;

 

(r) has not commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; and has held and will hold title to all of its real and personal property in its own name and not in the name of any other Person;

 

(s) has maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(t) has not, does not and will not hold itself out to be responsible for the debts or obligations of any other Person (other than the Crossed Loans) and, except for the Loan Documents to which other Persons are party, shall not consent to any other Person holding itself out as being responsible for the debts or obligations of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(u) has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the

 

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Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) assumed, guaranteed or otherwise become liable on, and will not assume, guarantee or otherwise become liable on, or in connection with any obligation of any other Person (other than the Crossed Borrowers under the Crossed Loans) and, except for the Loan Documents to which other Persons are party, has not (except for the Prior Loans, from which the Mortgaged Property, Borrower and the SPC Party have been fully released, and for which neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, upon the closing of the Loan, and in connection with which no recourse whatsoever against any portion of the Mortgaged Property shall be available under any circumstances) consented and shall not consent to any other Person guaranteeing, assuming or otherwise becoming liable for any obligation of Borrower (other than the Crossed Borrowers pursuant to the Crossed Loan Documents);

 

(v) except for funds deposited into the Local Collection Account, the Collection Account or the Reserve Accounts in accordance with the Loan Documents, has not and shall not hold title to its assets other than in its name;

 

(w) has complied, complies and shall at all times hereafter comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto;

 

(x) has paid and will pay its own liabilities and expenses, out of its own funds and has not consented and shall not consent to any other Person paying Borrower’s (or any SPC Party’s, if applicable) obligations except to the extent that timely reimbursement is made for the same;

 

(y) has held and will hold regular meetings, as appropriate to conduct its business and has observed at all times and will observe all limited liability company (if a limited liability company) or limited partnership (if a limited partnership) or corporate (if a corporation) formalities and record keeping;

 

(z) has allocated and will allocate to Borrower (and any SPC Party, if applicable) reasonably and on the basis of fair market value determined on an arm’s-length basis all general overhead and administrative expenses, including all costs associated with common employees and shared office space, any such allocation has been and shall be specifically and reasonably documented and substantiated, any such allocation of expenses to Borrower (or any SPC Party, if applicable) has been and shall be paid solely by Borrower (or such SPC Party, if applicable) from Borrower’s (or such SPC Party’s, if applicable) own funds, and Borrower (and any SPC Party, if applicable) has used and shall at all times use separate stationary, letterhead, invoices and checks;

 

(aa) has not identified and will not identify its members or partners, Independent Director (as defined below) or any other member or partner of any Affiliate of Borrower, or any other Person, as a division or part of it;

 

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(bb) has paid and will pay the salaries of its own employees and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations;

 

(cc) has maintained, currently maintains, and will continue to maintain, its own cash, cash positions and bank accounts separate from any other Person;

 

(dd) (i) has not (A) liquidated or dissolved, in whole or in part; (B) consolidated, merged or entered into any form of consolidation with or into any other Person, nor conveyed, transferred or leased its assets substantially as an entirety to any Person nor permitted any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor conveyed, transferred or leased its assets substantially as an entirety to any Person; (C) engaged in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest (if Borrower is a limited partnership) or sole member interest (if Borrower is a Delaware limited liability company) in Borrower); or (D) amended any provisions of its organizational documents containing provisions similar to those contained in this Article VIII ; and (ii) shall not (A) to the extent permitted by law, liquidate or dissolve, in whole or in part; (B) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor convey, transfer or lease its assets substantially as an entirety to any Person; (C) engage in any business other than the ownership and operation of the Mortgaged Property (or, with respect to any SPC Party, ownership of the general partnership interest in Borrower); or (D) amend any provisions of its organizational documents containing provisions similar to those contained in this Article VIII ;

 

(ee) If Borrower is a limited partnership or a non-Delaware limited liability company:

 

(A) each general partner or managing member (each, an “ SPC Party ”) shall be either a corporation or a Delaware single member limited liability company, in either case, whose sole asset is its interest in Borrower and each such SPC Party will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Article VIII as if such representation, warranty or covenant was made directly by such SPC Party. The SPC Party’s Organizational Documents shall incorporate the provisions of this Article VIII and require that the directors, managers or members, as applicable, of such SPC Party consider the interests of the creditors of such SPC Party in connection with any Material Action (as defined below). As used herein, “ Material Action ” shall mean to institute proceedings to have Borrower or SPC Party adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against Borrower or SPC Party or file a petition seeking or consent to, reorganization or relief with respect to Borrower or SPC Party under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Borrower or SPC Party or a substantial part of Borrower’s or SPC Party’s property, or make any assignment

 

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for the benefit of creditors of Borrower or SPC Party, or admit in writing Borrower’s or SPC Party’s inability to pay its debts generally as they become due, or any similar action, or take action in furtherance of any of the foregoing actions.

 

(B) If the SPC Party is a corporation, Borrower shall at all times cause there to be at least one (1) duly appointed member of the board of directors of the SPC Party who is an Independent Director.

 

(C) If the SPC Party is a limited liability company, Borrower shall at all times cause there to be at least one (1) duly appointed independent manager of the SPC Party who is also a non-economic member of SPC Party, who is an Independent Director.

 

(D) The Borrower’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of Borrower’s Organizational Documents and the SPC Party’s Organizational Documents) will be required in order for Borrower to take any Material Action.

 

(E) The SPC Party’s Organizational Documents shall provide that the affirmative vote and written consent of the SPC Party, acting with the affirmative vote of the Independent Director (which shall be required in order for the SPC Party to take such action under the terms of the SPC Party’s Organizational Documents) will be required in order for the SPC Party to take any Material Action.

 

(F) The SPC Party shall not: (i) if the SPC Party is a corporation, cause or permit the board of directors of the SPC Party to take any action which, under the terms of any certificate of incorporation, by-laws or any voting trust agreement with respect to any common stock, requires the vote of the board of directors of the SPC Party unless at the time of such action there shall be at least one (1) member of such board of directors who is an Independent Director; and (ii) if the SPC Party is a limited liability company, cause or permit the members or managers of the SPC Party to take any action which, under the terms of any certificate of formation, operating agreement or other organizational document requires the vote of the members or managers of the SPC Party unless at the time of such action there shall be at least one (1) independent manager and non-economic member of such SPC Party who is an Independent Director.

 

(ff) If Borrower is a Delaware single member limited liability company:

 

(A) Borrower shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ Borrower Single Member ”), and Borrower’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

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(B) Borrower’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require Borrower to at all times cause there to be at least one (1) duly appointed independent manager of Borrower who is also a non-economic member of Borrower and an Independent Director whose affirmative vote will be required in order for Borrower to take any Material Action. Borrower’s Organizational Documents shall further require that upon the occurrence of any event that causes the Borrower Single Member to cease to be a member in Borrower, the Independent Director shall, without action of any person and simultaneously with the Borrower Single Member ceasing to be a member of Borrower, automatically be admitted to Borrower as a member and shall continue Borrower without dissolution.

