MASTER CREDIT FACILITY AGREEMENT

Exhibit 10.1

EXECUTION VERSION

MASTER CREDIT FACILITY AGREEMENT

BY AND BETWEEN

BORROWERS SIGNATORY HERETO

AND

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.

dated as of

April 7, 2009

TABLE OF CONTENTS

 

 

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EXHIBITS

 

 

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MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT (this “ Agreement ”) is made as of the 7th day of April, 2009, by and among (i) (a)  BRE-FMCA, LLC , a Delaware limited liability company, (b)  BRE-FMAZ, LLC , a Delaware limited liability company, and (c) such Additional Borrowers as may from time to time become borrowers under this Agreement (individually and collectively, “ Borrower ”), (ii)  BRE PROPERTIES, INC. , a Maryland corporation (“ Guarantor ”), and (iii)  DEUTSCHE BANK BERKSHIRE MORTGAGE, INC. , a Delaware corporation (“ Lender ”).

RECITALS

A. Borrower owns one (1) or more Multifamily Residential Properties (unless otherwise defined or the context clearly indicates otherwise, capitalized terms shall have the meanings ascribed to such terms in Appendix I of this Agreement) as more particularly described in Exhibit A to this Agreement.

B. Borrower has requested that Lender establish a Credit Facility in favor of Borrower which shall be in the maximum amount of $620,000,000, as determined by Lender pursuant to the terms of Section 1.01 of this Agreement.

C. To secure the obligations of Borrower under this Agreement and the other Loan Documents issued in connection with the Credit Facility, Borrower shall create a Collateral Pool in favor of Lender. The Collateral Pool shall be comprised of (i) certain Multifamily Residential Properties owned by Borrower or any Additional Borrower and (ii) any other collateral pledged to Lender from time to time by any Borrower or Additional Borrower pursuant to this Agreement or any other Loan Documents. As of the Initial Closing Date, the Collateral Pool shall consist of the Mortgaged Properties listed on Exhibit A .

D. Each Note and Security Document shall be cross-defaulted ( i.e. , a default under any Note, Security Document, or under this Agreement, shall constitute a default under each Note, Security Document, and this Agreement) and cross-collateralized ( i.e. , each Security Instrument shall secure all of Borrower’s obligations under this Agreement and the other Loan Documents) and it is the intent of the parties to this Agreement that Lender may accelerate any Note without the obligation, but the right to accelerate any other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender may, except as provided in this Agreement, exercise and perfect any and all of its rights in and under the Loan Documents with regard to any Mortgaged Property without the obligation (but with the right) to exercise and perfect its rights and remedies with respect to any other Mortgaged Property and that any such exercise shall be without regard to the Allocable Facility Amount assigned to such Mortgaged Property and that Lender may recover an amount equal to the full amount Outstanding in respect of any of the Notes in connection with such exercise and any such amount shall be applied to the Obligations as determined by Lender in its sole and absolute discretion.

E. Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to establish the Credit Facility.

 

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NOW, THEREFORE, Borrower and Lender, in consideration of the mutual promises and agreements contained in this Agreement, hereby agree as follows:

ARTICLE 1

THE FIXED FACILITY COMMITMENT

Section 1.01. The Fixed Facility Commitment .

Subject to the terms, conditions and limitations of this Agreement:

(a) Fixed Facility Commitment Amount; No Increase . The amount of the Fixed Facility Commitment shall be in an amount not to exceed $620,000,000. The maximum amount of the Fixed Facility Commitment shall be determined by Lender based on the Net Operating Income of the Mortgaged Properties in effect as of the Initial Closing Date and the U.S. Treasury Index Rate for securities having a maturity substantially similar to the maturity of the Fixed Advances. Once determined, Borrower shall have no right to increase the amount of the Fixed Facility Commitment. As of the Initial Closing Date, the amount advanced under the Fixed Facility Commitment is $310,000,000.

(b) Future Advance Drawn from Fixed Facility Commitment . Subject to the terms and conditions of this Agreement, including without limitation Section 1.01(c) , Section 1.06 , Section 2.02 and Article 5 , Borrower agrees that the remainder of the Fixed Facility Commitment not advanced on the Initial Closing Date, $310,000,000 shall be drawn on or before the Future Advance Expiration Date as a Fixed Advance. The aggregate original principal amount of the Fixed Advances Outstanding shall not exceed the Fixed Facility Commitment. The repayment, in whole or in part, of a Fixed Advance shall permanently reduce the Fixed Facility Commitment by the original principal amount of such Fixed Advance. Borrower may not re-borrow any part of any Advance which it has previously borrowed and repaid. Subject to the terms of Section 2.05 , no Advance shall be made as a result of increases in the Debt Service Coverage Ratio or decreases in the Loan to Value Ratio of any Mortgaged Property.

(c) Failure to Rate Lock or Draw Full Amount of Future Advance . Failure by Borrower to rate lock the Future Advance by the Rate Lock Deadline or failure by Borrower to draw the Future Advance by the Future Advance Expiration Date shall result in the following:

(i) if Borrower rate locks and/or draws $310,000,000 or less (including the Initial Advance by the Rate Lock Deadline or Future Advance Expiration Date, as applicable), the interest rate for the Initial Advance and the Future Advance shall be increased by fifteen basis points (0.15%) per annum;

(ii) if Borrower rate locks and/or draws more than $310,000,000 but less than $465,000,000 (including the Initial Advance by the Rate Lock Deadline or Future Advance Expiration Date, as applicable), the interest rate for the Initial Advance and Future Advance shall be increased by ten basis points (0.10%) per annum (There shall be no increase to the interest rate if Borrower draws at least $465,000,000 (including the Initial Advance).);

 

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(iii) a permanent and automatic reduction of the Fixed Facility Commitment by the amount of the Future Advance or portion thereof not drawn by Borrower;

(iv) Borrower shall be liable for breakage and other costs in accordance with Section 2.02 ; and

(v) Borrower shall be subject to the provisions of Section 3.04(g).

Section 1.02. [ Reserved. ]

Section 1.03. Maturity Date of Fixed Advances; Amortization; Prepayment .

(a) Maturity Date . The maturity date of any Fixed Advance shall be specified by Borrower for such Fixed Advance, provided that such maturity date shall be no earlier than the date that is the first day of the month following the date five (5) years after the Closing Date of such Fixed Advance and not later than the first day of the month following the date eleven (11) years after the Closing Date of such Fixed Advance, provided that the maturity date of any Fixed Advance shall not be later than the first day of the month following the date twelve (12) years after the Initial Closing Date.

(b) Interest Only; Amortization of Fixed Advances . Amortization and interest only payments for Fixed Advances shall be as follows:

(i) for a total term of less than seven (7) years, all payments shall include amortization;

(ii) for a total term equal to or greater than seven (7) years but less than ten (10) years, the first three (3) years shall be interest only payments and the remainder of the term of the Fixed Advance shall include amortization; and

(iii) for a total term of ten (10) years or more, the first five (5) years shall be interest only payments and the remainder of the term shall include amortization.

All references to amortization in this Section 1.03(b) shall mean an amount necessary to fully amortize the original principal amount of the Fixed Advance over the Amortization Period.

(c) Prepayment . Subject to the terms and conditions of Section 3.04(d) , Borrower may prepay all or a portion of any Fixed Advance pursuant to the prepayment provisions of the Fixed Facility Note. Any repaid Fixed Advances shall automatically result in a permanent reduction of the Fixed Facility Commitment.

(d) Fixed Advance Executions . At such time as Borrower rate locks any Fixed Advance, Borrower shall select either:

(i) a Fixed Advance with a fixed rate term that matures not earlier than the date that is the first day of the month following the date five (5) years after the Closing Date of such Fixed Advance, and not later than the date that is the first day of the month following the

 

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date ten (10) years after the Closing Date of such Fixed Advance, provided that no final maturity date of any Fixed Advance shall be later than the date that is the first day of the month following the date eleven (11) years after the Initial Closing Date (the “ Fixed Standard Yield Maintenance Maturity Option ”) as more specifically set forth in the Fixed Facility Note, the form of which is attached as Exhibit B-1 to this Agreement, or

(ii) a Fixed Advance with an initial fixed rate term with an initial maturity date that is not earlier than the first day of the month following the date five (5) years after the Closing Date and not later than the first day of the month following the date that is ten (10) years after the Closing Date which initial maturity date is automatically followed by a 1-year adjustable rate term, such that the Fixed Advance has a final maturity date that is not earlier than the first day of the month following the date six (6) years and not later than the first day of the month following the date that is eleven (11) years after the Closing Date of such Fixed Advance, provided that no final maturity date of any Fixed Advance shall be later than the date that is the first day of the month following the date twelve (12) years after the Initial Closing Date (the “ Fixed+1 Maturity Option ”) as more specifically set forth in the Fixed Facility Note, the form of which is attached as Exhibit B-2 to this Agreement.

Section 1.04. Interest on Advances .

(a) Partial Month Interest . Notwithstanding anything to the contrary in this Section 1.04(a) , if a Fixed Advance is not made on the first day of a calendar month, Borrower shall pay interest on the original stated principal amount of such Advance for the partial month period commencing on the Closing Date for such Advance and ending on the last day of the calendar month in which the Closing Date occurs. Borrower shall pay interest for such partial month on any such Advance at a rate per annum equal to the interest rate described in the applicable Note.

(b) Annual Interest Rate . The interest rate for the Initial Advance shall be five and fifty-seven one hundredths percent (5.57%) per annum. The interest rate for the Future Advance shall be five and sixty-nine one hundredths percent (5.69%) per annum.

Section 1.05. Notes .

The obligation of Borrower to repay each Fixed Advance shall be evidenced by a separate Fixed Facility Note. Each Fixed Facility Note shall be payable to the order of Lender and shall be made in the original principal amount of such Fixed Advance.

Section 1.06. Limitation on All Advances .

Notwithstanding anything in this Agreement or any other Loan Document to the contrary, the Future Advance (if the Future Advance is not rate locked on or before the Rate Lock Deadline Date) and any Additional Loans shall be subject to the precondition that Lender must confirm with Fannie Mae that Fannie Mae is generally offering to purchase in the marketplace Advances of the execution type requested by Borrower at the time of the request and at the time of the rate setting date for the requested Advance. In the event Fannie Mae is not purchasing Advances of the type requested by Borrower, Lender agrees to offer, to the extent available from Fannie Mae, alternative Advance executions based on the types of executions Fannie Mae is

 

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generally offering to purchase in the marketplace at that time. Any alternative execution offered would be subject to mutually agreeable documentation necessary to implement the terms and conditions of such alternative execution.

ARTICLE 2

THE ADVANCES

Section 2.01. [ Reserved. ]

Section 2.02. ERL and Rate Lock Agreement .

(a) ERL Commitment . As of the Initial Closing Date, Guarantor has rate locked the Future Advance pursuant to the terms of Fannie Mae’s “Early Rate Lock” program as evidenced by that certain Rate Lock Agreement and Certification dated as of March 27, 2009 (the “ Rate Lock Agreement ”). In connection with the Future Advance and the Rate Lock Agreement, Lender has, at the request of Guarantor, entered into a rate lock agreement with Fannie Mae (the “ ERL Commitment ”) to sell to Fannie Mae the Future Advance originated by Lender under this Agreement pursuant to the ERL Commitment, at the rate specified therein (the “ Locked Interest Rate ”). The ERL Commitment entered into between Fannie Mae and Lender allows Guarantor and Borrower to (i) lock the interest rate on the entire Future Advance at the Locked Interest Rate, and (ii) close the Future Advance no later than the Future Advance Expiration Date pursuant to the terms of the Rate Lock Agreement and this Agreement. If Borrower fails to draw at least $465,000,000 (including the Initial Advance) on the terms and conditions contained in this Agreement and the Rate Lock Agreement by the Future Advance Expiration Date, Borrower and Guarantor shall be subject to the provisions of the Rate Lock Agreement and the provisions set forth in Section 1.01(c) and Section 3.04(g) hereof. Guarantor shall continue to be subject to all terms, conditions and obligations set forth in the Rate Lock Agreement as provided therein. Borrower and Guarantor agree that all Mortgaged Properties and the Collateral under this Agreement shall also secure all of Guarantor’s obligations under the Rate Lock Agreement. In the event of any express conflict between the terms of the Rate Lock Agreement and this Agreement, the terms of this Agreement shall prevail, except to the extent of Sections 4 and 5 of the Rate Lock Agreement, which Sections shall control regardless of any provision to the contrary contained in this Agreement.

(b) Right to Terminate ERL . Upon the occurrence of an Event of Default, Fannie Mae shall have the right, in its sole discretion, to terminate the ERL Commitment upon written notice to Borrower and Guarantor. Upon any termination of the ERL Commitment due to an Event of Default, Guarantor shall be liable to Lender (or to Fannie Mae, as assignee of Lender) pursuant to the terms of the Rate Lock Agreement. Nothing herein shall affect in any manner any other rights and remedies of Fannie Mae or Lender under this Agreement.

Section 2.03. Advances .

(a) Initial Advance . In connection with the Initial Advance if all conditions precedent contained in Section 5.02 and the General Conditions contained in Section 5.01 are satisfied on or before the Initial Closing Date for the Initial Advance, Lender shall make the Initial Advance on the Initial Closing Date or on such other date as Borrower and Lender may agree.

 

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(b) Future Advance . If all conditions precedent contained in Section 5.03 and the General Conditions contained in Section 5.01 are satisfied, Lender shall make the Future Advance, at a closing to be held at offices reasonably designated by Lender on a Closing Date reasonably selected by Lender, but no later than the Future Advance Expiration Date.

Section 2.04. Determination of Allocable Facility Amount and Valuations .

(a) Initial Determinations . On the Initial Closing Date, Lender shall determine (i) the Allocable Facility Amount and Valuation for each Initial Mortgaged Property, (ii) the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, and (iii) the Advance Amount. The determinations made as of the Initial Closing Date shall remain unchanged until the First Anniversary. Changes in the Allocable Facility Amount, Valuations, the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shall be made pursuant to Section 2.04(b) .

