MASTER REPURCHASE AGREEMENT

Exhibit 10.13

EXECUTION

 

 

 

MASTER REPURCHASE AGREEMENT

 

Dated as of August 22, 2008

 

 

KBS GKK PARTICIPATION HOLDINGS I, LLC,

as Seller

and

GOLDMAN SACHS MORTGAGE COMPANY,

as Buyer

 

 

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MASTER REPURCHASE AGREEMENT

MASTER REPURCHASE AGREEMENT dated as of August 22, 2008 (the “ Agreement ”), between KBS GKK PARTICIPATION HOLDINGS I, LLC, a Delaware limited liability company (“ Seller ”) and GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership (“ Buyer ”).

RECITALS

WHEREAS, Seller has requested that Buyer from time to time purchase Transaction Assets (as defined below) owned by Seller, and Buyer is prepared to enter into Transactions (as defined below) upon the terms and conditions hereof;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.          Applicability . From time to time, the parties hereto may enter into transactions in which Seller agrees to transfer to Buyer certain Eligible Transaction Assets (as defined below) owned by Seller against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Eligible Transaction Assets, at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement.

Section 2.         Definitions and Accounting Matters .

2.01.      Certain Defined Terms . As used herein, the following terms shall have the following meanings (all terms defined in this Section 2.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa):

“ 1934 Act ” shall mean the Securities and Exchange Act of 1934, as amended.

“ 1940 Act ” shall mean the Investment Company Act of 1940, as amended.

“ Act of Insolvency ” shall mean, with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or the consent by such party to the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the making by such party of a general assignment for the benefit of creditors, or (iii) the admission in writing by such party of such party’s inability to pay such party’s debts generally as they become due.

“ Affiliate ” shall mean (i) with respect to Buyer, any entity which controls, is controlled by, or is under common control with Buyer, and (ii) with respect to Seller or any affiliate of Seller, as such term is defined in the Bankruptcy Code. For purposes of this definition, “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “controlling” and “controlled” shall have meanings correlative thereto.

“ Aggregate Asset Value ” shall mean the aggregate Asset Value of all Transaction Assets subject to any Transaction outstanding under this Agreement.

“ Aggregate Citigroup Repurchase Price ” shall mean the aggregate Repurchase Price of all Transaction Assets subject to any Transaction outstanding under the Citigroup MRA.

“ Aggregate Repurchase Price ” shall mean the aggregate Repurchase Price of all Transaction Assets subject to any Transaction outstanding under this Agreement.

“ Agreement ” shall mean this Master Repurchase Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

“ Applicable DYT Advance Rate ” shall mean the applicable percentage rate set forth opposite the applicable “DYT Asset Type” in the chart below:

 

“ Appraisal ” means an appraisal of any Property prepared by a licensed appraiser approved by Buyer, in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches, as any of the same may be updated by recertification from time to time by the appraiser performing such Appraisal.

“ Asset File ” shall mean those documents set forth in a schedule to be delivered by Seller to Custodian and which are delivered to the Custodian pursuant to the terms of this Agreement and the Custodial Agreement, including, without limitation, all documents required by Buyer to transfer a valid ownership interest to Buyer and to grant to Buyer and perfect in Buyer a precautionary first priority security interest in such Transaction Assets.

“ Asset-Specific Transaction Balance ” means a portion of the Transaction allocable to a specific Transaction Asset. Such portion initially consists of the sum of all Purchase Price payments with respect to the Transaction entered into on account of such Eligible Transaction Asset, without subtracting from such Purchase Price payments Buyer’s Transaction Costs and other costs and fees to the extent advanced to Seller hereunder. Wherever this Agreement states that Repurchase Price prepayments on account of the Transaction are to be allocated or applied to or against the Asset-Specific Transaction Balance of a specific Transaction Asset, the Asset-Specific Transaction Balance of such Transaction Asset shall be deemed reduced accordingly by the amount of the Repurchase Price prepayments so applied.