 

(C) Borrower shall cause reputable Delaware counsel reasonably acceptable to Lender (the “ Delaware Law Firm ”) to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of Borrower Single Member and the Independent Director is required in order for Borrower to file a voluntary bankruptcy petition; (2) the provision in Borrower’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against Borrower Single Member; (3) the bankruptcy of Borrower Single Member will not cause Borrower to be dissolved; (4) no creditor of Borrower Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, Borrower’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

(D) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

(gg) If the SPC Party is a Delaware single member limited liability company:

 

(A) SPC Party shall be a limited liability company formed under the laws of the State of Delaware with one (1) member (the “ SPC Single Member ”), and SPC Party’s Organizational Documents shall be in form and substance reasonably satisfactory to Lender.

 

(B) SPC Party’s Organizational Documents shall contain each of the representations, covenants and warranties set forth in this Article VIII and require SPC Party to at all times cause there to be at least one (1) duly appointed

 

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independent manager of SPC Party who is also a non-economic member of SPC Party and an Independent Director whose affirmative vote will be required in order for SPC Party to take any Material Action. SPC Party’s Organizational Documents shall further require that upon the occurrence of any event that causes the SPC Single Member to cease to be a member in SPC Party, the Independent Director shall, without action of any person and simultaneously with the SPC Single Member ceasing to be a member of SPC Party, automatically be admitted to SPC Party as a member and shall continue SPC Party without dissolution.

 

(C) Borrower shall cause the Delaware Law Firm to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Delaware Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of SPC Single Member and the Independent Director is required in order for SPC Party to file a voluntary bankruptcy petition; (2) the provision in SPC Party’s Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against SPC Single Member; (3) the bankruptcy of SPC Single Member will not cause SPC Party to be dissolved; (4) no creditor of SPC Single Member shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, SPC Party’s property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower.

 

(hh) Borrower shall not cause or permit the board of directors, members or managers of Borrower to take any action which, under the terms of Borrower’s Organizational Documents, requires the vote of the board of directors, members or managers of Borrower unless at the time of such action there shall be at least one (1) member of such board of directors, members or managers who is an Independent Director.

 

(ii) has complied and will comply with the separateness provisions of the Borrower’s Organizational Documents since such Borrower’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to limited liability companies or limited partnerships, as applicable, and each SPC Party, if applicable, has complied and will comply with the separateness provisions of the SPC Party’s Organizational Documents since such SPC Party’s Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to corporations;

 

(jj) the Borrower’s Organizational Documents and, if applicable, the SPC Party’s Organizational Documents provide and shall at all times continue to provide that Borrower (and the SPC Party, if applicable) shall not cause, permit, or empower any Person to consolidate or merge Borrower or the SPC Party into any other entity; and

 

(kk) has not funded and will not fund any other Person’s operations and has not paid and will not pay any other Person’s expenses.

 

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Notwithstanding any other provision of the Borrower’s Organizational Documents, any SPC Party’s Organizational Documents or any provision of law that otherwise so empowers the Borrower, any SPC Party or any other Person, neither the Borrower, any SPC Party nor any other Person shall be authorized or empowered, nor shall they permit the Borrower, without the prior unanimous written consent of the Borrower and any SPC Party (including, in each case, all Independent Directors), to take any Material Action, provided, however, that neither the Borrower nor any SPC Party may vote on, or authorize the taking of, any Material Action, unless there is at least one (1) Independent Director then serving in such capacity.

 

Borrower hereby further represents, warrants and certifies to and for the benefit and reliance of Lender that: (i) upon closing of the Loan, the Mortgaged Property, Borrower and the SPC Party each shall have been fully released from the Prior Loans, neither the Borrower nor any SPC Party shall have any continuing liability, actual or contingent, for the Prior Loans, and no recourse whatsoever against any portion of the Mortgaged Property shall be available to satisfy the Prior Loans under any circumstances; (ii) Borrower has provided Lender with true, correct and complete copies of (A) Borrower’s current (and since the date of its inception) financial statements, (B) Borrower’s current (and since the date of its inception) Borrower’s Organizational Documents, and (C) the Prior Loan Documents; (iii) Borrower has prior to the Closing Date (and at all times since the date of its inception) conducted its affairs as a special purpose bankruptcy remote entity in substantial accordance with (A) the provisions of this Section 8.1 , (B) the provisions of Borrower’s Organizational Documents (as in effect now and as in effect at all times since the date of its inception), and (C) the Prior Loan Documents; and (iv) the Borrower’s certifications and statements set forth in the certificate attached hereto as Schedule 8.1(a) are true and correct.

 

ARTICLE IX.

MISCELLANEOUS

 

Section 9.1. Survival . This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement, the making the Loan hereunder and the execution and delivery by Borrower to Lender of the Loan Documents, and shall continue in full force and effect so long as any portion of the Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of the respective successors and assigns of Lender. Nothing in this Agreement or in any other Loan Document, express or implied, shall give to any Person other than the parties and the holder of the Note and the other Loan Documents, and their legal representatives, successors and assigns, any benefit or any legal or equitable right, remedy or claim hereunder.

 

Section 9.2. Lender’s Discretion . Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

 

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Section 9.3. Governing Law .

 

This Agreement was negotiated in New York and made by Lender and accepted by Borrower in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity, performance, and maximum permissible rates of interest), this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

(a) Borrower hereby consents to the jurisdiction of any federal court or state court in New York, New York or within the county and state in which any Mortgaged Property is located and irrevocably agrees that, subject to Lender’s election, any legal suit, action or proceeding against Lender or Borrower arising out of or relating to this Agreement or the other Loan Documents may be instituted and litigated in such courts. Borrower hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. Borrower does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by Borrower from time to time in accordance with the terms hereof) with a copy to Borrower and written notice of said service of Borrower mailed or delivered to Borrower in the manner provided herein shall be deemed in every respect effective service of process upon Borrower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to Lender of any change in address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

Section 9.4. Modification, Waiver in Writing . No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or any other Loan Document, or consent or waiver referred to in any Loan Document or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

 

Section 9.5. Delay Not a Waiver . Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document,

 

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or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 9.6. Notices . All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if delivered or sent by: (a) hand delivery, (b) certified or registered United States mail, postage prepaid, (c) nationally recognized overnight delivery service, (d) by facsimile transmission, addressed if to Lender or to Borrower at its applicable address set forth on Schedule 5 hereto, or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 8.6 , or (e) other than with respect to an amendment or modification, an electronic medium. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or three Business Days after mailing; in the case of overnight delivery and facsimile transmission, on the Business Day after the same was sent; or in the case of electronic medium, when confirmed by e-mail. A party receiving a notice which does not comply with the technical requirements for notice under this Section 9.6 may elect to waive any deficiencies and treat the notice as having been properly given. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

 

Section 9.7. TRIAL BY JURY . BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

 

Section 9.8. Headings . The Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

Section 9.9. Assignment .