(b) Monitoring Determinations . Once each Calendar Quarter, or, if the Collateral Pool has an Aggregate Debt Service Coverage Ratio equal to or greater than 1.25:1.0, once each Calendar Year, within twenty (20) Business Days after Borrower has delivered to Lender the reports required in Section 7.04 , Lender shall determine the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, the Valuations and the Allocable Facility Amounts and whether Borrower is in compliance with the other covenants set forth in the Loan Documents. After the First Anniversary, Lender shall redetermine Allocable Facility Amounts and Valuations (i) quarterly, or (ii) if the Collateral Pool has an Aggregate Debt Service Coverage Ratio equal to or greater than 1.25:1.0, annually, or (iii) at such other time if Lender reasonably determines that changed market or property conditions warrant. Lender shall also redetermine Allocable Facility Amounts to take account of any release or substitution of Collateral or other event that invalidates the outstanding determinations. Notwithstanding the provisions of this Section 2.04 , for purposes of reviewing proposed Substitute Mortgaged Properties, if Lender reasonably determines market conditions have changed in a manner adversely affecting any of the Mortgaged Properties since the determination of the Allocable Facility Amounts, Lender may make new determinations of Allocable Facility Amounts for purposes of determining the Loan to Value Ratio and Debt Service Coverage Ratio of the Release Mortgaged Property. In determining Valuations, Lender shall use Cap Rates in its reasonable discretion based on its internal survey and analysis of Cap Rates for comparable sales in the vicinity of the Mortgaged Property, with such adjustments as Lender reasonably deems appropriate. If Lender is unable to determine a Cap Rate for a Mortgaged Property, Lender shall have the right, not more than once annually, to obtain, at Borrower’s expense, a third-party market study in order to establish a Cap Rate. Lender shall promptly disclose its determinations to Borrower. Until redetermined, the outstanding Allocable Facility Amounts and Valuations determined by Lender shall remain in effect. Notwithstanding anything in this Agreement to the contrary, no change in Allocable Facility Amounts, Valuations, the Aggregate Loan to Value Ratio or the Aggregate Debt Service Coverage Ratio shall, (A) result in a Potential Event of Default or Event of Default, or (B) require the prepayment of any Advances.

 

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Section 2.05. Additional Financing .

During the period beginning on the First Anniversary and ending on the date five (5) years prior to the Termination Date, not more than one (1) time per year and not more than two (2) total times during such period, Borrower may request additional financing with a fixed or variable interest rate without adding any additional Mortgaged Properties to the Collateral Pool (each such loan, an “ Additional Loan ”). Any such Additional Loan will be made in Lender and Fannie Mae’s sole discretion and subject to all of Fannie Mae’s requirements and guidelines in effect at the time of the request. Once made, any Additional Loan will be deemed an advance hereunder and subject to this Agreement and shall be secured by the Mortgaged Properties. Borrower agrees to pay any and all fees that may be charged by Lender in connection with an Additional Loan.

Section 2.06. Increase in Fixed Facility Commitment .

Subject to the provisions of Section 2.05 , Borrower shall have no right under this Agreement to increase the Fixed Facility Commitment.

ARTICLE 3

COLLATERAL CHANGES

Section 3.01. [ Reserved. ]

Section 3.02. [Reserved.]

Section 3.03. Right to Obtain Releases of Collateral .

Subject to the terms and conditions of this Article 3 in connection with a repayment or prepayment of a Note, or a Release of a Mortgaged Property pursuant to Section 3.04 , or a Substitution pursuant to Section 3.05 , Borrower shall have the right from time to time to obtain a release of a Mortgaged Property from the Collateral Pool.

Section 3.04. Procedure for Obtaining Releases of Collateral .

(a) Request . To obtain a release of a Mortgaged Property from the Collateral Pool (a “ Release ”), Borrower shall deliver a Release Request to Lender. The delivery of the Release Request itself shall not result in a termination of all or any part of the Credit Facility; however, any prepayments associated with such Release shall automatically result in a permanent reduction of the Fixed Facility Commitment by the amount of such prepayments, which repaid amount shall not be available to be re-borrowed.

(b) Conditions Precedent; Closing . As a condition precedent to the release of a Release Mortgaged Property, the Aggregate Loan to Value Ratio and Aggregate Debt Service Coverage Ratio for the proposed resulting Collateral Pool must satisfy the following conditions:

(i) from the Initial Closing Date until the day immediately prior to the Third Anniversary, the Aggregate Loan to Value Ratio and Aggregate Debt Service Coverage Ratio of the resulting Collateral Pool shall satisfy the Coverage and LTV Tests;

 

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(ii) from the Third Anniversary to the day immediately prior to the Sixth Anniversary, the Aggregate Loan to Value Ratio of the resulting Collateral Pool shall be no greater than seventy percent (70%) and the Aggregate Debt Service Coverage Ratio of the resulting Collateral Pool shall be no less than 1.30:1.0; and

(iii) from the Sixth Anniversary until the Termination Date, the Aggregate Loan to Value Ratio of the resulting Collateral Pool shall be no greater than sixty-five percent (65%) and the Aggregate Debt Service Coverage Ratio of the resulting Collateral Pool shall be no less than 1.35:1.0.

(iv) If Lender determines that all conditions precedent are satisfied, including without limitation those in Section 5.01 and Section 5.05 , Lender shall cause the Release Mortgaged Property to be released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and occurring within thirty (30) days after Lender’s receipt of the Release Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and expense of Borrower, the Release Documents. At Lender’s option, Borrower shall prepare the Release Documents and submit them to Lender for its review.

(c) Release Price . Subject to the terms of this Section 3.04(c) , the “ Release Price ” for each Release Mortgaged Property means the greater of:

(i) one hundred percent (100%) of the Allocable Facility Amount for the Release Mortgaged Property; or

(ii) one hundred percent (100%) of the amount of Advances Outstanding that are required to be repaid by Borrower to Lender in connection with the proposed release of the Release Mortgaged Property from the Collateral Pool so that, immediately after the release the conditions precedent of Section 3.04(b) regarding Aggregate Loan to Value Ratio and Aggregate Debt Service Coverage Ratio are satisfied.

In addition to the Release Price, Borrower shall pay to Lender all associated prepayment premiums, accrued interest and other amounts due under the Notes evidencing the Advances being repaid to and including the date such Advance may be repaid.

(d) Application of Release Price .

(i) The Release Price for the Release Mortgaged Property shall be applied against Outstanding Advances in the order selected by Borrower, provided that (A) any Outstanding Advance which Borrower elects to prepay must be the only Advance partially prepaid or must be prepaid in full or, if the Release Price is not sufficient to do so, must be the only Advance partially prepaid; (B) such prepayment is permitted (for example, not subject to a lock out period) under the applicable Note; (C) any prepayment premium due and owing is paid; and (D) interest must be paid through the end of the month.

 

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(ii) In the event Borrower desires to release a Release Mortgaged Property on a date other than the last day of the month, or in the event that no Outstanding Advances may be prepaid under the terms of the applicable Note (for example, due to a lock out period), the Release Price or the remainder of the Release Price, if any, shall be held by Lender (or its appointed collateral agent) as substitute Collateral (“ Substitute Cash Collateral ”), in accordance with a security agreement (if required by Lender) and other documents in form and substance acceptable to Lender. Notwithstanding the foregoing, the release of the Release Mortgaged Property may not be approved unless the aggregate Valuation of all Mortgaged Properties remaining in the Collateral Pool is greater than Outstanding Advances. Any Substitute Cash Collateral shall be used to prepay the applicable Advance once such prepayment is permitted.

(e) Release of Borrower . Upon the Release of a Mortgaged Property, Borrower that owns such Release Mortgaged Property shall automatically without further action be released from its obligations under this Agreement and the other Loan Documents with respect to the Release Mortgaged Property only except for (i) any liabilities or obligations (other than the Indebtedness) of such Borrower which arose prior to the Closing Date of such Release, and (ii) any Obligations that survive release as specifically set forth in Section 18 (Environmental Hazards) of the Security Instrument applicable to such Release Mortgaged Property.

(f) Title Insurance . Notwithstanding the other provisions of this Section 3.04 , no Release of any Mortgaged Property shall be made unless Borrower has provided title insurance insuring Lender for the remaining Mortgaged Properties in the Collateral Pool (i) if tie-in endorsements are available for all or a portion of the remaining Mortgaged Properties in the Collateral Pool, in an aggregate amount equal to the combined Allocable Facility Amounts for all of the remaining Mortgaged Properties in the Collateral Pool covered by the tie-in endorsements, not to exceed the Fixed Facility Commitment in the maximum amount then available hereunder, or (ii) if tie-in endorsements are not available for any of the remaining Mortgaged Properties in the Collateral Pool, then with respect to such Mortgaged Properties not subject to the tie-in endorsement, an amount equal to one hundred fifteen percent (115%) of the Valuation of such remaining Mortgaged Properties not subject to the tie-in endorsement (or such lesser amount that is the maximum allowed by law or regulation).

(g) Failure to Draw Full Amount of Fixed Facility Commitment . In the event that Borrower fails to draw the full amount of the Fixed Facility Commitment of $620,000,000 (including the Initial Advance) for any reason other than the default by Lender, any Request by Borrower to Release a Mortgaged Property pursuant to this Agreement as a result of such failure shall not include the following Mortgaged Properties: (i) Westridge, (ii) MacArthur, (iii) Carmel Creek, (iv) Avenue 64, (v) Sharon Green, (vi) Towne Center, and (vii) Bell Centre.

 

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Section 3.05. Substitutions .

(a) Right to Substitute Collateral . Subject to the terms, conditions and limitations of Article 3 and Article 5 , Borrower shall have the right prior to the date twelve (12) months before the Termination Date to obtain the Release of one or more Release Mortgaged Properties from the Collateral Pool by replacing such Release Mortgaged Property with one (1) or more additional Mortgaged Properties that meet the requirements of this Agreement (the “ Substitute Mortgaged Property ”) thereby effecting a “ Substitution ” of Collateral.

(b) Request . Borrower shall deliver to Lender a completed and executed Substitution Request. Each Substitution Request shall be accompanied by the following:

(i) the information required by the Underwriting Requirements with respect to the proposed Substitute Mortgaged Property and any additional information Lender reasonably requests; and

(ii) the payment of all Additional Collateral Due Diligence Fees.

(c) Underwriting .

(i) Borrower may add a Substitute Mortgaged Property to the Collateral Pool provided that:

(A) after such Substitution:

(1) the Substitute Mortgaged Property satisfies the Individual Coverage and LTV Tests,

(2) the Loan to Value Ratio of the Substitute Mortgaged Property is less than or equal to the Loan to Value Ratio immediately prior to the Release of the Release Mortgaged Property, and

(3) the Debt Service Coverage Ratio of the Substitute Mortgaged Property is greater than or equal to the Debt Service Coverage Ratio immediately prior to the Release of the Release Mortgaged Property;

(B) the Substitute Mortgaged Property is an asset of similar quality with similar economic and market fundamentals and characteristics as the Release Mortgaged Property, as determined by Lender in accordance with the Underwriting Requirements; and

(C) all other terms and conditions set forth in this Agreement are satisfied.

(ii) Lender shall evaluate the proposed Substitute Mortgaged Property in accordance with the Underwriting Requirements, including an exit analysis performed by Lender and acceptable to Fannie Mae. Lender shall make underwriting determinations as to the Debt

 

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Service Coverage Ratio and the Loan to Value Ratio of the proposed Substitute Mortgaged Property on the basis of the lesser of (A) the acquisition price of the proposed Substitute Mortgaged Property if purchased by Borrower within twelve (12) months of the related Substitution Request, or (B) a Valuation made with respect to the proposed Substitute Mortgaged Property. Borrower shall promptly provide any information reasonably required by Lender to make the determinations required in this Section.

(iii) After receipt of (A) the Substitution Request and (B) all reports, certificates and documents required by the Underwriting Requirements, Lender shall notify Borrower whether it has determined whether the proposed Substitute Mortgaged Property meets the conditions for a Substitution. If Lender determines that the proposed Substitute Mortgaged Property meets the conditions set forth in this Agreement, Lender shall determine the Aggregate Debt Service Coverage Ratio, and the Aggregate Loan to Value Ratio that Lender estimates shall result from the addition of the proposed Substitute Mortgaged Property to the Collateral Pool. Within ten (10) days after receipt of Lender’s written consent to the proposed Substitution Request, Borrower shall notify Lender in writing whether it elects to add the proposed Substitute Mortgaged Property to the Collateral Pool and release the identified Mortgaged Property. If Borrower fails to notify Lender of its election within the timeframe stated, then the Request will be deemed withdrawn.

(iv) Notwithstanding the foregoing, if the tests identified in Section 3.05(c) are not satisfied after the Substitution of a proposed Substitute Mortgaged Property, such Substitution may be permitted by Lender if the Substitution improves the Collateral Pool based on factors that are consistent with Lender’s Underwriting Requirements and result in improvement in one or more of the following areas: the then current Aggregate Debt Service Coverage Ratio or the then current Aggregate Loan to Value Ratio.

(d) Closing . If, pursuant to this Section 3.05 , Lender determines that the conditions set forth herein for the Substitution of the proposed Substitute Mortgaged Property into the Collateral Pool in replacement of the proposed Release Mortgaged Property are satisfied, and Borrower timely elects to cause such Substitution to occur and all conditions contained in this Section 3.05 and Article 5 are satisfied, then the proposed Substitute Mortgaged Property shall be substituted into the Collateral Pool in replacement of the proposed Release Mortgaged Property, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and occurring —

(i) if the Substitution of the proposed Substitute Mortgaged Property is to occur simultaneously with the release of the proposed Release Mortgaged Property, within thirty (30) days after Lender’s receipt of Borrower’s election to proceed with the Substitution (or on such other date to which Borrower and Lender may agree); or

(ii) if the Substitution of the proposed Substitute Mortgaged Property is to occur subsequent to the Release of the Release Mortgaged Property, within ninety (90) days after the effective date of the release of such Release Mortgaged Property (provided such date does not exceed one hundred eighty (180) days after Lender’s receipt of Borrower’s Release Request, unless otherwise agreed to by Lender) (the “ Property Delivery Deadline ”); provided that on a case by case basis, Lender may consent in its sole discretion to extend the Property Delivery Deadline by one (1) additional ninety (90) day period.

 

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(e) Substitution Deposit .

(i) The Deposit . If the addition of the proposed Substitute Mortgaged Property is to occur subsequent to the Release of the Release Mortgaged Property pursuant to Section 3.05(d) , at the Closing Date of the Release of the Release Mortgaged Property, Borrower shall deposit with Lender the “ Substitution Deposit ” described in Section 3.05(e)(ii) in the form of cash or, in lieu of (and/or in addition to) depositing cash for the Substitution Deposit, Borrower may post a Letter of Credit in accordance with the terms of Section 5.10 of this Agreement, having a face amount equal to the Substitution Deposit (less the amount that has been deposited in cash). Funds deposited in cash shall be invested and reinvested by and in the name of Lender in Permitted Investments.