“ Asset Value ” shall mean, with respect to each Eligible Transaction Asset or Transaction Asset, as applicable, the Purchase Rate multiplied by the Market Value of such Eligible Transaction Asset or Transaction Asset, as applicable; provided that, the following additional limitations shall apply:

 

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(i)       Asset Value may be deemed to be zero or such greater amount as Buyer shall determine in its sole good faith discretion with respect to each Eligible Transaction Asset or Transaction Asset, as applicable:

(1)     in respect of which there is a breach of (x) a representation and warranty set forth on Schedule 1 (in the case of any Transaction Asset that is not a GS Asset) or (y) any of the GS Asset Representations (in the case of any Transaction Asset that is a GS Asset) (assuming in either case that each representation and warranty is made as of the date Asset Value is determined), or

(2)     in respect of which there is a delinquency in the payment of interest on the Mortgage Note (or other evidence of indebtedness of the Transaction Asset Obligor with respect to the Transaction Asset), which continues for a period in excess of thirty (30) days (without regard to any applicable grace periods), or

(3)     which has been released from the possession of the Custodian under the Custodial Agreement for a period in excess of ten (10) days other than as directed or consented to by Buyer in writing, or

(4)     which exceeds any LTV limitations determined by Buyer, in its sole good faith discretion, to be correlative to the Eurodollar Rate Spread determined by Buyer to be applicable to an Eligible Transaction Asset approved by Buyer hereunder (but solely to the extent of such excess); or

(5)     in respect of which Buyer has not received the items described in Section 8.01(d) or Section 8.01(e) within the time periods set forth in such Sections; and

(ii)    any DYT Asset that is the subject of a Transaction hereunder shall have an Asset Value of zero.

“ Assignment and Pledge ” means the assignment and pledge agreement executed in connection with each Transaction whereby Seller assigns all its right, title and interest, and grants a precautionary security interest to Buyer, in the related Transaction Asset(s) and Transaction Asset Items.

“ B Note ” shall mean a Mortgage B Note or a Mezzanine B Note .

“ Bailee ” shall mean such third party bailee as Buyer may approve.

“ Bailee Agreement ” shall mean the Bailee Agreement among Seller, Buyer and Bailee in the form of Exhibit H hereto.

“ Bailee’s Trust Receipt and Certification ” shall mean a Trust Receipt and Certification in the form annexed to the Bailee Agreement as Attachment 2.

“ Bankruptcy Code ” shall mean the United States Bankruptcy Code of 1978, as amended from time to time.

“ Base Rate ” means fifty (50) basis points (0.50%) in excess of the Federal Funds Rate.

 

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“ Blocked Account Agreement ” shall mean a collection account control agreement among Seller, Buyer and the Depository Bank substantially in the form of Exhibit F hereto, as the same may be amended, supplemented or otherwise modified from time to time.

“ Business Day ” shall mean any day, other than Saturday or Sunday, on which banks in New York (and, with respect to any determination of LIBOR and any definitions associated with the definitions of LIBOR, London) are open for business.

“ Buyer ” shall mean Goldman Sachs Mortgage Company together with its successors and/or assigns.

“ Capital Expenditure ” means hard and soft costs incurred by Seller or any Affiliate of Seller that is an owner of a DYT Asset, with respect to replacements and capital repairs made to Underlying Properties (including repairs to, and replacements of, structural components, roofs, building systems, parking garages, parking lots, and expenditures for building improvements or major repairs), leasing commissions and tenant improvements, in each case to the extent capitalized in accordance with GAAP.

“ Capital Lease ” means, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person or entity as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person or entity.

“ Capital Lease Obligations ” shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a Capital Lease, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“ Change of Control ” shall mean any of the following events have occurred:

(i)        a sale, transfer or other disposition of all or substantially all of Seller’s or Guarantor’s assets (excluding any such action taken in connection with any securitization transaction or sale of mortgage loans in the ordinary course of Seller’s or Guarantor’s business); or

(ii)       a merger, consolidation, acquisition of assets or interests or other transaction pertaining to Guarantor, if more than 50% of the combined voting interests of the continuing or surviving entity outstanding immediately after such merger, consolidation, acquisition of assets or interests or other transaction is not owned, directly or indirectly, by persons who were holders of voting interests in the Guarantor immediately prior to the consummation of such transaction.

“ Citigroup MRA ” shall mean that certain Master Repurchase Agreement. dated as of the date hereof between Citigroup Financial Products, Inc., as buyer, and Citigroup Seller, as seller, as the same may be amended, supplemented or otherwise modified from time to time.

“ Citigroup Seller ” Shall mean KBS GKK Participation Holdings II, LLC, a Delaware limited liability company.

“ CMBS ” shall mean, in the singular or plural as the context requires, securities backed by mortgages and other liens on commercial real estate and related collateral or by securities, interests or other obligations backed directly or indirectly by such mortgages.

“ CMBS Securitization Documents ” shall mean, with respect to any CMBS, any pooling and servicing agreement or other agreement governing the issuance and administration of such CMBS; any

 

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new issue asset summary books; the applicable prospectus or offering memorandum; to the extent that the CMBS is certificated, the relevant certificate duly endorsed in blank to Buyer and if the CMBS is not certificated, all documents requested by Buyer to confirm that the CMBS is being held in a security account under the control of the Buyer, or such other evidence of confirmation of the pledge to the Buyer as the Buyer shall require; and any other agreement or instrument evidencing or otherwise governing the CMBS.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“ Collection Account ” shall have the meaning set forth in Section 4.01(a).