 

(a) Borrower may not sell, assign or transfer any interest in the Loan Documents, or any portion of the foregoing (including, without limitation, Borrower’s rights, title, interests, remedies, powers and duties hereunder and thereunder) without Lender’s prior written consent. Lender shall have the right to assign or participate this Agreement and/or its interest in any of the other Loan Documents and the obligations hereunder to any Person. In the event of an assignment by Lender, (a) the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would have if it were an original “Lender”

 

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hereunder; (b) the assignee shall be deemed for all purposes to be a “Lender” hereunder; and (c) upon any such substitution of Lender, a replacement or addition “Lender signature page” shall be executed by the new Lender and attached to this Agreement and thereupon become a part of this Agreement. After the effectiveness of any assignment, the new Lender shall provide notice to Borrower of the identity, address and other pertinent information pertaining to the new Lender. Borrower shall maintain a copy of each assignment and notice delivered to it and a register (the “ Register ”) for the recordation of the names and addresses of the Lenders and the principal amount of the assigned loans owing to each Lender from time to time. The entries on the Register shall be conclusive, in the absence of manifest error, and the Borrower and the Lenders shall treat each person whose name is recorded in the Register as the owner of the assigned loans recorded therein for all purposes of this Agreement. Any assignment or transfer of all or a part of a loan evidenced by a note shall be registered on the Register only upon surrender for registration of assignment or transfer of the note evidencing such loan, accompanied by a duly executed assignment and notice, and thereupon one or more new notes shall be issued to the designated assignee. Notwithstanding anything in this Agreement to the contrary, after an assignment by Lender, the “Lender” (prior to such assignment) shall continue to have the benefits of any rights or indemnifications and shall continue to have the obligations contained herein which Lender had during the period such party was a “Lender” hereunder.

 

(b) Lender may from time to time elect to enter into a servicing agreement with a servicer, pursuant to which the servicer shall be appointed to service and administer the Loan and the Account Collateral in accordance with the terms hereof and to exercise any and all other rights of Lender with respect to the Loan as set forth in such servicing agreement. Lender shall promptly notify Borrower if Lender shall elect to appoint or change the servicer, and all notices and other communications from Borrower to Lender shall be delivered to the servicer with a copy concurrently delivered to the Lender, and any notice, direction or other communication from the servicer to Borrower shall have the same force and effect as a notice, direction or communication from Lender. The servicer shall be entitled to be reimbursed for any cost, expense or liability which is incurred by the servicer pursuant to such servicing and administrative duties and which would otherwise be reimbursable to Lender under this Agreement or any other Loan Document in the same manner and to the same extent as if Lender incurred such cost, expense or liability in the first place. The parties hereto acknowledge and agree that the servicer shall be a third party beneficiary to this Agreement and the other Loan Documents.

 

Section 9.10. Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

Section 9.11. Preferences . Lender shall have no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the obligations of Borrower pursuant to this Agreement, the Note or any other Loan Document. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder, provided that such application or reapplication is performed by Lender in accordance with the terms of this Agreement or any

 

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other applicable Loan Document. To the extent Borrower makes a payment or payments to Lender for Borrower’s benefit, which payment or proceeds 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 under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

 

Section 9.12. Waiver of Notice . Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or another Loan Document specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents does not specifically and expressly provide for the giving of notice by Lender to Borrower.

 

Section 9.13. Failure to Consent . If Borrower shall seek the approval by or consent of Lender hereunder or under the Note, or any of the other Loan Documents, and Lender shall fail or refuse to give such consent or approval, then Borrower shall not be entitled to any damages for any withholding or delay of such approval or consent by Lender, it being intended that Borrower’s sole remedy shall be to bring an action for an injunction or specific performance.

 

Section 9.14. Schedules Incorporated . The information set forth on the cover, heading and recitals hereof, and the Schedules attached hereto, are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

 

Section 9.15. Offsets, Counterclaims and Defenses . Any assignee of any of Lender’s interest in and to this Agreement and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to this Agreement and the other Loan Documents which Borrower may otherwise have against any assignor or this Agreement and the other Loan Documents. No such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement or upon any other Loan Document. Any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

 

Section 9.16. No Joint Venture or Partnership . Borrower and Lender intend that the relationship created hereunder be solely that of borrower and lender. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower (or any Affiliate of Borrower) and Lender nor to grant Lender any interest in the Collateral other than that of secured party, mortgagee or lender.

 

Section 9.17. Waiver of Marshalling of Assets Defense . To the fullest extent Borrower may legally do so, Borrower waives all rights to a marshalling of the assets of Borrower, and others with interests in Borrower, and of the Collateral, or to a sale in inverse

 

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order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of any Collateral for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender to the payment of the Indebtedness out of the Net Proceeds of the Collateral in preference to every other claimant whatsoever.

 

Section 9.18. Waiver of Counterclaim . To the extent permitted by applicable law, Borrower hereby waives the right to assert a counterclaim, other than compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

 

Section 9.19. Conflict; Construction of Documents . In the event of any conflict between the provisions of this Agreement and the provisions of any of the other Loan Documents, the provisions of this Agreement shall prevail. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same.

 

Section 9.20. Brokers and Financial Advisors . Borrower and the Lender hereby represent that they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower and Lender hereby agree to indemnify and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of the indemnifying party in connection with the transactions contemplated herein. The provisions of this Section 9.20 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness.

 

Section 9.21. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

Section 9.22. Estoppel Certificates . Borrower and Lender hereby agree at any time and from time to time upon not less than fifteen (15) days prior written notice by Borrower or Lender to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the knowledge of such certifying party, any Default or Event of Default has occurred and is then continuing, and, if so, specifying each such Default or Event of Default; provided , however , that it shall be a condition precedent to Lender’s obligation to deliver the statement pursuant to this Section 9.22 , that Lender shall have received, together with Borrower’s request for such statement, an Officer’s Certificate stating that, to the knowledge of Borrower, no Default or Event of Default exists as of the date of such certificate (or specifying such Default or Event of Default).