(ii) Substitution Deposit Amount . The “ Substitution Deposit ” for each proposed Substitution shall be an amount equal to the sum of:

(A) the Release Price relating to such proposed Release Mortgaged Property, plus

(B) any and all of the yield maintenance, fee maintenance or the prepayment premium, as applicable, through the end of the month in which the Property Delivery Deadline occurs as if the Fixed Advance were to be prepaid in such month, plus

(C) interest on such Advance through the end of the month in which the Property Delivery Deadline occurs. Borrower shall also be obligated to make any regularly scheduled payments of principal and interest due under the applicable Note during any period between the closing of the Release Mortgaged Property and the earlier of the closing of the Substitute Mortgaged Property and the date of prepayment of the Note.

(iii) Failure to Close Substitution . If the addition of the proposed Substitute Mortgaged Property does not occur by the Property Delivery Deadline in accordance with Section 3.05(d)(ii) , then such Borrower shall have irrevocably waived its right to substitute such Release Mortgaged Property with the proposed Substitute Mortgaged Property, and the release of the Release Mortgaged Property shall be deemed to be a Release pursuant to Section 3.04 and shall trigger a prepayment of the Note, and if applicable, together with all yield maintenance, fee maintenance or prepayment premium then due in connection with such payment. Subject to the terms of Section 3.04(d) , the Property Delivery Deadline shall be no later than the date ninety (90) days after the effective date Lender’s lien on such Release Mortgaged Property is released. Any Advance being prepaid shall be deemed to be prepaid as of the end of the month in which the Property Delivery Deadline falls. Lender shall follow standard Fannie Mae procedures for the prepayment of the Note, including delivery of the Substitution Deposit, together with all yield maintenance, fee maintenance, or prepayment premium, if any, then due, to Fannie Mae in accordance with such procedures.

 

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Borrower shall comply with the requirements set forth in Section 3.04(c) and Section 3.04(d) not previously satisfied with respect to the Release Mortgaged Property, including payment of the Release Price. Such Release Price, or the applicable portion thereof, shall be applied in the manner set forth in Section 3.04(d) and the Substitution Deposit delivered by Borrower pursuant to Section 3.05(e) of this Agreement shall be returned to Borrower. However, if Borrower fails to timely pay the Release Price, Lender may draw upon the Substitution Deposit delivered by Borrower in satisfaction of such obligation.

(iv) Substitution Deposit Disbursement . At closing of the Substitution, Lender shall disburse or return the Substitution Deposit, as applicable, directly to Borrower at such time as the conditions precedent for the Substitution have been satisfied, which must occur no later than the Property Delivery Deadline. Notwithstanding the foregoing, in the event that Borrower adds a Substitute Mortgaged Property to the Collateral Pool prior to the Property Delivery Deadline but the addition of such Substitute Mortgaged Property has not in and of itself satisfied the requirements to close the Substitution, the Substitution Deposit shall be reduced by the Allocable Facility Amount of such Substitute Mortgaged Property as determined by Lender, and such reduction in the Substitution Deposit shall be returned to Borrower, or in the case of a Letter of Credit, such Letter of Credit shall be reduced by such reduction in the Substitution Deposit. If Borrower has not completely satisfied the requirements to close the Substitution by the Property Delivery Deadline, the terms of Section 3.05(e)(iii) shall apply with respect to the remaining Substitution Deposit.

(f) Conditions Precedent to Substitutions . The obligation of Lender to make a requested Substitution is also subject to Lender’s determination that each of the conditions precedent for additions of Substitute Mortgaged Properties and Releases of Release Mortgaged Properties set forth in Section 5.01 and Section 5.06 of this Agreement have been satisfied.

(g) Restriction on Borrowings . If the addition of the Substitute Mortgaged Property to the Collateral Pool and the release of the Release Mortgaged Property from the Collateral Pool do not occur simultaneously (i.e., within thirty (30) days pursuant to Section 3.05(d) above) then, for so long as the Substitution Deposit is in place, no Future Advance nor Additional Loans shall be permitted.

ARTICLE 4

TERMINATION OF FACILITIES

Section 4.01. Right to Terminate Credit Facility .

Subject to the terms and conditions of this Article 4 , Borrower shall have the right to terminate this Agreement and the Credit Facility and receive a Release of all of the Collateral.

Section 4.02. Procedure for Terminating Credit Facility .

(a) Request . To terminate this Agreement and the Credit Facility, Borrower shall deliver a Credit Facility Termination Request to Lender.

 

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(b) Closing . If Lender determines that all conditions precedent contained in Section 5.07 are satisfied, this Agreement shall terminate, and Lender shall cause all of the Collateral to be released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, within thirty (30) Business Days after Lender’s receipt of the Credit Facility Termination Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and expense of Borrower, the Credit Facility Termination Documents.

ARTICLE 5

CONDITIONS PRECEDENT TO ALL REQUESTS

Section 5.01. Conditions Applicable to All Requests .

The obligation of Lender to close the transaction requested in a Request (other than a Credit Facility Termination Request made pursuant to Section 4.02 ) shall be subject to Lender’s determination that all of the following general conditions precedent (“ General Conditions ”) have been satisfied in addition to any other conditions precedent contained in this Agreement:

(a) Payment of Expenses . The payment by Borrower of Lender’s and Fannie Mae’s reasonable third party out-of-pocket fees and expenses payable in accordance with this Agreement, including, but not limited to, the legal fees and expenses described in Section 10.03 .

(b) No Material Adverse Effect . Except in connection with a Credit Facility Termination Request, there has been no Material Adverse Effect on the financial condition or business or prospects of Borrower or Guarantor or in the physical condition, operating performance or value of any of the Mortgaged Properties since the date of the most recent Compliance Certificate (or, with respect to the conditions precedent to the Initial Advance, from the condition, business or prospects reflected in the financial statements, reports and other information obtained by Lender during its review of Borrower and Guarantor and the Initial Mortgaged Properties).

(c) No Default . Except in connection with a Credit Facility Termination Request, (i) there shall exist no Event of Default or Potential Event of Default on the Closing Date for the Request, (ii) there shall have been no more than one (1) monetary Event of Default (which Event of Default shall have been cured within two (2) Business Days) involving the payment of principal or interest due under any Loan Documents or any impound or reserve required to be paid under the Loan Documents on or before the Closing Date for the Request, (iii) there shall never have been any non-monetary defaults past any notice and grace periods under the Loan Documents; and (iv) the closing of such Request shall not result in an Event of Default or Potential Event of Default.

(d) No Insolvency . Receipt by Lender on the Closing Date for the Request of evidence satisfactory to Lender that neither Borrower nor Guarantor is insolvent (within the meaning of any applicable federal or state laws relating to bankruptcy or fraudulent transfers) or will be rendered insolvent by the transactions contemplated by the Loan Documents, including the making of a Future Advance, or, after giving effect to such transactions, will be left with an

 

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unreasonably small capital with which to engage in its business or undertakings, or will have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature or will have intended to hinder, delay or defraud any existing or future creditor.

(e) No Untrue Statements . The Loan Documents shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary to make the information contained therein not misleading.

(f) Representations and Warranties . Except in connection with a Credit Facility Termination Request, all representations and warranties made by Borrower and Guarantor in the Loan Documents shall be true and correct in all material respects on the Closing Date for the Request with the same force and effect as if such representations and warranties had been made on and as of the Closing Date for the Request. On the Closing Date of any Request, the representations and warranties as referred to in this Section 5.01(f) shall be deemed remade by Borrower and Guarantor.

(g) No Condemnation or Casualty . Except in connection with a Credit Facility Termination Request, there shall not be pending or threatened any condemnation or other taking, whether direct or indirect, against any Mortgaged Property (other than a Release Mortgaged Property subject to a Release Request or a Substitution Request) and there shall not have occurred any casualty to any improvements located on any Mortgaged Property (other than a Release Mortgaged Property subject to a Release Request or a Substitution Request), which condemnation or casualty would have a Material Adverse Effect.

(h) Delivery of Closing Documents . The receipt by Lender of the following, each dated as of the Closing Date for the Request, in form and substance satisfactory to Lender in all respects:

(i) The Loan Documents required to be delivered in connection with the Request;

(ii) A Compliance Certificate;

(iii) An Organizational Certificate; and

(iv) Such other documents, instruments, approvals (and, if requested by Lender, certified duplicates of executed copies thereof) and opinions as Lender may reasonably request.

(i) Covenants . Except in connection with a Credit Facility Termination Request, Borrower is in full compliance with each of the covenants contained in the Loan Documents, without giving effect to any notice and cure rights of Borrower.

(j) Fannie Mae Commitment . Except in connection with the Future Advance thath as been rate locked by the Rate Lock Deadline, the receipt by Lender of a Fannie Mae Commitment, and the performance by Fannie Mae of its obligations to purchase the Advance in accordance with the terms of the Fannie Mae Commitment.

 

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Section 5.02. Conditions Precedent to Initial Advance .

The obligation of Lender to make the Initial Advance is subject to Lender’s determination that each of the following conditions precedent has been satisfied:

(a) The Coverage and LTV Tests are satisfied;

(b) Delivery to the Title Company, for filing and/or recording in all applicable jurisdictions, of all applicable Loan Documents required by Lender, including duly executed and delivered original copies of the Initial Security Instruments covering the Initial Mortgaged Properties and UCC-1 Financing Statements covering the portion of the Collateral comprised of personal property, and other appropriate instruments, in form and substance reasonably satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Liens created by the applicable Security Instruments and any other Loan Documents creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(c) Receipt by Lender of any Lender required subordination, non-disturbance and attornment agreements and/or estoppel certificates with respect to any commercial leases or ground leases (if any) affecting the Initial Mortgaged Property, provided that with respect to the Initial Mortgaged Properties, Lender shall not require subordination, non-disturbance and attornment agreements on the commercial leases in place as of the Initial Closing Date;

(d) Receipt by Lender of the portion of the Origination Fee due pursuant to Section 10.01 and the Initial Due Diligence Fees pursuant to Section 10.02(a) ; and

(e) Receipt by Lender of documentation acceptable to Lender evidencing the status of the environmental issues pertaining to the dry cleaners adjacent to the Mortgaged Property commonly known as Sharon Green.

Section 5.03. Conditions Precedent to the Future Advance .

The obligation of Lender to make the Future Advance is subject to Lender’s determination that each of the following conditions precedent has been satisfied:

(a) After giving effect to the requested Future Advance, the Coverage and LTV Tests shall be satisfied;

(b) Delivery of a Fixed Facility Note, duly executed by Borrower, in the amount and reflecting all of the terms of the Future Advance;

(c) Receipt by Lender of the balance of the Origination Fee, if any such fee is due, pursuant to Section 10.01 ;

(d) For any Title Insurance Policy not containing a future advance endorsement, the receipt by Lender of an endorsement to the Title Insurance Policy, amending the effective date of the Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than Permitted Liens;

 

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(e) No Governmental Approval not already obtained or made is required for the execution and delivery of the documents to be delivered in connection with the Future Advance;

(f) Borrower or Guarantor is not under any cease or desist order or other orders of a similar nature, temporary or permanent of any Governmental Authority which would have the effect of preventing or hindering performance of the terms and provisions of the Agreement or any other Loan Documents, nor are there any proceedings presently in progress or, to its knowledge, contemplated which, if successful, would lead to the issuance of any such order; and

(g) Receipt by Lender of a Confirmation of Guaranty for each Guaranty then in effect.

Section 5.04. [ Reserved. ]

Section 5.05. Conditions Precedent to Release of Mortgaged Property from the Collateral Pool .

The obligation of Lender to Release a Mortgaged Property from the Collateral Pool by executing and delivering the Release Documents on the Closing Date is subject to Lender’s determination that each of the following conditions precedent has been satisfied:

(a) The requirements of Section 3.04 are satisfied;

(b) Receipt by Lender of the Release Price;

(c) Receipt by Lender of the Release Fee;

(d) Receipt by Lender of all legal fees and expenses payable by Borrower in connection with the Release Request;

(e) Receipt by Lender on the Closing Date of one or more counterparts of each Release Document, dated as of the Closing Date, signed by each of the parties (other than Lender) who is a party to such Release Document;

(f) If required by Lender, amendments to the Notes and the Security Instruments, reflecting the release of the Release Mortgaged Property from the Collateral Pool and, as to any Security Instrument so amended, the receipt by Lender of an endorsement to the Title Insurance Policy insuring the Security Instrument, amending the effective date of the Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than Permitted Liens;

(g) If Lender determines the Release Mortgaged Property to be one phase of a project, and one or more other phases of the project are Mortgaged Properties which will remain in the Collateral Pool (“ Remaining Mortgaged Properties ”), Lender must reasonably

 

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determine that the Remaining Mortgaged Properties can be operated separately from the Release Mortgaged Property and any other phases of the project which are not Mortgaged Properties and whether any cross use agreements or easements are necessary. In making this determination, Lender shall evaluate access, utilities, marketability, community services, ownership and operation of the Release Mortgaged Properties and any other issues identified by Lender in connection with similar loans anticipated to be sold to Fannie Mae;

(h) Receipt by Lender on the Closing Date of a Confirmation of Obligations, dated as of the Closing Date, signed by Borrower and Guarantor, pursuant to which Borrower and Guarantor confirm their remaining obligations under the Loan Documents; and

(i) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance Policies, if deemed necessary by Lender, to reflect the release. Notwithstanding anything to the contrary herein, no Release of any Mortgaged Property shall be made unless Borrower has provided title insurance insuring Lender for the remaining Mortgaged Properties in the Collateral Pool (i) if tie-in endorsements are available for all or a portion of the remaining Mortgaged Properties in the Collateral Pool, in an aggregate amount equal to the combined Allocable Facility Amounts for all of the remaining Mortgaged Properties in the Collateral Pool covered by the tie-in endorsements, not to exceed the Fixed Facility Commitment in the maximum amount then available hereunder, or (ii) if tie-in endorsements are not available for any of the remaining Mortgaged Properties in the Collateral Pool, then with respect to such Mortgaged Properties not subject to the tie-in endorsement, an amount equal to one hundred fifteen percent (115%) of the Valuation of such remaining Mortgaged Properties not subject to the tie-in endorsement (or such lesser amount that is the maximum allowed by law or regulation).

Section 5.06. Conditions Precedent to Substitution of a Substitute Mortgaged Property into the Collateral Pool .