“ Collections ” shall mean, collectively, all collections and proceeds on or in respect of all Transaction Assets, excluding collections required to be paid to the Servicer or a Transaction Asset Obligor on the Transaction Asset.

“ Confirmation ” shall have the meaning provided in Section 3.02(a) hereof.

“ Consolidated EBITDA ” shall mean, for any period, determined with respect to any Person(s) on an aggregate basis, an amount equal to the sum of (a) net income (or loss) of such Person(s) for such period determined on an aggregate basis (prior to any impact from minority interests and provision for income taxes, and before deduction of preferred dividends on preferred stock, if any, of such Person(s)), in accordance with GAAP, plus (to the extent actually included in determination of such net income (or loss)) (i) depreciation and amortization expense, (ii) interest expense, (iii) extraordinary or non-recurring gains and losses.

“ Consolidated Interest Expense ” shall mean, for any period, determined without duplication with respect to any Person(s) on an aggregate basis, the amount of total interest expense incurred (in accordance with GAAP), including capitalized or accruing interest.

“ Current Debt Yield ” shall mean, with respect to any Test Period, the quotient of (x) trailing quarterly Net Operating Income for such Test Period (viewed on an annualized basis) with respect to the Underlying Properties underlying the Initial Transaction Asset, divided by (y) Total DYT Indebtedness for such Test Period.

“ Custodial Agreement ” shall mean the Custodial Agreement to be entered into among Seller, Custodian and the Buyer, in substantially the form of Exhibit B hereto, as the same shall be modified and supplemented and in effect from time to time.

“ Custodial Identification Certificate ” shall mean the certificate executed by Seller in connection with the sale and precautionary pledge by Seller of an Eligible Transaction Asset to Buyer, in the form of Annex 3 to the Custodial Agreement.

“ Custodian ” shall mean LaSalle Bank, N.A., as custodian under the Custodial Agreement, and its successors and permitted assigns thereunder.

“ DBSI ” shall have the meaning provided in Schedule 8 hereto.

“ Debt Service Coverage Ratio ” shall mean the ratio of Net Underwritable Cash Flow to interest expense on principal and interest paid on borrowings over the trailing twelve months, based on the actual coupon rate for fixed interest rate Transaction Assets and at the lifetime cap rate for any floating interest

 

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rate Transaction Assets, the calculation of which shall be satisfactory to Buyer in its sole good faith discretion.

“ Debt Yield Test Cure ” shall mean the conveyance to Buyer in strict accordance with Section 3.04 of one or more DYT Assets having a Debt Yield Test Value that (assuming that such DYT Assets are, on the date of calculation, the subject of a Transaction consummated in accordance with Section 3.04), when added to the Debt Yield Test Value of all DYT Assets that have previously become the subject of a Transaction consummated in accordance with Section 3.04, shall be equal to or greater than the Replacement Amount.

A “ Debt Yield Test Failure ” shall occur when the Current Debt Yield for any Test Period, as at the last day of each Fiscal Quarter, is less than the Minimum Debt Yield.

“ Debt Yield Test Value ” shall mean the product of the book value as evidenced to the satisfaction of Buyer in its sole good faith discretion) of a DYT Asset, but not to exceed par, multiplied by (y) the Applicable DYT Advance Rate.

“ Default ” shall mean an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

“ Deposit Application Date ” shall have the meaning set forth in Section 3.07(b).

“ Deposit Funding Date ” shall have the meaning set forth in Section 3.07(b).

“ Depository Bank ” shall mean LaSalle Bank, N.A.

“ Diligence Materials ” means the Preliminary Due Diligence Package together with the materials requested in the Supplemental Due Diligence List.

“ Dollars ” and “ $ ” shall mean lawful money of the United States of America.

“ Due Diligence Review ” shall mean the performance by Buyer of any or all of the reviews permitted hereunder with respect to any or all of the Transaction Assets, as desired by Buyer from time to time, including pre-Transaction due diligence and diligence under Section 12.15.

“ DYT Asset ” shall mean any asset now in, or subsequently becoming part of, the DYT Asset Pool.

“ DYT Asset Due Diligence Package ” shall mean, with respect to any DYT Asset, substantially all of the items set forth in (a) the definition of “ Preliminary Due Diligence Package ” and (b) Section 3.02(b)(i)-(vi), to the extent presently in Seller’s possession or control as set forth in the Post-Closing DYT Asset Certificate (or as such items may subsequently become within Seller’s possession or control).