 

Section 9.23. Payment of Expenses . Borrower shall pay all Transaction Costs, which shall include, without limitation, (a) reasonable out-of-pocket costs and expenses of

 

121


Lender in connection with (i) the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein; (ii) the creation, perfection or protection of Lender’s Liens in the Collateral (including, without limitation, fees and expenses for title and lien searches or amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments, title insurance premiums and filing and recording fees, third party due diligence expenses for the Mortgaged Property plus travel expenses, accounting firm fees, costs of the Appraisals, Environmental Reports (and an environmental consultant), and the Property Condition Assessments and earthquake “maximum probable loss” report and costs and fees incurred in connection with arranging, setting up, servicing and maintaining the Account Collateral); (iii) response to any requests by Borrower (or its Affiliates) for Lender consent or approval of any matter relating to the Loan, the Loan Documents or the Mortgaged Property; (iv) the negotiation, preparation, execution and delivery of any amendment, waiver, restructuring or consent relating to any of the Loan Documents, and (v) the preservation of rights under and enforcement of the Loan Documents and the documents and instruments referred to therein, including any communications or discussions relating to any action that Borrower shall from time to time request Lender to take, as well as any restructuring or rescheduling of the Indebtedness, (b) the reasonable fees, expenses and other charges of counsel to Lender in connection with all of the foregoing, and (c) Lender’s reasonable out-of-pocket travel expenses in connection with site visits to the Mortgaged Property.

 

Section 9.24. Non-Recourse . Anything contained herein, in the Note or in any other Loan Document to the contrary notwithstanding, but subject in all respects to the provisions set forth below, Lender shall not enforce the liability and obligation of the Borrower to perform and observe any of its obligations that may be contained in the Note, this Agreement, the Mortgage or any other Loan Document by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Mortgaged Property, the Rents and other Receivables, or any other Collateral pursuant to the Loan Documents; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Mortgaged Property, in the Rents and other Receivables and in any other Collateral. NOTWITHSTANDING ANYTHING TO THE CONTRARY ABOVE OR ELSEWHERE IN THIS AGREEMENT, THE MORTGAGE OR ANY OF THE LOAN DOCUMENTS, however,

 

(a) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not: (i) constitute a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Indebtedness or to require that all Collateral and all Crossed Properties shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents; (ii) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (iii) impair the right of Lender to name Borrower (or any Crossed Borrowers) as a party defendant in any action or suit for foreclosure and sale under the Mortgage or other Loan Documents (or Crossed Loan Documents); (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Rents and Leases (or any Assignment of Rents and Leases (as defined in the Crossed Loan

 

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Agreements)); (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Mortgage, any other Mortgages (as defined in the Crossed Loan Agreements), the other Loan Documents and the Crossed Loan Documents, or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Mortgaged Property, any other Collateral or any Crossed Properties; (vii) have any applicability whatsoever to or limit the liability of the Borrower, Guarantor or other parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement or any other guaranty or indemnity made in connection with the Loan, the Crossed Loans or any of the rights and remedies of Lender thereunder; or (viii) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or this Agreement or secured by the Loan Documents or evidenced or secured by the Crossed Loan Documents, and the same shall continue until paid or discharged in full, and

 

(b) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not

 

(A) prevent recourse to the assets of Borrower or any Crossed Borrower, the Mortgaged Property, any Crossed Property or any other instrument or document which is pledged by Borrower or Crossed Borrower to Lender pursuant to the Loan Documents or Crossed Loan Documents, including all Collateral;

 

(B) have any applicability whatsoever to or limit the liability of the parties under the Guaranty of Non-Recourse Obligations, the Environmental Indemnity Agreement (or any “Environmental Indemnity Agreement” as defined and referred to or included among any Crossed Loan Documents) or any Crossed Guaranty;

 

(C) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or secured by the Loan Documents (or evidenced and/or secured by any Crossed Loan Documents), and the same shall continue until paid or discharged in full; or

 

(D) prevent recourse to Borrower, any Crossed Borrowers and Guarantor, jointly and severally, and their respective assets for repayment of the Indebtedness, and Lender’s agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force or effect, and the Indebtedness shall be fully recourse not only to Borrower but also to any Crossed Borrowers and Guarantor, in the event:

 

  (1) Borrower shall file or commence any voluntary bankruptcy, insolvency or similar proceeding, including any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, or Borrower shall make a general assignment for the benefit of creditors or institute receivership proceedings or similar proceedings with respect to the Mortgaged Property, Borrower or Borrower’s assets,

 

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       or (A) any such proceedings or petition shall be filed or commenced against Borrower by Guarantor, or its Affiliates or agents acting under the control or direction of Guarantor, or (B) if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor (or if Guarantor or its Affiliates or agents acting under the control or direction of Guarantor cause Borrower to, by exercise of their rights as equity owners or officers or directors of Borrower or otherwise) aid, solicit or otherwise cooperate or collude to bring about the filing or commencement of any such proceedings or petition;

 

  (2) any Transfer or removal of material Equipment occurs in violation of the terms of the Loan Documents; or

 

  (3) any material breach of the provisions of Article VIII of this Agreement occurs; or

 

(E) prevent recourse to Borrower, any Crossed Borrower and Guarantor, jointly and severally, and their respective assets, and Borrower, any Crossed Borrowers and Guarantor shall be fully and personally liable, for (x) any obligation to pay Lender any Insurance Gap and (y) any loss, costs, liability, damage or expense (including, without limitation, attorneys’ fees and disbursements) suffered or incurred by Lender or any Indemnified Party, in each case, to the extent related to or arising from any of the following acts committed by or on behalf of Borrower, any Crossed Borrowers, Guarantor or any of their respective Affiliates:

 

  (1) any fraud on the part of Borrower, Guarantor or their respective Affiliates in connection with the Loan;

 

  (2) any willful misrepresentation contained in any Loan Documents or report furnished pursuant to any Loan Document;

 

  (3) any misappropriation or misapplication of funds (including Loss Proceeds or Rents) in contravention of the Loan Documents;

 

  (4) additional financing obtained by Borrower (whether secured or unsecured) in violation of the terms of the Loan Documents;

 

  (5) actual material physical waste to the Mortgaged Property or material damage to the Mortgaged Property resulting from gross negligence or willful misconduct;

 

  (6) any breach of any representation, warranty or covenant in this Agreement or the Environmental Indemnity Agreement, concerning Environmental Laws and Hazardous Substances;

 

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  (7) any Security Deposits received by Borrower or Manager from tenants not being properly applied, returned to tenants when due or delivered to Lender, a receiver or a purchaser of the Mortgaged Property in the event of a foreclosure sale upon such Person taking possession of the Mortgaged Property;

 

  (8) all costs and expenses, including reasonable attorneys’ fees and expenses, incurred in enforcing any obligation or liability or in collecting any amount due under this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, which, as to Borrower, is a recourse obligation of Borrower as described in this Section 9.24(D) or this Section 9.24(E) , the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the Environmental Indemnity;

 

  (9) the failure to pay Impositions assessed against the Mortgaged Property to the extent there were sufficient funds available to pay and Lender allows Borrower to apply the same, or the failure to pay and discharge any mechanic’s or materialman’s Liens against the Mortgaged Property to the extent there was sufficient funds available to pay and discharge and Lender allows Borrower to apply the same, except, in the case of each of the foregoing, to the extent the same were or are being contested in accordance with the terms of the Loan Documents;

 

  (10) any Rents or Proceeds received or collected by Borrower, any Affiliate of Borrower or Manager and not deposited into the Local Collection Account or the Collection Account in accordance with Section 2.12 or otherwise endorsed, delivered or turned over to Lender; or

 

  (11) If the Indebtedness is not paid in full by the Maturity Date or is accelerated or if any monetary Event of Default has occurred, and Borrower or any Affiliate contests or in any way interferes with, directly or indirectly (collectively, a “ Contest ”), any foreclosure action or sale commenced by Lender or with any other enforcement of Lender’s rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to any of the Collateral (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise) (except this clause (11) shall not prohibit a good faith defense on the basis that no Event of Default exists, and such a good faith defense shall not give rise to recourse liability under this clause (11)).