The Substitution of a Substitute Mortgaged Property into the Collateral Pool is subject to Lender’s determination that each of the following conditions precedent has been satisfied:

(a) The provisions of Section 3.05(c) (including the Underwriting Requirements) are satisfied;

(b) Receipt by Lender of the Substitution Deposit, if applicable;

(c) Receipt by Lender of the Substitution Fee;

(d) Delivery to the Title Company, with fully executed instructions directing the Title Company to file and/or record in all applicable jurisdictions, all applicable Substitution Loan Documents required by Lender, including duly executed and delivered original copies of any Security Instruments and UCC-1 Financing Statements covering the portion of the Substitute Mortgaged Property comprised of personal property, and other appropriate documents, in form and substance satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Lien created by the applicable additional Security Instrument, and any other Substitution Loan Document creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

 

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(e) Receipt by Lender of the Additional Collateral Due Diligence Fee pursuant to Section 10.02(b) .

(f) Receipt by Lender of all legal fees and expenses payable by Borrower in connection with the Substitution Request pursuant to Section 10.03 ;

(g) Receipt by Lender of any required subordination, non-disturbance and attornment agreements and/or estoppel certificates with respect to any commercial leases, laundry leases or ground leases (if any) affecting the Substitute Mortgaged Property;

(h) If reasonably required by Lender, amendments to the Notes and the Security Instruments, reflecting the Substitution of any Additional Borrower and/or the Substitute Mortgaged Property to the Collateral Pool and, as to any Security Instrument so amended, the receipt by Lender of an endorsement to the Title Insurance Policy insuring the Security Instrument, amending the effective date of the Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than Permitted Liens;

(i) If the Title Insurance Policy for the Substitute Mortgaged Property contains a tie-in endorsement, receipt by Lender of an endorsement to every other Title Insurance Policy containing a tie-in endorsement, adding a reference to the Substitute Mortgaged Property.

Section 5.07. Conditions Precedent to Termination of Credit Facility .

The right of Borrower to terminate this Agreement and the Credit Facility and to receive a release of all of the Collateral from the Collateral Pool and Lender’s obligation to execute and deliver the Credit Facility Termination Documents on the Closing Date are subject to Lender’s determination Borrower has paid in full all of the Notes Outstanding on the Closing Date, including any associated prepayment premiums or other amounts due under the Notes and all other amounts owing by Borrower to Lender under this Agreement.

Section 5.08. Opinion Relating to Initial Advance or Substitution Request .

With respect to the Initial Closing or closing of a Substitution Request, it shall be a condition precedent that Lender receives favorable opinions of counsel (including local counsel, as applicable) to Borrower and Guarantor, as to the due organization and qualification of Borrower and Guarantor, the due authorization, execution, delivery and enforceability of each Loan Document executed in connection with the Request and such other matters as Lender may reasonably require, each dated as of the Closing Date for the Request, in form and substance reasonably satisfactory to Lender in all respects.

 

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Section 5.09. Delivery of Property-Related Documents .

With respect to each of the Initial Mortgaged Properties or a Substitute Mortgaged Property, it shall be a condition precedent that Lender receive from Borrower each of the documents and reports required by Lender pursuant to the Underwriting Requirements in connection with the pledge of such Mortgaged Property and each of the following, each dated as of the Closing Date for the Initial Mortgaged Property or a Substitute Mortgaged Property, as the case may be, in form and substance satisfactory to Lender in all respects:

(a) A commitment for the Title Insurance Policy applicable to the Mortgaged Property and a pro forma Title Insurance Policy based on the title commitment in the amount of title insurance afforded by the Title Insurance Policy for each Mortgaged Property in the Collateral Pool equal to (i) if tie-in endorsements are available for all or a portion of the Mortgaged Properties, in an aggregate amount equal to the combined Allocable Facility Amounts for all of the Mortgaged Properties covered by the tie-in endorsements, not to exceed the Fixed Facility Commitment in the maximum amount then available hereunder, or (ii) if tie-in endorsements are not available for any of the Mortgaged Properties, then with respect to such Mortgaged Properties not subject to the tie-in endorsement an amount equal to one hundred fifteen percent (115%) of the Valuation of such Mortgaged Properties not subject to the tie-in endorsement (or such lesser amount that is the maximum allowed by law or regulation).

(b) The Insurance Policy (or a certified copy of the Insurance Policy) applicable to the Mortgaged Property;

(c) Unless waived by Lender, the Survey applicable to the Mortgaged Property and approved by Lender (which shall be last revised no less than forty-five (45) days prior to the Closing Date); provided that Lender acknowledges that it has waived Surveys with respect to each of the Initial Mortgaged Properties;

(d) Evidence satisfactory to Lender of compliance of the Mortgaged Property with Applicable Laws;

(e) An Appraisal of the Mortgaged Property;

(f) A Replacement Reserve Agreement, providing for the establishment of a replacement reserve account, to be pledged to Lender, in which the owner shall (unless waived by Lender) periodically deposit amounts for replacements for improvements at the Mortgaged Property and as additional security for Borrower’s obligations under the Loan Documents;

(g) A Completion/Repair and Security Agreement, if required by Lender, together with required escrows, on the standard form required by Lender;

(h) An Assignment of Management Agreement, on the standard form required by Lender;

(i) An Assignment of Leases and Rents, if Lender determines one to be necessary or desirable, provided that the provisions of any such assignment shall be substantively identical to those in the Security Instrument covering the Collateral, with such modifications as may be necessitated by applicable state or local law;

(j) A Certificate of Borrower Parties; and

 

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(k) Any other document that Lender may reasonably determine is required in connection with a Mortgaged Property.

Section 5.10. Conditions Precedent to Letters of Credit .

The right or requirement of Borrower to provide a Letter of Credit in connection with this Agreement is subject to Lender’s determination that each of the following conditions precedent has been satisfied:

(a) Letter of Credit Requirements . Any Letter of Credit shall be issued by a financial institution satisfactory to Fannie Mae (the “ Issuer ”). If Borrower provides Lender with a Letter of Credit pursuant to this Agreement, the Letter of Credit shall be in form and substance satisfactory to Lender and Lender shall be entitled, upon occurrence of circumstances in (b), to draw under such Letter of Credit solely upon presentation of a sight draft to the Issuer. Any Letter of Credit shall be for a term of at least three hundred sixty-four (364) days (provided that in connection with a Substitution, the term of any Letter of Credit shall be until the date five (5) days after the Property Delivery Deadline).

(b) Draws Under Letter of Credit . Lender shall have the right in its sole discretion to draw monies under the Letter of Credit:

(i) upon the occurrence of (A) an Event of Default, or (B) a Potential Event of Default of which Borrower has knowledge has occurred and continued for two (2) Business Days;

(ii) if thirty (30) days prior to the expiration of the Letter of Credit, either the Letter of Credit has not been extended for a term of at least three hundred sixty four (364) days (provided that in connection with a Substitution, the term of any Letter of Credit shall be at least until the date five (5) days after the Property Delivery Deadline) or Borrower has not delivered to Lender either (A) an acceptable replacement Letter of Credit or (B) substitute cash collateral in the amount required by Lender; or

(iii) upon the downgrading of the long-term obligations of the Issuer below a level satisfactory to Lender; provided that Borrower shall have ten (10) Business Days after notice of such downgrading to deliver to Lender either (A) an acceptable replacement Letter of Credit or (B) substitute cash collateral in the amount required by Lender.

(c) Deposit to Cash Collateral Account . If Lender draws under the Letter of Credit pursuant to Section 5.10(b)(ii) or Section 5.10(b)(iii) above, Lender shall deposit such draw monies into a Cash Collateral Account established pursuant to a Cash Collateral Agreement entered into the first time Lender draws any such monies. Lender shall hold the Letter of Credit drawn monies in the Cash Collateral Account until the earliest of the following events occurs:

(i) Borrower presents an acceptable replacement Letter of Credit and Lender agrees, in its sole discretion, to accept such Letter of Credit (provided that any agreement by Lender to accept a replacement Letter of Credit will be conditioned upon Borrower’s payment of all administrative and legal costs incurred by Lender and Fannie Mae in connection with the replacement of the Letter of Credit.)

 

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(ii) the applicable provisions of this Agreement pursuant to which the Letter of Credit was provided are satisfied;

(iii) Borrower pays all amounts due and payable under the Loan Documents and Lender releases the liens of all Security Instruments;

(iv) Lender, in its sole discretion, consents to Borrower’s request to apply the funds to the principal balance of a Note and any prepayment premium due in connection with such application; or

(v) an Event of Default occurs and Lender elects to apply the proceeds as described below in Section 5.10(d) ;

During any period that Lender holds the cash proceeds resulting from a draw on any Letter of Credit, Lender will not pay interest to, or on behalf of, Borrower in connection with such funds.

(d) Default Draws . If Lender draws under the Letter of Credit pursuant to Section 5.10(b)(i) above, Lender may in its sole discretion use monies drawn under the Letter of Credit for any of the following purposes:

(i) to pay any amounts required to be paid by Borrower under the Loan Documents (including, without limitation, any amounts required to be paid to Lender under this Agreement);

(ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the owner of the Mortgaged Property) pre-pay any Note in whole or in part, including any prepayment premium or yield maintenance;

(iii) to make improvements or repairs to any Mortgaged Property; or

(iv) deposit monies into the Cash Collateral Account.

(e) Legal Opinion . Prior to or simultaneous with the delivery of any new Letter of Credit (but not the extension of any existing Letter of Credit), such Borrower shall cause the Issuer’s counsel (or Issuer’s in-house counsel) to deliver a legal opinion satisfactory in form and substance reasonably satisfactory to Lender.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

Section 6.01. Representations and Warranties of Borrower Parties .

The representations and warranties of Borrower Parties are contained in the Certificate of Borrower Parties, the form of which is attached to this Agreement as Exhibit F .

 

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Section 6.02. Representations and Warranties of Lender .

Lender hereby represents and warrants to Borrower and Guarantor as follows:

(a) Due Organization . Lender is a corporation duly organized, validly existing and in good standing under the laws of Delaware.

(b) Power and Authority . Lender has the requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

(c) Due Authorization . The execution and delivery by Lender of this Agreement, and the consummation by it of the transactions contemplated hereby, and the performance by it of its obligations hereunder, have been duly and validly authorized by all necessary action and proceedings by it or on its behalf.

ARTICLE 7

AFFIRMATIVE COVENANTS OF BORROWER

Borrower Parties agree and covenant with Lender that, at all times during the Term of this Agreement:

Section 7.01. Compliance with Agreements .

Each of Borrower and Guarantor shall comply with all the terms and conditions of each Loan Document to which it is a party or by which it is bound; provided, however, that Borrower’s or Guarantor’s failure to comply with such terms and conditions shall not be an Event of Default until the expiration of the applicable notice and cure periods, if any, specified in the applicable Loan Document.

Section 7.02. Maintenance of Existence .

Each Borrower Party shall maintain its existence and continue to be duly organized under the laws of the state of its organization. Borrower and Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Agreement or any other Loan Document.

Section 7.03. Maintenance of REIT Status .

During the Term of this Agreement, Guarantor shall qualify, and be taxed as, a real estate investment trust under Subchapter M of the Internal Revenue Code, and will not be engaged in any activities which would jeopardize such qualification and tax treatment.

 

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Section 7.04. Financial Statements; Accountants’ Reports; Other Information .

Each Borrower Party shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect (i) such Borrower Party’s financial transactions and assets and (ii) the results of the operation of each Mortgaged Property and copies of all written contracts, Leases and other instruments which affect each Mortgaged Property (including all bills, invoices and contracts for electrical service, gas service, water and sewer service, waste management service, telephone service and management services). In addition, Borrower or Guarantor, as applicable, shall furnish, or cause to be furnished, to Lender:

(a) Annual Financial Statements . As soon as available, and in any event within ninety (90) days after the close of its fiscal year during the Term of this Agreement, the balance sheet of Borrower, Guarantor and its Subsidiaries on a consolidated basis as of the end of such fiscal year, the statement of income, Borrower’s and Guarantor’s equity and retained earnings of Borrower, Guarantor and its Subsidiaries on a consolidated basis for such fiscal year and the statement of cash flows of Borrower, Guarantor and its Subsidiaries on a consolidated basis for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and with respect to the audited statements (as required below) accompanied by a certificate of independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business. All financial statements required by this subsection (a)  with respect to Guarantor shall be audited and all financial statements required by this subsection (a)  with respect to Borrower may be unaudited.

(b) Quarterly Financial Statements . As soon as available, and in any event within forty-five (45) days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet of Borrower, Guarantor and its Subsidiaries on a consolidated basis as of the end of such fiscal quarter, the unaudited statement of income and retained earnings of Borrower, Guarantor and its Subsidiaries on a consolidated basis and the unaudited statement of cash flows of Borrower, Guarantor and its Subsidiaries on a consolidated basis for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of a Proper Officer to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied and subject to customary exceptions, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, subject to year end adjustments in accordance with GAAP.

(c) Quarterly Property Statements . As soon as available, and in any event within forty-five (45) days after each Calendar Quarter, a statement of income and expenses presented monthly of each Mortgaged Property accompanied by a certificate of a Proper Officer to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Mortgaged Property in all material respects for the period indicated.

 

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(d) Annual Property Statements . On an annual basis within ninety (90) days of the end of its fiscal year, an annual statement of income and expenses of each Mortgaged Property accompanied by a certificate of a Proper Officer to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Mortgaged Property in all material respects for the period indicated.

(e) Updated Rent Rolls . As soon as available, and in any event within forty five (45) days after each Calendar Quarter, a current Rent Roll for each Mortgaged Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable, the rent paid and any other information requested by Lender and accompanied by a certificate of a Proper Officer to the effect that each such Rent Roll fairly, accurately and completely presents the information required therein in all material respects.

(f) Security Deposit Information . Upon Lender’s request, an accounting of all security deposits held in connection with any Lease of any part of any Mortgaged Property, including, to the extent applicable, the name and identification number of the accounts (if any) in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name and telephone number of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts.

(g) Accountants’ Reports; Other Reports . Promptly upon receipt thereof: (i) copies of any reports or management letters submitted to Borrower or Guarantor by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to subsection (a) above); provided, however, that Borrower or Guarantor shall only be required to deliver such reports and management letters to the extent that they relate to Borrower or Guarantor or any Mortgaged Property; and (ii) all schedules, financial statements or other similar reports delivered by Borrower or Guarantor pursuant to the Loan Documents or requested by Lender with respect to Guarantor’s business affairs or condition (financial or otherwise) or any of the Mortgaged Properties.

(h) Annual Budgets . Prior to the start of its fiscal year, an annual budget for each Mortgaged Property for such fiscal year, setting forth an estimate of all of the costs and expenses, including capital expenses, of maintaining and operating each Mortgaged Property.

(i) Statement of Ownership . At any time upon Lender’s request, a statement that identifies: (i) all owners of any interest in Borrower and the interest held by each and (ii) if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members.

 

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(j) Other Information . Within forty-five (45) days after Lender’s request, but not more frequently than once per Calendar Year, such other information reasonably requested by Lender.

(k) Federal Tax Returns . Within forty-five (45) days after Lender’s request, the Federal Tax Return of Borrower and Guarantor.

Section 7.05. Confidentiality of Certain Information .

Without express written consent of Lender and Fannie Mae, no Borrower Party shall disclose any terms, conditions, underwriting requirements or underwriting procedures of the Credit Facility or any of the Loan Documents; provided, however, that such confidential information may be disclosed (a) as required by law or pursuant to generally accepted accounting procedures, (b) to officers, directors, employees, agents, partners, attorneys, accountants, engineers and other consultants of Borrower who need to know such information, provided such Persons are instructed to treat such information confidentially, (c) to any regulatory authority having jurisdiction over Borrower, (d) in connection with any filings with the Securities and Exchange Commission or other Governmental Authorities, or (e) to any other Person to which such delivery or disclosure may be necessary or appropriate (i) in compliance with any law, rule, regulation or order applicable to Borrower, (ii) in response to any subpoena or other legal process or information investigative demand or (iii) in connection with any litigation to which Borrower is a party.

Section 7.06. Access to Records; Discussions With Officers and Accountants .

To the extent permitted by law and in addition to the applicable requirements of the Security Instruments, Borrower shall permit Lender to:

(a) inspect, make copies and abstracts of, and have reviewed or audited, such of Borrower’s or Guarantor’s books and records as may relate to the Obligations or any Mortgaged Property;

(b) discuss Borrower’s affairs, finances and accounts with any Proper Officer of Borrower or Guarantor or any other person performing the functions of the Proper Officers;

(c) discuss Borrower’s affairs, finances and accounts with its independent public accountants, provided that a Proper Officer has been given the opportunity by Lender to be a party to such discussions;

(d) discuss the Mortgaged Properties’ conditions, operations or maintenance with the Property Managers and/or asset manager of such Mortgaged Properties and the officers and employees of Borrower and Guarantor, provided that a Proper Officer or his/her designee has been given the opportunity by Lender to be a party to such discussions; and

(e) receive any other information that Lender deems reasonably necessary or relevant in connection with any Advance, any Loan Document or the Obligations from the officers of Borrower or Guarantor or officers and employees of Property Manager, provided that a Proper Officer or his/her designee has been given the opportunity by Lender to be a party to such discussions.

 

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Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default and in the absence of an emergency, all inspections and communications shall be conducted at reasonable times during normal business hours upon reasonable advance notice to Borrower or Guarantor, as appropriate.

Section 7.07. Certificate of Compliance .

Guarantor shall deliver to Lender concurrently with the delivery of the financial statements and/or reports required by Section 7.04(a) and Section 7.04(b) a certificate signed by a Proper Officer (i) setting forth in reasonable detail the calculations required to establish whether Borrower and Guarantor were in compliance with the requirements of Article 7 of this Agreement on the date of such financial statements, and (ii) stating that, to the best knowledge of such individual following reasonable inquiry, no Event of Default or Potential Event of Default has occurred, or if an Event of Default or Potential Event of Default has occurred, specifying the nature thereof in reasonable detail and the action Borrower or Guarantor is taking or proposes to take. Any certificate required by this Section 7.07 shall run directly to and be for the benefit of Lender and Fannie Mae.

Section 7.08. Maintain Licenses .

Borrower shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

Section 7.09. Inform Lender of Material Events .

Borrower shall promptly inform Lender in writing of any of the following (and shall deliver to Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Borrower has actual knowledge:

(a) Defaults . The occurrence of any Event of Default or any Potential Event of Default under this Agreement or any other Loan Document;

(b) Regulatory Proceedings . The commencement of any rulemaking or disciplinary proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be expected to have, a Material Adverse Effect; the receipt of written notice from any Governmental Authority having jurisdiction over Borrower or Guarantor that (i) Borrower or Guarantor is being placed under regulatory supervision, (ii) any license, Permit, charter, membership or registration material to the conduct of Borrower’s or Guarantor’s business or the Mortgaged Properties is to be suspended or revoked or (iii) Borrower or Guarantor is to cease and desist any practice, procedure or policy employed by Borrower or Guarantor in the conduct of its business;

 

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(c) Bankruptcy Proceedings . The commencement of any proceedings by or against Borrower or Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(d) Environmental Claim . The receipt from any Governmental Authority or other Person of any written notice of violation, claim, demand, abatement, order or other order or direction (conditional or otherwise) for any damage the result of which is to have a Material Adverse Effect, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other Material Adverse Effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (i) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity on any Mortgaged Property or (ii) the violation, or alleged violation, of any Hazardous Materials Laws in connection with any Mortgaged Property or any of the other assets of Borrower;

(e) Material Adverse Effects . The occurrence of any act, omission, change or event (including the commencement or threat of any proceedings by or against Borrower or Guarantor in any Federal, state or local court, or before any Governmental Authority, or before any arbitrator), which has, or would have, a Material Adverse Effect, subsequent to the date of the most recent financial statements of Borrower or Guarantor delivered to Lender pursuant to Section 7.04 ;

(f) Accounting Changes . Any material change in Borrower’s or Guarantor’s accounting policies or financial reporting practices; and

(g) Legal and Regulatory Status . The occurrence of any act, omission, change or event, including any Governmental Approval, the result of which is to have a Material Adverse Effect on the legal or regulatory status of Borrower or Guarantor or any Mortgaged Property.

Section 7.10. Compliance with Applicable Laws .

Borrower shall comply in all material respects with all Applicable Laws now or hereafter affecting any Mortgaged Property or any part of any Mortgaged Property or affecting any alterations, repairs or improvements to any Mortgaged Property. Borrower shall procure and continuously maintain in full force and effect, and shall abide by and satisfy all material terms and conditions of all Permits, and shall comply with all written notices from Governmental Authorities.

Section 7.11. Alterations to the Mortgaged Properties .

Except as otherwise provided in the Loan Documents, Borrower shall have the right to undertake any alteration, improvement, demolition, removal or construction (collectively, “ Alterations ”) to the Mortgaged Property which it owns without the prior consent of Lender; provided , however , that in any case, no such Alteration shall be made to any Mortgaged Property without the prior written consent of Lender if (i) such Alteration could reasonably be expected to

 

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materially and adversely affect the value of such Mortgaged Property or its operation as a multifamily housing facility in substantially the same manner in which it is being operated on the date such property became Collateral, (ii) the construction of such Alteration could reasonably be expected to result in interference to the occupancy of tenants of such Mortgaged Property such that tenants in occupancy with respect to five percent (5%) or more of the Leases would be permitted to terminate their Leases or to abate the payment of all or any portion of their rent, or (iii) such Alteration is anticipated to be completed in more than twelve (12) months from the date of commencement or in the last year of the Term of this Agreement. Notwithstanding the foregoing, Borrower must obtain Lender’s prior written consent to construct Alterations (other than scheduled repairs and maintenance to existing improvements) with respect to any Mortgaged Property costing in excess of the lesser of (A) five percent (5%) of the Allocable Facility Amount of such Mortgaged Property, or (B) $2,000 per unit for each unit at such Mortgaged Property, or (C) $1,000,000, and Borrower must give prior written notice to Lender of its intent to construct Alterations (other than scheduled repairs and maintenance to existing improvements) with respect to such Mortgaged Property costing in excess of $100,000; provided, however, that the preceding requirements shall not be applicable to Alterations made, conducted or undertaken by Borrower as part of Borrower’s routine maintenance and repair of the Mortgaged Properties as required by or contemplated under the Loan Documents.

Section 7.12. Loan Document Taxes .

If any tax, assessment or Imposition (other than a franchise tax or excise tax imposed on or measured by, the net income or capital (including branch profits tax) of Lender (or any transferee or assignee thereof, including a participation holder)) (“ Loan Document Taxes ”) is levied, assessed or charged by the United States, or any State in the United States, or any political subdivision or taxing authority thereof or therein upon any of the Loan Documents or the obligations secured thereby, the interest of Lender in the Mortgaged Properties, or Lender by reason of or as holder of the Loan Documents, Borrower shall pay all such Loan Document Taxes to, for, or on account of Lender (or provide funds to Lender for such payment, as the case may be) as they become due and payable and shall promptly furnish proof of such payment to Lender, as applicable. In the event of passage of any law or regulation permitting, authorizing or requiring such Loan Document Taxes to be levied, assessed or charged, which law or regulation in the opinion of counsel to Lender may prohibit Borrower from paying the Loan Document Taxes to or for Lender, Borrower shall enter into such further instruments as may be permitted by law to obligate Borrower to pay such Loan Document Taxes, provided that if for any reason payment by Borrower cannot be required or if the payment thereof would constitute usury or render any of the Loan Documents or the Obligations wholly or partially usurious under any of the terms or provisions of the Loan Documents, or otherwise, Lender may, at its option, upon thirty (30) days’ written notice to Borrower, (a) declare the whole of the Obligations, together with interest thereon and any prepayment premiums payable in connection therewith, to be immediately due and payable, or (b) declare that portion of the Obligations which are responsible for triggering the Loan Document Taxes immediately due and payable, in which event the remaining lawful portion of the Obligations shall continue outstanding with interest payable in accordance with the terms of the applicable Notes.

 

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Section 7.13. Further Assurances .

Borrower Parties, at the request of Lender, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Agreement or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

Section 7.14. Transfer of Ownership Interests in Borrower and Guarantor .

(a) Prohibition on Transfers . Subject to paragraph (b) of this Section 7.14 , Borrower and Guarantor shall not cause or permit a Transfer or a Change of Control.

(b) Permitted Transfers . Notwithstanding the provisions of paragraph (a) of this Section 7.14 , the following Transfers of Ownership Interests in Borrower, Guarantor, or Managing Member are permitted without the consent of Lender, provided that Borrower shall provide fifteen (15) Business Days prior written notice thereof to Lender (provided, however, that no such notice to Lender need be given with respect to those Permitted Transfers that occur due to the ordinary course of trading of a Publicly-Held Corporation or those Permitted Transfers of non-managing member interests in BRE Property Investors LLC) (“ Permitted Transfers ”):

(i) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is the owner of a direct or indirect Ownership Interest in Borrower or Guarantor.

(ii) A Transfer to trusts or other entities established for the benefit of the transferor and/or immediate family members for estate planning purposes.

(iii) A Transfer of any direct or indirect Ownership Interest in Borrower, Guarantor, or Managing Member; provided, however, that no Change of Control occurs as the result of such Transfer.

(iv) The issuance by Borrower or Guarantor of additional membership interests, partnership interests or stock (including by creation of a new class or series of interests or stock and all varieties of convertible debt, equity and other similar securities), as the case may be, and the subsequent direct or indirect Transfer of such interests or stock; provided, however, that no Change of Control occurs as the result of such Transfer.

(v) Any amendment, modification or any other change in the governing instrument or instruments of Borrower or Guarantor in connection with the creation of a new class or series of interests of stock pursuant to (iv)  above; provided, however, that no Change of Control occurs as the result of such Transfer.

 

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(vi) A merger with or acquisition of another entity by Borrower or Guarantor provided that (A) such Borrower or Guarantor, as the case may be, is the surviving entity after such merger or acquisition, (B) no Change of Control occurs, and (C) such merger or acquisition does not result in an Event of Default, as such terms are defined in this Agreement.

(vii) A Transfer of any minority non-controlling Ownership Interest in Borrower or Guarantor provided no Change of Control occurs as a result of such Transfer.

(viii) A conversion of Borrower from one type of legal entity into another type of legal entity for tax or other structuring purposes, provided:

(A) no Change of Control occurs,

(B) Borrower provides Lender with prior written notice of such conversion,

(C) Borrower provides Lender any certificates evidencing such conversion filed with the appropriate Secretary of State,

(D) Borrower provides Lender new certificates of good standing for such entity,

(E) Lender reserves the right to file UCC-3 amendments where necessary reflecting the conversion,

(F) Borrower executes an amendment to this Agreement documenting the conversion, and

(G) The Title Company shall confirm (via electronic mail or letter) that nothing is needed in the land records (of each of the appropriate jurisdictions) at such time to evidence such conversion, and no endorsements to the title policies are necessary to maintain Lender’s coverage.

Notwithstanding anything in this Section 7.14 to the contrary, a “ Permitted Transfer ” shall not include any transfer that Lender, in its reasonable discretion, determines is unacceptable because it would overexpose the Lender or Fannie Mae to the credit risk posed by a third party transferee or its Affiliates, if any.

Notwithstanding anything in this Section 7.14 to the contrary, the occurrence of any of the following transfers shall not constitute an Event of Default under the Loan Documents: Transfers of Ownership Interests in Borrower to any BRE Affiliate, provided that Lender receives at least fifteen (15) Business Days prior written notice of such Transfer along with copies of the instruments evidencing such transfer and is paid a $10,000 review fee. No transfer fee shall be due in connection with any transfer satisfying the requirements of the preceding sentence. As used in this Section 7.14 , the term “ BRE Affiliate ” means any entity (x) in which Guarantor owns no less than fifty-one percent (51%) of the Ownership Interests of such entity, AND (y) which is controlled by Guarantor. An entity will be deemed to “ control ” another entity

 

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if it possesses the ability, directly or indirectly, independently (A) to elect the majority of directors of such other entity (if such other entity is a corporation), provided the business and affairs of the corporation may be directed and controlled by a majority of its directors; (B) to exercise managerial authority over such other entity; (C) to select the managing partner or managing member of a partnership or limited liability company (if such other entity is a partnership of limited liability company), provided the business and affairs of the partnership or limited liability company may be directed and controlled by its managing partners or managing member, as applicable; or (D) otherwise to remove and then select a majority of those individuals exercising managerial authority over such other entity.