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

 

LENDER:

CITIGROUP GLOBAL MARKETS REALTY CORP.,

a New York corporation

By:

 

/s/    D ONALD D REWITZ


Name:

 

Donald Drewitz

Title:

 

Authorized Agent

 

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BORROWER:

GIP Wakefield, LLC,

a Delaware limited liability company

By:

 

GIP Wakefield Holding Company, LLC,

   

a Delaware limited liability company,

   

its Member and Manager

   

By:

 

Digital Realty Trust, L.P.,

       

a Maryland limited partnership,

       

its Member and Manager

       

By:

 

Digital Realty Trust, Inc.,

           

a Maryland corporation

           

its General Partner

           

By:

 

/s/    M ICHAEL F. F OUST


           

Print Name:

 

Michael F. Foust


           

Title:

 

Chief Executive Officer


 

127

Exhibit 10.43

 

PROMISSORY NOTE

 

$36,300,000

 

New York, New York

November 3, 2004

 

FOR VALUE RECEIVED, the undersigned, GIP WAKEFIELD, LLC, a Delaware limited liability company (the “ Maker ”), promises to pay to the order of CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation (collectively, with any subsequent holder of this Note, the “ Holder ”) at its offices located at 388 Greenwich Street, 11th Floor, New York, New York 10013 or at such other address as the Holder may from time to time designate in writing, the principal sum of THIRTY-SIX MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($36,300,000), together with interest thereon, and all other amounts payable under the Loan Documents, such principal, interest and other amounts to be payable as provided in the Loan Agreement.

 

This Note is the Note referred to in that certain Loan Agreement, dated as of November 3, 2004, among the Maker and the Holder (as modified and supplemented and in effect from time to time, the “ Loan Agreement ”). Reference to the Loan Agreement is hereby made for a statement of the rights of the Holder and the duties and obligations of the Maker, but neither this reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Maker to pay the principal, interest and other amounts, if any, payable with respect to this Note when due. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement. The outstanding principal amount shall bear interest at the rates provided for in the Loan Agreement.

 

This Note is secured by the Mortgage and certain other Loan Documents and (subject to Section 2.11(g) of the Loan Agreement) Crossed Loan Documents.

 

The principal sum evidenced by this Note, together with accrued interest and other sums or amounts due hereunder, shall become immediately due and payable at the option of the Holder upon the occurrence of any Event of Default in accordance with the provisions of the Loan Agreement.

 

With respect to the amounts due pursuant to this Note, the Maker waives the following: (1) all rights of exemption of property from levy or sale under execution or other process for the collection of debts under the Constitution or laws of the United States or any state thereof; (2) demand, presentment, protest, notice of dishonor, notice of nonpayment, suit against any party, diligence in collection of this Note, and all other requirements necessary to enforce this Note, except for notices required by Governmental Authorities and notices required by the Loan Agreement and any of the other Loan Documents; and (3) any further receipt by or acknowledgment of any Collateral now or hereafter deposited as security for the Loan.

 

In no event shall the amount of interest (and any other sums or amounts that are deemed to constitute interest under applicable Legal Requirements) due or payable hereunder (including interest calculated at the Default Rate) exceed the maximum rate of interest designated by applicable Legal Requirements (the “ Maximum Amount ”), and in the event such payment is inadvertently paid by the Maker or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal (without prepayment penalty), and if in excess of such balance, shall be immediately returned to the Maker upon such determination. It is the express intent hereof that the Maker not pay and the Holder not receive, directly or indirectly, interest in excess of the Maximum Amount.


The Holder shall not by any act, delay, omission or otherwise be deemed to have modified, amended, waived, extended, discharged or terminated any of its rights or remedies, and no modification, amendment, waiver, extension, discharge or termination of any kind shall be valid unless in writing and signed by the Holder. All rights and remedies of the Holder under the terms of this Note and applicable statutes or rules of law shall be cumulative, and may be exercised successively or concurrently.

 

Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements, but if any provision of this Note shall be prohibited by or invalid under applicable Legal Requirements, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

 

The Holder may, at its option, release any Collateral given to secure the indebtedness evidenced hereby, and no such release shall impair the obligations of the Maker to the Holder.

 

This Note was negotiated in New York, and made by the Maker and accepted by the Holder in the State of New York, and the proceeds of this Note were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity and performance), this Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America.

 

Any legal suit, action or proceeding against the Maker by the Holder arising out of or relating to this Note shall be instituted in any federal or state court in New York, New York or in the state where the Mortgaged Property is located. The Maker hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. The Maker does hereby designate and appoint CT Company Systems, having an office at 111 Eighth Avenue, New York, New York 10011, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by such agent in accordance with the terms hereof) with a copy to the Maker, together with written notice of said service of the Maker, mailed or delivered to the Maker in the manner provided in the Loan Agreement shall be deemed in every respect effective service of process upon the Maker, in any such suit, action or proceeding in the State of New York or the state where the Mortgaged Property is located (as applicable). The Maker (i) shall give prompt notice to the Holder of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor.

 

The provisions of this Note shall be subject to the provisions of Section 9.24 of the Loan Agreement, which provisions are incorporated by reference as if herein set forth in full.

 

THE MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS NOTE OR THE OTHER LOAN DOCUMENTS. THE MAKER AGREES THAT THE HOLDER

 

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MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF THE MAKER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THE MAKER AND THE HOLDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Upon the transfer of this Note, Holder may deliver all Collateral granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights and obligations herein or under applicable law given to Holder with respect thereto, and Holder shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter, but Holder shall retain all rights and obligations hereby given to it with respect to any liabilities and the Collateral not so transferred.

 

3


IN WITNESS WHEREOF, the Maker has caused this Note to be properly executed on the date first above written, and has authorized this Note to be dated as of the day and year first above written.

 

MAKER:

GIP WAKEFIELD, LLC,

a Delaware limited liability company

By:

 

GIP Wakefield Holding Company, LLC,

a Delaware limited liability company,

its Member and Manager

    By:  

Digital Realty Trust, L.P.,

a Maryland limited partnership,

its Member and Manager

        By:   Digital Realty Trust, Inc.,
            a Maryland corporation
            its General Partner
            By:  

/s/ S COTT P ETERSON


            Print Name:  

Scott Peterson


            Title:  

Senior Vice President


Exhibit 10.44

 

F ORM OF

PROFITS INTEREST UNITS AGREEMENT

 

THIS PROFITS INTEREST UNITS AGREEMENT (this “ Agreement ”) is made and entered into as of                      , 2004 (the “ Effective Date ”), by and between Digital Realty Trust, L.P., a Maryland limited partnership (the “ Partnership ”), and                                          (“ Participant ”). Capitalized terms used in this Agreement but not otherwise defined herein shall have their respective meanings set forth in the Plan and/or the Partnership Agreement (each as defined below), as applicable.

 

THE PARTIES HERETO AGREE AS FOLLOWS:

 

1. Issuance of Award . Pursuant to the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (the “ Plan ”), effective as of the Effective Date, the Partnership hereby (a) grants to Participant an Award which represents ______ Profits Interest Units of the Partnership (the “ Award ”), and (b) if not already a Partner, admits Participant as a Partner of the Partnership, in consideration of Participant’s agreement to provide services to or for the benefit of the Partnership on the terms and conditions set forth herein, in the Plan and in the Partnership Agreement. The Partnership and Participant acknowledge and agree that the Profits Interest Units are hereby issued to the Participant for the performance of services to or for the benefit of the Partnership in his or her capacity as a partner of the Partnership. Upon receipt of the Award, Participant shall, automatically and without further action on his or her part, be deemed to be a party to, signatory of and bound by the Partnership Agreement. At the request of the Partnership, Participant shall execute the Partnership Agreement or a counterpart signature page thereto. Participant acknowledges that the Partnership from time to time may issue or cancel (or otherwise modify) Profits Interest Units.

 

2. Vesting; Restrictions on Transfer of Awards .

 

2.1 The Award shall be fully vested with respect to 100% of the Profits Interest Units subject thereto as of the Effective Date.

 

2.2 Notwithstanding Section 2.1 above, without the consent of the Partnership (which it may give or withhold in its sole discretion), Participant shall not sell, pledge, assign, hypothecate, transfer, or otherwise dispose of (collectively, “ Transfer ”) all or any portion of the Award or any Profits Interest Units (or any securities into which the Profits Interest Units are converted or exchanged) prior to the third anniversary of the Effective Date (the “ Transfer Restrictions ”), other than by will or pursuant to the laws of descent and distribution; provided, however , that the Transfer Restrictions shall not apply to any Transfer of Profits Interest Units to the Partnership or Digital Realty Trust, Inc (the “ Company ”).

 

2.3 The Award is subject to the terms of the Plan and the terms of the Partnership Agreement, including, without limitation, the restrictions on transfer of Units (including, without limitation, Profits Interest Units) set forth in Article 11 of the Partnership


Agreement. Any permitted transferee of the Award shall take such Award subject to the terms of the Plan, this Agreement, and the Partnership Agreement. Any such permitted transferee must, upon the request of the Partnership, agree to be bound by the Plan, the Partnership Agreement, and this Agreement, and shall execute the same on request, and must agree to such other waivers, limitations, and restrictions as the Partnership or the Company may reasonably require. Any Transfer of the Award which is not made in compliance with the Plan, the Partnership Agreement and this Agreement shall be null and void and of no effect.

 

3. Representations, Warranties, Covenants, and Acknowledgments of Participant . Participant hereby represents, warrants, covenants, acknowledges and agrees on behalf of Participant and his or her spouse, if applicable, that:

 

3.1 Investment . Participant is holding the Award for Participant’s own account, and not for the account of any other Person. Participant is holding the Award for investment and not with a view to distribution or resale thereof except in compliance with applicable laws regulating securities.

 

3.2 Relation to Partnership . Participant is presently an employee of, or consultant to, the Partnership, or is otherwise providing services to or for the benefit of the Partnership, and in such capacity has become personally familiar with the business of the Partnership.

 

3.3 Access to Information . Participant has had the opportunity to ask questions of, and to receive answers from, the Partnership with respect to the terms and conditions of the transactions contemplated hereby and with respect to the business, affairs, financial conditions, and results of operations of the Partnership.

 

3.4 Registration . Participant understands that the Profits Interest Units have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and the Profits Interest Units cannot be transferred by Participant unless such transfer is registered under the Securities Act or an exemption from such registration is available. The Partnership has made no agreements, covenants or undertakings whatsoever to register the transfer of the Profits Interest Units under the Securities Act. The Partnership has made no representations, warranties, or covenants whatsoever as to whether any exemption from the Securities Act, including, without limitation, any exemption for limited sales in routine brokers’ transactions pursuant to Rule 144 of the Securities Act, will be available. If an exemption under Rule 144 is available at all, it will not be available until at least one (1) year from issuance of the Award and then not unless (a) a public trading market then exists in Profits Interest Units (or a successor security thereto); (b) adequate information as to the Partnership’s financial and other affairs and operations is then available to the public, and (c) all other terms and conditions of Rule 144 have been satisfied.

 

3.5 Public Trading . None of the Partnership’s securities is presently publicly traded, and the Partnership has made no representations, covenants or agreements as to whether there will be a public market for any of its securities.

 

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3.6 Tax Advice . The Partnership has made no warranties or representations to Participant with respect to the income tax consequences of the transactions contemplated by this Agreement, and Participant is in no manner relying on the Partnership or its representatives for an assessment of such tax consequences. Participant is advised to consult with his or her own tax advisor with respect to such tax consequences and his or her ownership of the Profits Interest Units.

 

4. Capital Account . Participant shall make no contribution of capital to the Partnership in connection with the Award and, as a result, Participant’s Capital Account balance in the Partnership immediately after its receipt of the Profits Interest Units shall be equal to zero, unless the Participant was a Partner in the Partnership prior to such issuance, in which case the Participant’s Capital Account balance shall not be increased as a result of its receipt of the Profits Interest Units.

 

5. Redemption Rights . Notwithstanding the contrary terms in the Partnership Agreement, Partnership Units which are acquired upon the exchange of the Profits Interest Units shall not, without the consent of the Partnership (which may be given or withheld in its sole discretion), be redeemed pursuant to Section 8.6 of the Partnership Agreement within two years of the date of the issuance of such Profits Interest Units.