(c) Consent to Prohibited Transfers . Lender may, in its sole and absolute discretion, consent to a Transfer that would otherwise violate this Section 7.14 if, prior to the Transfer, Borrower or Guarantor, as the case may be, has satisfied each of the following requirements:

(i) the submission to Lender of all information required by Lender to make the determination required by this Section 7.14 ;

(ii) the absence of any Event of Default or Potential Event of Default;

(iii) the transferee meets all of the eligibility (including the requirement that the proposed transferee is not a Prohibited Person), credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers or guarantors, as the case may be, in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(iv) in the case of a Transfer of direct or indirect Ownership Interests in Borrower or Guarantor, as the case may be, if transferor has obligations under any Loan Documents, the execution by the transferee or one (1) or more individuals or entities acceptable to Lender of an assumption agreement that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(v) Lender’s receipt of all of the following:

(A) a transfer fee equal to:

(1) in the event that the Outstanding Advances immediately prior to the Transfer are equal to or less than $200,000,000, the product of 75 basis points (0.75%) multiplied by such amount of Outstanding Advances;

(2) in the event that the Outstanding Advances immediately prior to the Transfer are greater than $200,000,000 but less than $400,000,000, the product of 50 basis points (0.50%) multiplied by such amount of Outstanding Advances; and

 

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(3) in the event that the Outstanding Advances immediately prior to the Transfer are equal to or greater than $400,000,000, the product of 25 basis points (0.25%) multiplied by such amount of Outstanding Advances;

(B) a $3,000 review fee; plus

(C) In addition, Borrower shall be required to reimburse Lender for all of Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request.

(vi) the Transfer will not result in a significant modification under section 1001 of the Internal Revenue Code of any Advance that has been securitized in a mortgage-backed security.

For the purposes of Section 7.14 and Section 7.15 , “ Prohibited Person ” means (i) a Person that is the subject of, whether voluntary or involuntary, any case, proceeding or other action against such Person under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization, liquidation, rehabilitation, receivership, or relief of debtors, or (ii) any Person with whom Lender is prohibited from doing business pursuant to any law, rule, regulation, judicial proceeding or administrative directive, or (iii) any Person identified on the federal “Excluded Parties List System,” the federal “Office of Foreign Assets and Control Specially Designated Nationals and Blocked Persons” list, the U.S. Department of Housing and Urban Development’s “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List,” or on Lender’s “Multifamily Applicant Experience Check,” each of which may be amended from time to time and any successor or replacement thereof, or (iv) a Person that is determined by Fannie Mae to have an unacceptable level of outstanding debt to Fannie Mae, or (v) a Person that has caused any unsatisfactory experience of a material nature with Fannie Mae or Lender, such as a default, fraud, intentional misrepresentation, material litigation, material arbitration or other similar act, or (vi) a Person that is, or whose senior management is, the subject of any pending criminal indictment or criminal investigation relating to an alleged felony or has ever been convicted of a felony or held liable for fraud in a civil or criminal action.

Section 7.15. Transfer of Ownership of Mortgaged Property .

(a) Prohibition on Transfers . Subject to subsection (b)  of this Section 7.15 , neither Borrower nor Guarantor shall cause or permit a Transfer of all or any part of a Mortgaged Property or interest in any Mortgaged Property without the prior written consent of Lender.

(b) Permitted Transfers . Notwithstanding provision (a)  of this Section 7.15 or any other provisions of this Agreement or any other Loan Document to the contrary, the following Transfers of a Mortgaged Property by Borrower or Guarantor are permitted without the consent of Lender:

(i) The grant of a leasehold interest in individual dwelling units or commercial spaces in accordance with the Security Instrument.

 

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(ii) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents or Permitted Liens.

(iii) The creation of a mechanic’s or materialmen’s lien or judgment lien against a Mortgaged Property which is released of record or otherwise remedied to Lender’s satisfaction within forty-five (45) days of the date of creation.

(iv) The grant of an easement if, prior to the granting of the easement, Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender consents to such easement based upon Lender’s determination that the easement will not materially adversely affect the operation of the Mortgaged Property or Lender’s interest in the Mortgaged Property and Borrower pays to Lender, within ten (10) Business Days after demand therefore, all reasonable third party out-of-pocket costs and expenses incurred by Lender in connection with reviewing Borrower’s request. Lender shall not unreasonably withhold its consent to or withhold its agreement to subordinate the lien of a Security Instrument to (A) the grant of a utility easement serving a Mortgaged Property to a publicly operated utility, or (B) the grant of an easement related to expansion or widening of roadways, driveways and parking areas, provided that any such easement is in form and substance reasonably acceptable to Lender and does not materially and adversely affect the access, use or marketability of a Mortgaged Property.

(v) Notwithstanding any provision to the contrary in this Agreement, but subject to the terms of the Security Instrument, the entry into, and modification, extension or termination of, the following leases and/or licenses with respect to the Mortgaged Property in accordance with the Security Instrument: (A) commercial leases with square footage of less than 3,000 square feet, (B) cell tower licenses, (C) laundry leases, (D) vending machine leases, and (E) solar facility leases.

(vi) The securing of purchase money financing and equipment leasing in the aggregate amount of less than $75,000 in connection with any Mortgaged Property provided that said financing or leasing is solely for office equipment used in connection with the operation of said Mortgaged Property.

(c) Consent to Prohibited Transfers . Lender may, in its sole and absolute discretion, consent to a Transfer that would otherwise violate this Section 7.15 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(i) the Transfer is in connection with a Transfer of all of the Mortgaged Properties in the Collateral Pool and is in connection with the full assumption of the Credit Facility (no individual Mortgaged Property may be Transferred subject to the lien of the Security Instrument);

 

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(ii) the submission to Lender of all information required by Lender to make the determination required by this Section 7.15 ;

(iii) the absence of any Event of Default or Potential Event of Default;

(iv) the transferee meets all of the eligibility (including the requirement that the proposed transferee is not a Prohibited Person), credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of Borrower or Guarantor, as the case may be, in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties;

(v) if transferor has obligations under any Loan Documents, the execution by the transferee or one (1) or more individuals or entities acceptable to Lender of an assumption agreement that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Agreement or any other Loan Document which previously may have been waived by Lender;

(vi) the Mortgaged Properties, at the time of the proposed Transfer, meets all standards as to physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties; and

(vii) Lender’s receipt of all of the following:

(A) a transfer fee equal to:

(1) in the event that the Outstanding Advances immediately prior to the Transfer are equal to or less than $200,000,000, the product of 75 basis points (0.75%) multiplied by such amount of Outstanding Advances;

(2) in the event that the Outstanding Advances immediately prior to the Transfer are greater than $200,000,000 but less than $400,000,000, the product of 50 basis points (0.50%) multiplied by such amount of Outstanding Advances; and

(3) in the event that the Outstanding Advances immediately prior to the Transfer are equal to or greater than $400,000,000, the product of 25 basis points (0.25%) multiplied by such amount of Outstanding Advances;

(B) a $3,000 review fee; and

 

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(C) In addition, Borrower shall be required to reimburse Lender for all of Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request.

(viii) the Transfer will not result in a significant modification under section 1001 of the Internal Revenue Code of any Advance that has been securitized in a mortgage-backed security.

Section 7.16. Change in Senior Management .

Borrower shall give Lender notice of any change in the identity of any of the Senior Management of Borrower or Guarantor within ten (10) Business Days of the occurrence thereof.

Section 7.17. Date-Down Endorsements .

At the closing of any Additional Loan, a Lender may, at its option, obtain an endorsement to each Title Insurance Policy amending the effective date of the Title Insurance Policy to the date of the title search performed in connection with the endorsement. Borrower shall pay for the cost and expenses incurred by Lender to the Title Company in obtaining such endorsement, provided that, for each Title Insurance Policy, it shall not be liable to pay for more than one (1) such endorsement in any consecutive twelve (12) month period.

Section 7.18. Ownership of Mortgaged Properties .

Borrower shall be the sole owner of each of the Mortgaged Properties, as set forth on Exhibit A of this Agreement, free and clear of any Liens other than Permitted Liens.

Section 7.19. Change in Property Manager .

No change in the Property Manager of each Mortgaged Property shall be made without the prior written consent of Lender, which approval shall be based on the criteria for approval of Property Managers as required by Lender for similar loans anticipated to be sold to Fannie Mae.

Section 7.20. Term of BRE Property Investors LLC .

On or before March 25, 2012, Borrower shall cause the term of the Operating Agreement for BRE Property Investors LLC to be extended to no earlier than the Termination Date. If Borrower fails to extend the term as required, Borrower agrees that each Mortgaged Property that is owned indirectly by BRE Property Investors LLC shall be (a) Released or Substituted on or before September 1, 2012, pursuant to the provisions of Article 3 , and Borrower shall comply with Article 3 and Section 5.05 or Section 5.06 (as applicable) including the payment of any Outstanding Advances required pursuant to such Sections, or (b) transferred to a BRE Affiliate pursuant to the terms of Section 7.14 (or BRE Property Investors LLC shall be replaced as the managing member of BRE-FMAZ, LLC by a BRE Affiliate pursuant to the terms of Section 7.14 ).

 

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Section 7.21. ROFO on Arizona Properties .

Borrower represents and warrants that attached as Exhibit K to this Agreement is a true, correct and complete copy of that certain Right of First Offer Agreement dated April 27, 2006, that affects those two (2) Mortgaged Properties commonly known as South Mountain and Towne Center (the “ Arizona ROFO ”) and it has not been amended, modified or waived in any respect. Borrower shall not amend, modify or waive any provision of the Arizona ROFO without Lender’s prior written consent. Borrower shall provide Lender copies of any notices sent or received pursuant to the Arizona ROFO within ten (10) Business Days after sending or receiving such notices.

ARTICLE 8

FINANCIAL COVENANTS

Section 8.01. Cash on Hand .

Borrower and Guarantor covenant and agree that at all times during the Term of this Agreement that they collectively shall maintain cash, Cash Equivalents, or an immediately available line of credit with a reputable financial institution acceptable to Lender and Fannie Mae in their sole discretion in an amount equal to no less than $20,000,000 (cash, Cash Equivalents and/or the line of credit, collectively, “ Cash on Hand ”). Lender and Fannie Mae acknowledge that Guarantor’s existing revolving line of credit with Wells Fargo, N.A. as lead lender is with an acceptable reputable financial institution(s). To the extent not available in the public reports and statements filed by Guarantor under the Securities Exchange Act of 1934, Borrower and Guarantor shall send quarterly reports to Lender specifying the amount and type of Cash on Hand and shall provide such other evidence of the existence of the Cash on Hand as Lender shall request.

Section 8.02. Net Worth .

Guarantor covenants and agrees that at all times it shall maintain a Consolidated Tangible Net Worth of no less than $300,000,000. Solely for the purpose of this Section 8.02 , the following terms shall have the meaning set forth below:

“ Consolidated Tangible Net Worth ” means, as of any date of determination, for the Guarantor and the Subsidiaries, (a) the Shareholders’ Equity of the Guarantor and the Subsidiaries on that date, exclusive of minority interests, minus (b) the Intangible Assets of the Guarantor and the Subsidiaries on that date.

“ Intangible Assets ” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

“ Shareholders’ Equity ” means, as of any date of determination, consolidated shareholders’ equity, determined in accordance with GAAP.

 

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“ Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Guarantor.

ARTICLE 9

NEGATIVE COVENANTS OF BORROWER AND GUARANTOR

Borrower agrees and covenants with Lender that, at all times during the Term of this Agreement:

Section 9.01. Other Activities .

No Borrower Party shall:

(a) amend its Organizational Documents in any material respect without the prior written consent of Lender, except in connection with a Permitted Transfer;

(b) change its name without notifying Lender in writing prior to such change;

(c) dissolve or liquidate in whole or in part;

(d) except as otherwise provided in this Agreement, without the prior written consent of Lender, merge or consolidate with any Person; or

(e) use, or permit to be used, any Mortgaged Property for any uses or purposes other than as a Multifamily Residential Property and ancillary uses consistent with Multifamily Residential Properties.

Section 9.02. Liens .

Borrower shall not create, incur, assume or suffer to exist any Lien on any Mortgaged Property or any part of any Mortgaged Property, except the Permitted Liens.

Section 9.03. Indebtedness .

Borrower shall not incur or be obligated at any time with respect to any Indebtedness (other than the Credit Facility or Additional Loans) in connection with or secured by any of the Mortgaged Properties. Neither Borrower nor any owner of Borrower shall incur any indebtedness or issue any equity secured by a pledge of the membership interests in Borrower (i.e., mezzanine debt) or by a pledge of the cash flow of Borrower.

 

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Section 9.04. Principal Place of Business .

Borrower shall not change its principal place of business, state of formation, legal name or the location of its books and records, each as set forth in the Certificate of Borrower Parties, without first giving thirty (30) days’ prior written notice to Lender.

Section 9.05. Condominiums .

Borrower shall not submit any Mortgaged Property to a condominium regime during the Term of this Agreement.

Section 9.06. Restrictions on Distributions .

Except for distributions required by tax laws and regulations in order for Guarantor to maintain its tax status as a real estate investment trust, Borrower shall not make any distributions of any nature or kind whatsoever to the owners of its Ownership Interests as such if, at the time of such distribution, a Potential Event of Default or an Event of Default has occurred and remains uncured.

Section 9.07. Conduct of Business .

The conduct of Borrower’s businesses shall not violate the Organizational Documents pursuant to which it is formed.

Section 9.08. Ownership of Property .

Borrower shall not (i) acquire any real or personal property other than the Mortgaged Properties and personal property related to the operation and maintenance of the Mortgaged Properties and (ii) operate any business other than the management and operation of the Mortgaged Properties.

ARTICLE 10

FEES

Section 10.01. Origination Fee .

Borrower shall pay to Lender an origination fee (“ Origination Fee ”) equal to $1,860,000, which is the product of 30 basis points (0.30%) multiplied by $620,000,000, the Fixed Facility Commitment. $1,550,000 of the Origination Fee shall be due and payable on or before the Initial Closing Date and $310,000 shall be due and payable on the earlier of the Closing Date of the Future Advance or the Future Advance Expiration Date.

 

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Section 10.02. Due Diligence Fees .

(a) Initial Due Diligence Fees . On the Initial Closing Date (or, if the proposed Initial Mortgaged Properties do not become part of the Collateral Pool, on demand), Borrower shall pay to Lender due diligence fees (“ Initial Due Diligence Fees ”) with respect to each Initial Mortgaged Property in an amount equal to the reasonable out-of-pocket costs incurred by Lender in connection with Lender’s due diligence for such Initial Mortgaged Properties, including but not limited to third party reports required by Lender plus a $1,500 fee payable by Lender to Fannie Mae. On or before the Initial Closing Date, Borrower shall pay a deposit toward the Initial Due Diligence Fees equal to the product obtained by multiplying (i) $15,000, by (ii) the number of Initial Mortgaged Properties, minus the portion of the estimated amount of Initial Due Diligence Fees previously paid to Lender by Borrower . On or prior to the Initial Closing Date, Lender shall notify Borrower of the actual amount of the Initial Due Diligence Fees and Borrower shall, on the Initial Closing Date, pay to Lender the remainder of such Initial Due Diligence Fees (if the actual amount of the Initial Due Diligence Fees exceeds the deposit and the other amounts previously paid to Lender by Borrower) or Lender shall promptly refund to Borrower any amounts paid to Lender by Borrower in excess of the Initial Due Diligence Fees (if the actual amount of the Initial Due Diligence Fees is less than the deposit and the other amounts previously paid to Lender by Borrower).

(b) Additional Due Diligence Fees for Substitute Collateral . Borrower shall pay to Lender additional due diligence fees (the “ Additional Collateral Due Diligence Fees ”) with respect to each Substitute Mortgaged Property in an amount equal to the reasonable out-of-pocket costs incurred by Lender in connection with Lender’s due diligence for such Substitute Mortgaged Properties, including but not limited to third party reports required by Lender plus a $1,500 fee payable by Lender to Fannie Mae. In connection with any Substitution Request, Borrower shall pay to Lender a deposit toward the Additional Collateral Due Diligence Fees equal to the product obtained by multiplying (i) $15,000, by (ii) the number of Substitute Mortgaged Properties. The Additional Collateral Due Diligence Fees not covered by the deposit shall be paid by Borrower on the Closing Date (or if the proposed Substitute Mortgaged Property does not become part of the Collateral Pool, on demand) for the Substitute Mortgaged Property. Any portion of the Additional Collateral Due Diligence Fee paid to Lender not actually used by Lender to cover reasonable due diligence expenses shall be promptly refunded to Borrower.

Section 10.03. Legal Fees and Expenses .

(a) Initial Legal Fees . Borrower shall pay, or reimburse Lender for, all reasonable out-of-pocket legal fees and expenses incurred by Lender and by Fannie Mae in connection with the preparation, review and negotiation of this Agreement and any other Loan Documents executed on the date of this Agreement.

(b) Fees and Expenses Associated with Requests . Borrower shall pay, or reimburse Lender and Fannie Mae for, all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including legal fees and expenses incurred by Lender and Fannie Mae in connection with the preparation, review and negotiation of all documents, instruments and certificates to be executed and delivered in connection with each Request, the performance by Lender of any of its obligations with respect to the Request, the satisfaction of all conditions precedent to Borrower’s rights or Lender’s obligations with respect to the Request, and all transactions related to any of the foregoing, including the cost of title insurance premiums and applicable recordation and transfer taxes and charges and all other reasonable out-of-pocket costs

 

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and expenses in connection with a Request. The obligations of Borrower under this subsection shall be absolute and unconditional, regardless of whether the transaction requested in the Request actually occurs. Borrower shall pay such costs and expenses to Lender on the Closing Date for the Request, or, as the case may be, after demand by Lender if Lender determines that such Request will not be approved or otherwise close.

Section 10.04. Failure to Close any Request .

If Borrower makes a Request to close the Future Advance or any Additional Advance and fails to close on the Future Advance or any Additional Advance for any reason other than the default by Lender, then Borrower shall pay to Lender and Fannie Mae all breakage costs incurred by Lender and Fannie Mae in connection with the failure to close.

ARTICLE 11

EVENTS OF DEFAULT

Section 11.01. Events of Default .

Each of the following events shall constitute an “ Event of Default ” under this Agreement, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of Borrower or Guarantor or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority:

(a) the occurrence of a default under any Loan Document beyond the cure period, if any, set forth therein; or

(b) the failure by Borrower to pay when due any amount payable by Borrower under any Note, any Security Instrument, this Agreement or any other Loan Document, including any fees, costs or expenses;

(c) the failure by Borrower to perform or observe any covenant set forth in Section 7.09 (Inform Lender of Material Events), Section 7.14 (Transfer of Ownership Interests in Borrower and Guarantor), Section 7.15 (Transfer of Ownership of Mortgaged Property), Section 7.18 (Ownership of Mortgaged Properties), Section 7.19 (Change in Property Manager), Section 8.01 (Cash on Hand), Section 8.02 (Net Worth), Section 9.01 (Other Activities), Section 9.02 (Liens), Section 9.03 (Indebtedness), Section 9.06 (Restrictions on Distributions), or Section 9.08 (Ownership of Property); provided that, with respect to Section 7.09(d) and Section 7.09(e) , the failure to promptly inform Lender in writing shall not be an Event of Default if the circumstances, acts, conditions or events with respect to which notice was required to be given under Section 7.09(d) and Section 7.09(e) do not then have and are not likely to have in the future a Material Adverse Effect on the Borrower, Guarantor or any Mortgaged Property (as determined by Lender in its sole discretion) at the time the written notice is actually given to Lender; or

 

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(d) the failure by Borrower to perform or observe any covenant contained in Article 7 or Article 9 (other than those sections specifically referenced in Section 11.01(c) above) for thirty (30) days after receipt of notice of such failure by Borrower from Lender, provided that such period shall be extended for up to sixty (60) additional days if Borrower, in the discretion of Lender, is diligently pursuing a cure of such default within thirty (30) days after receipt of notice from Lender; or

(e) any warranty, representation or other written statement made by or on behalf of Borrower or Guarantor contained in this Agreement, any other Loan Document or in any instrument furnished in compliance with or in reference to any of the foregoing, is false or misleading in any material respect on any date when made or deemed made; or

(f) (i) Any Borrower Party shall (A) commence a voluntary case, whether of such Person or an Affiliate thereof, under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition as debtor seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that any Borrower Party has no liability or obligations under this Agreement or any other Loan Document to which it is a party; or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceeding shall be commenced against any Borrower Party in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding upon or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of any Borrower Party, whether by such Person or an Affiliate thereof, or of all or a substantial part of the property, domestic or foreign, of any Borrower Party, whether by such Person or an Affiliate thereof, and any such case or proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar days, or any order granting the relief requested in any such case or proceeding against any Borrower Party, whether by such Person or an Affiliate thereof (including an order for relief under such Federal bankruptcy laws) shall be entered; or

(g) if any provision of this Agreement or any other Loan Document or the lien and security interest purported to be created hereunder or under any Loan Document shall at any time for any reason in any material respect cease to be valid and binding in accordance with its terms on Borrower or Guarantor, or shall be declared to be null and void in any material respect, or the validity or enforceability hereof or thereof or the validity or priority of the lien and security interest created hereunder or under any other Loan Document shall be contested by Borrower or Guarantor seeking to establish the invalidity or unenforceability hereof or thereof, or Borrower or Guarantor (only with respect to the Guaranty) shall deny that it has any further liability or obligation hereunder or thereunder; or

 

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(h) (i) except as permitted under the Loan Documents, the execution by Borrower of a chattel mortgage or other security agreement on any materials, fixtures or articles used in the construction or operation of the improvements located on any Mortgaged Property or on articles of personal property located therein, or (ii) if any such materials, fixtures or articles are purchased pursuant to any conditional sales contract or other security agreement or otherwise so that the Ownership thereof will not vest unconditionally in Borrower free from encumbrances, or (iii) if Borrower does not furnish to Lender upon request the contracts, bills of sale, statements, receipted vouchers and agreements, or any of them, under which Borrower claims title to any materials, fixtures, or articles referred to in subsections (i)  or (ii)  of this paragraph (h) ; or

(i) the failure by Borrower to comply with any requirement of any Governmental Authority within thirty (30) days after written notice of such requirement shall have been given to Borrower by such Governmental Authority; provided that, if action is commenced and diligently pursued by Borrower within such thirty (30) days, then Borrower shall have an additional ninety (90) days to comply with such requirement; or

(j) a dissolution or liquidation for any reason (whether voluntary or involuntary) of any Borrower Party; or

(k) any judgment against Borrower or Guarantor, any attachment or other levy against any portion of Borrower’s or Guarantor’s assets with respect to a claim or claims in an amount in excess of $100,000 individually and/or $250,000 in the aggregate remains unpaid, unstayed, unappealled, undischarged, unbonded, not fully insured or undismissed for a period of ninety (90) days; or

(l) the failure by Borrower or Guarantor to perform or observe any material term, covenant, condition or agreement hereunder, other than as contained in subsections (a)  through (k)  above, or in any other Loan Document, within thirty (30) days after receipt of notice from Lender identifying such failure, provided such period shall be extended for up to sixty (60) additional days if Borrower, in the discretion of Lender, is diligently pursuing a cure of such default within thirty (30) days after receipt of notice from Lender.

ARTICLE 12

REMEDIES

Section 12.01. Remedies; Waivers .

Upon the occurrence of an Event of Default, Lender may do any one or more of the following (without presentment, protest or notice of protest, all of which are expressly waived by Borrower Party):

(a) Lender may, at its sole option, cease making Future Advances and Additional Loans, permitting Substitutions under this Agreement, or closing any Requests and/or not permitting any new Requests under this Agreement.

(b) by written notice to Borrower, to be effective upon dispatch, terminate the Fixed Facility Commitment and declare the principal of, and interest on, the Advances and all other sums owing by Borrower to Lender under any of the Loan Documents forthwith due and payable, whereupon the Fixed Facility Commitment will terminate and the principal of, and interest on, the Advances and all other sums owing by Borrower to Lender under any of the Loan Documents will become forthwith due and payable.

 

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(c) Lender may accelerate any Note without the obligation, but the right to accelerate any other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender may, except as provided in this Agreement, exercise and perfect any and all of its rights in and under the Loan Documents with regard to any Mortgaged Property without the obligation (but with the right) to exercise and perfect its rights and remedies with respect to any other Mortgaged Property and that any such exercise shall be without regard to the Allocable Facility Amount assigned to such Mortgaged Property and that Lender may recover an amount equal to the full amount Outstanding in respect of any of the Notes in connection with such exercise and any such amount shall be applied to the Obligations as determined by Lender in its sole and absolute discretion.

(d) Lender shall have the right to pursue any other remedies available to it under any of the Loan Documents.

(e) Lender shall have the right to pursue all remedies available to it at law or in equity, including obtaining specific performance and injunctive relief.

Section 12.02. Waivers; Rescission of Declaration .

Lender shall have the right, to be exercised in its complete discretion, to waive any breach hereunder (including the occurrence of an Event of Default), by a writing setting forth the terms, conditions, and extent of such waiver signed by Lender and delivered to Borrower. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the waiver and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. This provision shall not be construed to permit the waiver of any condition to a Request otherwise provided for herein.

Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and Other Obligations .

If Borrower or Guarantor fails to perform the covenants and agreements contained in this Agreement or any of the other Loan Documents, then Lender at Lender’s option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender’s interest, including (a) disbursement of reasonable attorneys’ fees, (b) entry upon the Mortgaged Property to make repairs and replacements, (c) procurement of satisfactory insurance as provided in Section 5 of the Security Instrument encumbering the Mortgaged Property, and (d) if the Security Instrument is on a leasehold, exercise of any option to renew or extend the ground lease on behalf of Borrower and the curing of any default of Borrower in the terms and conditions of the ground lease. Any amounts disbursed by Lender pursuant to this Section 12.03 , with interest thereon, shall become additional Indebtedness of Borrower secured by the Loan Documents. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the weighted average, as determined by Lender, of the interest rates in

 

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effect from time to time for each Advance unless collection from Borrower of interest at such rate would be contrary to Applicable Law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under Applicable Law. Nothing contained in this Section 12.03 shall require Lender to incur any expense or take any action hereunder.

Section 12.04. No Remedy Exclusive .

Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Loan Documents or existing at law or in equity.

Section 12.05. No Waiver .

No delay or omission to exercise any right or power accruing under any Loan Document upon the happening of any Event of Default or Potential Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.

Section 12.06. No Notice .

To entitle Lender to exercise any remedy reserved to Lender in this Article, it shall not be necessary to give any notice, other than such notice as may be required under the applicable provisions of this Agreement or any of the other Loan Documents or under Applicable Law.

ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

Section 13.01. Insurance and Real Estate Taxes .

Borrower shall (unless waived by Lender in the Security Instrument) establish funds for Taxes, insurance premiums and certain other charges for each Mortgaged Property in accordance with Section 7(a) of the Security Instrument for each Mortgaged Property.

Section 13.02. Replacement Reserves .

Borrower shall execute a Replacement Reserve Agreement for the Mortgaged Properties and shall (unless waived by Lender pursuant to the Replacement Reserve Agreement) make all deposits for replacement reserves in accordance with the terms of the Replacement Reserve Agreement.

 

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ARTICLE 14

LIMITS ON PERSONAL LIABILITY

Section 14.01. Personal Liability to Borrower .

(a) Limits on Personal Liability . Except as otherwise provided in this Section 14.01 , Borrower and Guarantor shall have no personal liability under the Loan Documents for the repayment of any Indebtedness or for the performance of any other Obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of such Indebtedness and the performance of such Obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Properties and any other Collateral held by Lender as security for the Indebtedness under the Loan Documents.

(b) Exceptions to Limits on Personal Liability . Borrower and Guarantor shall be personally liable to Lender for the repayment of a portion of the Advances and other amounts due under the Loan Documents equal to any loss or damage suffered by Lender as a result of (i) failure of Borrower to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3(a) of the Security Instrument encumbering the Mortgaged Property and the amount of all security deposits collected by Borrower from tenants then in residence; (ii) failure of Borrower to apply all insurance proceeds, condemnation proceeds or security deposits from tenants as required by the Security Instrument encumbering the Mortgaged Property; (iii) failure of such Borrower or Guarantor to comply with its obligations under the Loan Documents with respect to the delivery of books and records and financial statements; (iv) fraud or written material misrepresentation by Borrower or Guarantor, or any officer, director, partner, member or employee of Borrower or Guarantor in connection with the application for or creation of the Obligations or any request for any action or consent by Lender; (v) failure to apply Rents (including pre-paid rents), first, to the payment of reasonable operating expenses and then to amounts (“ Debt Service Amounts ”) payable under the Loan Documents (except that Borrower or Guarantor will not be personally liable (A) to the extent that Borrower or Guarantor lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (B) with respect to Rents of a Mortgaged Property that are distributed in any Calendar Quarter if Borrower has paid all operating expenses and Debt Service Amounts for that Calendar Quarter); or (vi) Borrower’s failure to honor any and all indemnification obligations contained in Section 18 (environmental) of any Security Instrument.