 

6. Contribution Agreement Acknowledgement . Participant hereby understands and acknowledges that pursuant to Section 4.3 of that certain Contribution Agreement, dated as of July 31, 2004, by and between the Partnership and Global Innovation Partners, LLC (the “ Contribution Agreement ”), in the event that the closing of the initial public offering of the Company’s common stock has not occurred within 30 days after the closing of the transactions contemplated by the Contribution Agreement, the parties to the Contribution Agreement have agreed to unwind all of the transactions contemplated thereby.

 

7. Covenants . Participant hereby covenants that so long as Participant holds any Profits Interest Units, at the request of the Partnership, Participant shall disclose to the Partnership in writing such information relating to Participant’s ownership of the Profits Interest Units as the Partnership reasonably believes to be necessary or desirable to ascertain in order to comply with the Code or the requirements of any other appropriate taxing authority.

 

8. Binding Effect . Subject to the limitations set forth in this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the executors, administrators, heirs, legal representatives, successors and assigns of the parties hereto.

 

9. Taxes . The Partnership and the Participant intend that (i) the Profits Interest Units be treated as a “profits interest” as defined in Internal Revenue Service Revenue Procedure 93-27, (ii) the issuance of such units not be a taxable event to the Partnership or the Participant as provided in such revenue procedure, and (iii) the Partnership Agreement, the Plan and this Agreement be interpreted consistently with such intent. The Partnership may withhold from Participant’s wages, or require Participant to pay to the Partnership, any applicable withholding or employment taxes resulting from the issuance of Award hereunder, from the lapse of any restrictions imposed on the Award, or from the ownership or disposition of the Profits Interest Units.

 

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10. Remedies . Participant shall be liable to the Partnership for all costs and damages, including incidental and consequential damages, resulting from a disposition of the Award which is in violation of the provisions of this Agreement. Without limiting the generality of the foregoing, Participant agrees that the Partnership shall be entitled to obtain specific performance of the obligations of Participant under this Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. Participant will not urge as a defense that there is an adequate remedy at law.

 

11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents, without regard to any otherwise governing principles of conflicts of law.

 

12. Survival of Representations and Warranties . The representations, warranties and covenants contained in Section 3 hereof shall survive the later of the date of execution and delivery of this Agreement or the issuance of the Award.

 

13. Unit Certificate Restrictive Legends . Certificates evidencing the Award, to the extent such certificates are issued, may bear such restrictive legends as the Partnership and/or the Partnership’s counsel may deem necessary or advisable under applicable law or pursuant to this Agreement, including, without limitation, the following legends:

 

“The offering and sale of the securities represented hereby have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”). Any transfer of such securities will be invalid unless a Registration Statement under the Securities Act is in effect as to such transfer or in the opinion of counsel for the Partnership such registration is unnecessary in order for such transfer to comply with the Securities Act.”

 

“The securities represented hereby are subject to transferability and other restrictions as set forth in (i) a written agreement with the Partnership, (ii) the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan and (iii) the Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., dated as of                      , 2004, in each case, as may be amended from time to time, and such securities may not be sold or otherwise transferred except pursuant to the provisions of such documents.”

 

14. Restrictions on Public Sale by Participant . To the extent not inconsistent with applicable law, the Participant agrees not to effect any sale or distribution of the Profits Interest Units or any similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of a registration statement filed by the Partnership or the Company (except as part of such registration), if and to the extent requested in writing by the Partnership or the Company

 

4


in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing underwriter or underwriters and consented to by the Partnership or the Company, which consent may be given or withheld in the Partnership’s or the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing underwriter or underwriters).

 

15. Conformity to Securities Laws . Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of all applicable federal and state laws, rules and regulations (including, but not limited to the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation the applicable exemptive conditions of Rule 16b-3 of the Exchange Act) and to such approvals by any listing, regulatory or other governmental authority as may, in the opinion of counsel for the Partnership or the Company, be necessary or advisable in connection therewith. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award of Profits Interest Units is made, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, this Agreement and the Award shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

16. Counterparts . This Agreement may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same instrument.

 

17. Successors and Assigns . Subject to the limitations set forth in this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the executors, administrators, heirs, legal representatives, successors and assigns of the parties hereto, including, without limitation, any business entity that succeeds to the business of the Partnership.

 

18. Entire Agreement; Amendments and Waivers . This Agreement, together with the Plan and the Partnership Agreement, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended except in an instrument in writing signed on behalf of each of the parties hereto and approved by the Committee. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

19. Invalidity . If for any reason one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument.

 

5


20. Titles . The titles, captions or headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

6


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

Digital Realty Trust, L.P.,
a Maryland limited partnership

By:

 

 


Name:    
Title:    

 

Participant hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement.

 

Participant:

 


(Sign Name)

 


(Print Name)

 

Participant’s spouse indicates by the execution of this Agreement his or her consent to be bound by the terms herein as to his or her interests, whether as community property or otherwise, if any, in the Profits Interest Units.

 

Participant’s Spouse:

 


(Sign Name)

 


(Print Name)

 

S-1

Exhibit 10.45

 

FORM OF

DIGITAL REALTY TRUST , INC.

INCENTIVE STOCK OPTION AGREEMENT

 

THIS AGREEMENT, dated as of                      , 2004 (the “ Grant Date ”), is made by and between Digital Realty Trust, Inc., a Maryland corporation (the “ Company ”), and                      , an employee of the Company or a “subsidiary corporation” thereof within the meaning of Section 424(f) of the Code (the “ Optionee ”).

 

1. Definitions . All capitalized terms used in this Agreement without definition shall have the meanings ascribed to such terms in the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan, as amended from time to time (the “ Plan ”).

 

2. Grant of Option .

 

(a) As of the Grant Date, the Company hereby grants the Optionee an option (the “ Option ”) to purchase any part or all of an aggregate of [              ] shares of its common stock, par value $0.01 per share (“ Common Stock ”), upon the terms and conditions set forth herein. The Option shall constitute an “incentive stock option” within the meaning of Section 422 of the Code.

 

(b) The purchase price of the shares of Stock covered by the Option shall be [$              ] per share without commission or other charge.

 

(c) In consideration of the granting of this Option by the Company, the Optionee agrees to render faithful and efficient services to the Company or a “subsidiary corporation” thereof within the meaning of Section 424(f) of the Code, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in the Plan shall constitute, or be construed as, an employment contract or confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without good cause.

 

3. Vesting and Expiration .

 

(a) Subject to Sections 3(b), (c), (e) and (g), the Option shall become vested and exercisable as follows:

 

(i) The Option shall become vested and exercisable with respect to 25% of the shares subject thereto (rounded down to the next whole number of shares) on the first anniversary of the Grant Date (the “ Initial Vesting Date ”); and

 

(ii) The Option shall become vested and exercisable with respect to an additional 25% of the shares subject thereto (rounded down to the next whole number of shares) on each anniversary of the Initial Vesting Date, so that the Option shall be fully vested and exercisable as of the fourth anniversary of the Grant Date.

 

1


(b) Except as may otherwise be provided in any other written agreement entered into by and between the Company and the Optionee, in the event of a Change in Control, the Option shall become fully vested and exercisable immediately prior to such Change of Control.

 

(c) No portion of the Option which is unexercisable at the Optionee’s termination of employment shall thereafter become exercisable.

 

(d) The installments provided for in Section 3(a) are cumulative. Each such installment which becomes exercisable pursuant to Section 3(a) shall remain exercisable until it becomes unexercisable under Section 3(e).

 

(e) The Option may not be exercised to any extent by anyone after the first to occur of the following events:

 

(i) The expiration of ten years from the Grant Date; or

 

(ii) The expiration of three months following the date of the Optionee’s termination of employment for any reason other than death or Disability; or

 

(iii) The expiration of one year following the date of the Optionee’s termination of employment by reason of his death or Disability.

 

(f) Optionee hereby agrees and acknowledges that to the extent that the aggregate Fair Market Value (determined as of the time of grant) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are first exercisable by Optionee in any calendar year exceeds $100,000 or such other limitation as imposed by Section 422(d) of the Code (or any successor provision), the Option and such Incentive Stock Options, as applicable, shall be treated as not qualifying as an “incentive stock option” under Section 422 of the Code but rather shall be treated as Non-Qualified Stock Options.

 

(g) The Option may not be exercised (i) to the extent that the grant or exercise of such Award could cause the Participant to be in violation of the Common Stock Ownership Limit or the Aggregate Stock Ownership Limit (each as defined in the Company’s Articles of Incorporation, as amended from time to time) or (ii) if, in the discretion of the Committee, the grant or exercise of such Award could impair the Company’s status as a REIT.

 

4. Option Exercise .

 

(a) During the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof, and after the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3(e), be exercised by the Optionee’s personal representative or by any person empowered to do so under the deceased Optionee’s will or under the then applicable laws of descent and distribution.

 

2


(b) Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3(e); provided, however , that each partial exercise (other than the exercise of the entire Option) shall be for whole shares only.

 

(c) The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Company’s corporate secretary of all of the following prior to the time when such Option or such portion becomes unexercisable pursuant to Section 3(e):

 

(i) Notice in writing signed by the Optionee, specifically stating the number of shares with respect to which the Option is being exercised;

 

(ii) Full payment for the shares with respect to which such Option or portion thereof is exercised. Such payment shall be made in form of: (A) cash or by personal, certified, or bank cashiers check; or (B) with the consent of the Committee (1) shares of Common Stock which have been owned by the Optionee for at least six months duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, (2) unless otherwise provided by the Committee, delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, or (3) any combination of the consideration listed in this Section 4(c)(ii);

 

(iii) The payment to the Company (in cash or by personal, certified or bank cashier or by any other means of payment approved by the Committee) of all amounts necessary to satisfy any and all federal, state and local tax withholding requirements arising in connection with the exercise of the Option;

 

(iv) Such other documents as the Company may deem necessary or advisable to effect compliance with any applicable law, rule or regulation;

 

(v) In the event that the Option or portion thereof shall be exercised pursuant to Section 4 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.

 

5. No Rights as Stockholder . The Optionee shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder.

 

[6. Restrictions on Public Sale by Participant . To the extent not inconsistent with applicable law, Optionee agrees not to effect any sale or distribution of any shares purchasable upon the exercise of the Option or any similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under

 

3


the Securities Act of 1933, as amended, during the 14 days prior to, and during the 90-day period beginning on, the effective date of a registration statement filed by the Company (except as part of such registration), if and to the extent requested in writing by the Company in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing underwriter or underwriters and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public offering (such agreement to be in the form of lock-up agreement provided by the managing underwriter or underwriters).]

 

7. Amendment . This Agreement may be amended without the consent of the Optionee, provided that no amendment of this Agreement shall, without the consent of the Optionee, impair any rights of the Optionee under this Agreement. The Option may be adjusted as described in Article 11 of the Plan.

 

8. Option Not Transferable . Neither the Option nor any interest or right therein or part thereof shall be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution, unless and until such Option has been exercised, or the shares underlying such Option have been issued, and all restrictions applicable to such shares have lapsed.

 

9. Notice of Disposition . Optionee hereby agrees that he shall give the Company prompt notice of any disposition of shares of Stock acquired upon exercise of the Option if such disposition occurs within (i) two years after the Grant Date or (ii) one year after the transfer of such shares of Stock to Optionee. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Optionee in such disposition or other transfer.

 

10. Governing Law; Severability . This Agreement shall be administered, interpreted and enforced under the internal laws of the State of California without regard to conflicts of laws thereof. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

11. Notices . Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the Optionee to his address shown in the Company records, and to the Company at its principal executive office.

 

[ Signature Page Follows ]

 

4


The Optionee represents that he has read this Agreement and the Plan and is familiar with the terms and provisions of each. The Optionee acknowledges that the Option is issued pursuant to, and is subject to the terms and conditions of, the Plan, and the Optionee will be bound by the terms of the Plan as if it were set forth verbatim in this Agreement. The Optionee agrees to comply with all rules the Company may establish with respect to the Plan. The Optionee further acknowledges and agrees that this Agreement (and the Plan) constitutes the entire agreement between the parties with respect to the Option and that this Agreement (and the Plan) supersedes any and all prior agreements, whether written or oral, between the parties with respect to the Option.

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

 

DIGITAL REALTY TRUST, INC.   OPTIONEE

 


 

 


Name:

   

Title:

   
   

Residence Address :

   

 


   

 


   

 


 

5

Exhibit 31.1

 

Certification of Principal Executive Officer

 

Pursuant to Section 302 of The Sarbanes–Oxley Act Of 2002

 

I, Michael F. Foust, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: December 13, 2004

 

By:

 

/s/    M ICHAEL F. F OUST


       

Michael F. Foust

       

Chief Executive Officer

Exhibit 31.2

 

Certification of Principal Executive Officer

 

Pursuant to Section 302 of The Sarbanes–Oxley Act Of 2002

 

I, A. William Stein, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: December 13, 2004

 

By:

 

/s/    A. W ILLIAM S TEIN


       

A. William Stein

       

Chief Financial Officer and

       

Chief Investment Officer

Exhibit 32.1

 

Certification of Chief Executive Officer Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

 

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: December 13, 2004

 

/s/    M ICHAEL F. F OUST


   

Michael F. Foust

   

Chief Executive Officer

Exhibit 32.2

 

Certification of Chief Executive Officer Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

 

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: December 13, 2004

 

/s/    A. W ILLIAM S TEIN


   

A. William Stein

   

Chief Financial Officer and

   

Chief Investment Officer