(c) Full Recourse . Borrower and Guarantor shall be personally liable to Lender for the payment and performance of all Obligations upon the occurrence of any of the following: (i) Borrower acquisition of any property or operation of any business not permitted by the Single Purpose requirements in the Loan Documents; or (ii) a Transfer that is an Event of Default under any Loan Documents; or (iii) any of the items identified in Section 11.01(f)(i)(A) through (H) , inclusive.

(d) Miscellaneous . To the extent that Borrower or Guarantor has personal liability under this Section 14.01 , or Guarantor has liability under the Guaranty, such liability shall be joint and several and Lender may exercise its rights against Borrower or Guarantor personally

 

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without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under the Loan Documents or Applicable Law. For purposes of this Article 14 , the term “ Mortgaged Property ” shall not include any funds that (i) have been applied by Borrower as required or permitted by the Loan Documents prior to the occurrence of an Event of Default, or (ii) are owned by Borrower or Guarantor and which Borrower was unable to apply as required or permitted by the Loan Documents because of a bankruptcy, receivership, or similar judicial proceeding.

(e) Permitted Transfer Not Release . No Transfer by any Person of its Ownership Interests in Borrower shall release Borrower or Guarantor from liability under this Article, this Agreement or any other Loan Document, unless Lender shall have approved the Transfer and shall have expressly released Borrower or Guarantor in connection with the Transfer.

Section 14.02. Additional Borrowers .

If the owner of a Substitute Mortgaged Property is a new Borrower, the owner of such Substitute Mortgaged Property must demonstrate to the satisfaction of Lender that:

(a) such new Borrower complies with the definition of “Additional Borrower;” and

(b) the Additional Borrower is a Single-Purpose entity, unless otherwise approved by Lender.

In addition, on the Closing Date of the addition of a Substitute Mortgaged Property, the owner of such Substitute Mortgaged Property, if such owner is an Additional Borrower, shall become a party to a contribution agreement in a manner satisfactory to Lender, shall deliver a Certificate of Borrower in form and substance satisfactory to Lender, and execute and deliver, along with the other Borrowers, Fixed Facility Notes. Any Additional Borrower of a Substitute Mortgaged Property which becomes added to the Collateral Pool shall be a Borrower for purposes of this Agreement and shall execute and deliver to Lender an amendment adding such Additional Borrower as a party to this Agreement and revising the Exhibits hereto, as applicable, to reflect the Substitute Mortgaged Property and Additional Borrower, in each case satisfactory to Lender.

Upon the release of a Mortgaged Property, in the event that the Borrower which owns the Release Mortgaged Property owns no other Mortgaged Property in the Collateral Pool, such Borrower shall automatically without further action be released from its obligations under this Agreement and the other Loan Documents except for (i) any liabilities or obligations other than the Indebtedness of such Borrower which arose prior to the Closing Date of such release and (ii) any Obligations that survive release as specifically set forth in Section 18 (Environmental Hazards) of the Security Instrument applicable to such Release Mortgaged Property.

 

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Section 14.03. Borrower Agency Provisions .

(a) Each Borrower and Additional Borrower hereby irrevocably designates BRE PROPERTIES, INC., a Maryland corporation, as the borrower agent (the “ Borrower Agent ”) to be its agent and in such capacity to receive on behalf of Borrower all proceeds, receive all notices on behalf of Borrower under this Agreement, make all Requests under this Agreement, and execute, deliver and receive all instruments, certificates, Requests, documents, amendments, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower, and hereby authorizes Lender to pay over all loan proceeds hereunder in accordance with the direction of Borrower Agent. Each Borrower hereby acknowledges that all notices required to be delivered by Lender to any Borrower shall be delivered to Borrower Agent and thereby shall be deemed to have been received by such Borrower.

(b) The handling of this Credit Facility as a co-borrowing facility with a Borrower Agent in the manner set forth in this Agreement is solely as an accommodation to Borrower and is at their request. Lender shall not incur liability to Borrower as a result thereof. To induce Lender to do so and in consideration thereof, each Borrower hereby indemnifies Lender and holds Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Lender by any Person arising from or incurred by reason of Borrower Agent handling of the financing arrangements of Borrower as provided herein, reliance by Lender on any request or instruction from Borrower Agent or any other action taken by Lender with respect to this Section 14.03 except due to willful misconduct or gross negligence of the indemnified party.

Section 14.04. Waivers With Respect to Other Borrower Secured Obligation (for Mortgaged Properties located in California) .

To the extent that a Security Instrument or any other Loan Document executed by one Borrower secures an Obligation of another Borrower (the “ Other Borrower Secured Obligation ”), and/or to the extent that a Borrower has guaranteed the debt of another Borrower pursuant to Article 14 , Borrower who executed such Loan Document and/or guaranteed such debt (the “ Waiving Borrower ”) hereby agrees, to the extent permitted by law, to the provisions of this Section 14.04 . To the extent that any Mortgaged Properties are located in California, and to the extent permitted by law, the references to the California Code below shall apply to this Agreement and any California Security Instrument securing a California Mortgaged Property, otherwise the California Code shall have no effect on this Agreement or any other Loan Document.

(a) The Waiving Borrower hereby waives any right it may now or hereafter have to require the beneficiary, assignee or other secured party under such Loan Document, as a condition to the exercise of any remedy or other right against it thereunder or under any other Loan Document executed by the Waiving Borrower in connection with the Other Borrower Secured Obligation: (i) to proceed against the other Borrower or any other person, or against any other collateral assigned to Lender by either Borrower or any other person; (ii) to pursue any other right or remedy in Lender’s power; (iii) to give notice of the time, place or terms of any public or private sale of real or personal property collateral assigned to Lender by the other Borrower or any other person (other than the Waiving Borrower), or otherwise to comply with Section 9615 of the California Commercial Code (as modified or recodified from time to time) with respect to any such personal property collateral located in the State of California to the

 

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extent permitted by law; or (iv) to make or give (except as otherwise expressly provided in the Security Documents) any presentment, demand, protest, notice of dishonor, notice of protest or other demand or notice of any kind in connection with the Other Borrower Secured Obligation or any collateral (other than the Collateral described in such Security Document) for the Other Borrower Secured Obligation.

(b) The Waiving Borrower hereby waives any defense it may now or hereafter have that relates to: (i) any disability or other defense of the other Borrower or any other person; (ii) the cessation, from any cause other than full performance, of the Other Borrower Secured Obligation; (iii) the application of the proceeds of the Other Borrower Secured Obligation, by the other Borrower or any other person, for purposes other than the purposes represented to the Waiving Borrower by the other Borrower or otherwise intended or understood by the Waiving Borrower or the other Borrower; (iv) any act or omission by Lender which directly or indirectly results in or contributes to the release of the other Borrower or any other person or any collateral for any Other Borrower Secured Obligation; (v) the unenforceability or invalidity of any Security Document or Loan Document (other than the Security Instrument executed by the Waiving Borrower that secures the Other Borrower Secured Obligation) or guaranty with respect to any Other Borrower Secured Obligation, or the lack of perfection or continuing perfection or lack of priority of any Lien (other than the Lien of such Security Instrument) which secures any Other Borrower Secured Obligation; (vi) any failure of Lender to marshal assets in favor of the Waiving Borrower or any other person; (vii) any modification of any Other Borrower Secured Obligation, including any renewal, extension, acceleration or increase in interest rate; (viii) any and all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the Waiving Borrower’s rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (ix) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or guarantor’s obligation in proportion to the principal obligation; (x) any failure of Lender to file or enforce a claim in any bankruptcy or other proceeding with respect to any person; (xi) the election by Lender, in any bankruptcy proceeding of any person, of the application or non-application of Section 1111(b)(2) of the Bankruptcy Code; (xii) any extension of credit or the grant of any lien under Section 364 of the Bankruptcy Code; (xiii) any use of cash collateral under Section 363 of the Bankruptcy Code; or (xiv) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any person. The Waiving Borrower further waives any and all rights and defenses that it may have because the Other Borrower Secured Obligation is secured by real property; this means, among other things, that: (A) Lender may collect from the Waiving Borrower without first foreclosing on any real or personal property collateral pledged by the other Borrower; (B) if Lender forecloses on any real property collateral pledged by the other Borrower, then (C) the amount of the Other Borrower Secured Obligation may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (D) Lender may foreclose on the real property encumbered by the Security Instrument executed by the Waiving Borrower and securing the Other Borrower Secured Obligation even if Lender, by foreclosing on the real property collateral of the Other Borrower, has destroyed any right the Waiving Borrower may have to collect from the Other Borrower. Subject to the last

 

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sentence of Section 14.03 , the foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses the Waiving Borrower may have because the Other Borrower Secured Obligation is secured by real property. These rights and defenses being waived by the Waiving Borrower include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, the Waiving Borrower further expressly waives, except as provided in Section 14.04(g) below, to the extent permitted by law any and all rights and defenses, which might otherwise be available to it under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections.

(c) The Waiving Borrower hereby waives any and all benefits and defenses under California Civil Code Section 2810 and agrees that by doing so the Security Instrument executed by the Waiving Borrower and securing the Other Borrower Secured Obligation shall be and remain in full force and effect even if the other Borrower had no liability at the time of incurring the Other Borrower Secured Obligation, or thereafter ceases to be liable. The Waiving Borrower hereby waives any and all benefits and defenses under California Civil Code Section 2809 and agrees that by doing so the Waiving Borrower’s liability may be larger in amount and more burdensome than that of the other Borrower. The Waiving Borrower hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of any of its waivers, and agrees that the Waiving Borrower’s waivers shall not be affected by any circumstances, which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. The Waiving Borrower hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Other Borrower Secured Obligation, presentment, demand for payment, protest, all notices with respect to the Other Borrower Secured Obligation, which may be required by statute, rule of law or otherwise to preserve Lender’s rights against the Waiving Borrower hereunder, including notice of acceptance, notice of any amendment of the Loan Documents evidencing the Other Borrower Secured Obligation, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by the other Borrower of any obligation or indebtedness and all rights to require Lender to (i) proceed against the other Borrower, (ii) proceed against any managing member of the other Borrower, (iii) proceed against or exhaust any collateral held by Lender to secure the Other Borrower Secured Obligation, or (iv) if the other Borrower is a partnership, pursue any other remedy it may have against the other Borrower, or any managing member of the other Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850.

(d) The Waiving Borrower understands that the exercise by Lender of certain rights and remedies contained in a Security Instrument executed by the other Borrower (such as a nonjudicial foreclosure sale) may affect or eliminate the Waiving Borrower’s right of subrogation against the other Borrower and that the Waiving Borrower may therefore incur a partially or totally nonreimburseable liability. Nevertheless, the Waiving Borrower hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination thereof, which may then be available, since it is the intent and purpose of the Waiving Borrower that its waivers shall be absolute, independent and unconditional under any and all circumstances.

 

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(e) In accordance with Section 2856 of the California Civil Code, the Waiving Borrower also waives any right or defense based upon an election of remedies by Lender, even though such election (e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of the Other Borrower Secured Obligation) destroys or otherwise impairs the subrogation rights of the Waiving Borrower to any right to proceed against the other Borrower for reimbursement, or both, by operation of Section 580d of the California Code of Civil Procedure or otherwise.

(f) In accordance with Section 2856 of the California Civil Code, the Waiving Borrower waives any and all other rights and defenses available to the Waiving Borrower by reason of Sections 2787 through 2855, inclusive, of the California Civil Code, including any and all rights or defenses the Waiving Borrower may have by reason of protection afforded to the other Borrower with respect to the Other Borrower Secured Obligation pursuant to the antideficiency or other laws of the State of California limiting or discharging the Other Borrower Secured Obligation, including Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure.

(g) In accordance with Section 2856 of the California Civil Code and pursuant to any other Applicable Law, the Waiving Borrower agrees to withhold the exercise of any and all subrogation, contribution and reimbursement rights against the other Borrower, against any other person, and against any collateral or security for the Other Borrower Secured Obligation, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Other Borrower Secured Obligation has been indefeasibly paid and satisfied in full, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of their right, title and interest in such collateral or security.

(h) Each Borrower hereby irrevocably and unconditionally agrees that in the event that, notwithstanding Section 14.04(g) hereof, to the extent its agreement and waiver set forth in Section 14.04(g) is found by a court of competent jurisdiction to be void or voidable for any reason and such Borrower has any subrogation or other rights against any other Borrower, any such claims, direct or indirect, that such Borrower may have by subrogation rights or other form of reimbursement, contribution or indemnity, against any other Borrower or to any security or any such Borrower, shall be and such rights, claims and indebtedness are hereby deferred, postponed and fully subordinated in time and right of payment to the prior payment, performance and satisfaction in full of the Obligations. Until payment and performance in full with interest (including post-petition interest in any case under any chapter of the Bankruptcy Code) of the Obligations, each Borrower agrees not to accept any payment or satisfaction of any kind on Indebtedness of any other Borrower in respect of any such subrogation rights arising by virtue of payments made pursuant to this Article 14 , and hereby assigns such rights or indebtedness to Lender, including the right to file proofs of claim and to vote thereon in connection with any case under any chapter of the Bankruptcy Code, including the right to vote on any plan of reorganization. In the event that any payment on account of any such subrogation rights shall be received by any Borrower in violation of the foregoing, such payment shall be held in trust for the benefit of Lender, and any amount so collected should be turned over to Lender for application to the Obligations.

 

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(i) At any time without notice to the Waiving Borrower, and without affecting or prejudicing the right of Lender to proceed against the Collateral described in any Loan Document executed by the Waiving Borrower and securing the Other Borrower Secured Obligation, (i) the time for payment of the principal of or interest on, or the performance of, the Other Borrower Secured Obligation may be extended or the Other Borrower Secured Obligation may be renewed in whole or in part; (ii) the time for the other Borrower’s performance of or compliance with any covenant or agreement contained in the Loan Documents evidencing the Other Borrower Secured Obligation, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (iii) the maturity of the Other Borrower Secured Obligation may be accelerated as provided in the related Note or any other related Loan Document; (iv) the related Note or any other related Loan Document may be modified or amended by Lender and the other Borrower in any respect, including an increase in the principal amount; and (v) any security for the Other Borrower Secured Obligation may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Other Borrower Secured Obligation.

(j) It is agreed among each Borrower and Lender that all of the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the Loan Documents and that but for the provisions of this Article 14 and such waivers Lender would decline to enter into this Agreement.

Section 14.05. Joint and Several Obligation; Cross-Guaranty .

Notwithstanding anything contained in this Agreement or the other Loan Documents to the contrary (but subject to the last sentence of this Section 14.05 and the provisions of Section 14.01 and Section 14.12 ), each Borrower shall have joint and several liability for all Oblig