“ DYT Asset Pool ” shall mean, collectively, the Mortgage Loans, Mezzanine Loans, Mezzanine Loan Participations, B Notes, (or participations therein) and CMBS that are described on Schedule 5 and Schedule 8 hereto (or on any supplement to Schedule 5 hereto provided by Seller to Buyer subsequent to the date hereof in accordance with Section 8.21), and as to which the DYT Asset Representations shall be correct from and after the date any such DYT Asset becomes the subject of a Transaction hereunder.

“ DYT Asset Representations ” shall mean (a) with respect to DYT Assets that are GS Assets, the GS Asset Representations, (b) with respect to DYT Assets that are not GS Assets and were acquired by

 

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Seller or any other Subsidiary of Guarantor from any Person, (i) all of the representations and warranties in Section 7.10 hereof and (ii) all of the representations and warranties that were made to Seller or such Subsidiary of Guarantor at the time of such acquisition, and (c) with respect to all DYT Assets that were originated by Seller or any other Subsidiary of Guarantor, (i) all of the representations and warranties in Section 7.10 hereof and (ii) all of the representations and warranties in the applicable section of Schedule 1 attached hereto as modified by the Variance Statement.

“ DYT Notice ” shall have the meaning provided in section 3.04(a) hereof.

“ DYT Shortfall ” shall mean, for any Test Period, the quotient of (a) the sum of (i) Minimum Debt Yield for the applicable Test Period minus (ii) Current Debt Yield for the applicable Test Period, divided by (b) Minimum Debt Yield for the applicable Test Period.

“ Effective Date ” shall mean the date upon which the conditions precedent set forth in Section 6.01 shall have been satisfied.

“ Eligible Transaction Assets ” shall mean stabilized and transitional Mortgage Loans, Mezzanine Loans, Mezzanine Loan Participations, B Notes, (or participations therein), Preferred Equity Interests, CMBS and Other Approved Transaction Assets, that are not delinquent and as to which the representations and warranties in Section 7.10 and the applicable section of Schedule 1 hereof are correct and which are intended to be the subject of a Transaction; provided that Buyer may waive compliance with any representations and warranties in the applicable section of Schedule 1 in its sole good faith discretion; provided , further , that with respect to any GS Asset, the representations and warranties contained in Schedule 1 hereof shall not be applicable for purposes of this definition and instead, the GS Asset Representations shall be applicable; and provided , further , that DYT Assets shall be eligible to be the subject of a Transaction hereunder solely for the purpose of enabling Seller to effect a Debt Yield Test Cure.

“ Equity Interest ” shall mean any interest in a Person constituting a share of stock or a partnership or membership interest (including, without limitation, a Preferred Equity Interest) or other right or interest in a Person that is not characterized as indebtedness under GAAP.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ ERISA Affiliate ” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“ Eurocurrency Reserve Requirements ” shall mean, for any day as applied to any Transaction, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including without limitation basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “ Eurocurrency Liabilities ”) in Regulation D of such Board maintained by a member bank of such Governmental Authority.

 

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“ Eurodollar Base Rate ” shall mean, with respect to any Eurodollar Contract Period, the rate per annum equal to the rate appearing at page LIBOR01 on Reuters as 30 day LIBOR on the second Business Day prior to the commencement of any Eurodollar Contract Period, and if such rate shall not be so quoted, the rate per annum at which Buyer is offered Dollar deposits at or about 10:00 A.M., New York City time, on such date by prime banks in the interbank eurodollar market where the eurodollar and foreign currency exchange operations in respect of its loans are then being conducted for delivery on such day for a period of 30 days and in an amount comparable to the amount of the Transactions to be outstanding on such day.

“ Eurodollar Contract Period ” means, with respect to each Transaction Asset, a period of thirty (30) days, and the number of days in such period being subject to adjustment as follows: (a) in no event shall a Eurodollar Contract Period extend beyond the Repurchase Date; (b) each such period (except the initial Eurodollar Contract Period with respect to each Asset-Specific Transaction Balance) shall end on the day immediately preceding the Payment Date which occurs approximately thirty (30) days after the commencement of such period; and (c) the initial Eurodollar Contract Period with respect to each Asset-Specific Transaction Balance shall commence on the date of funding of the related Transaction and shall end on the day immediately preceding the next occurring Payment Date.

“ Eurodollar Rate ” shall mean, with respect to each Eurodollar Contract Period pertaining to a Transaction, a rate per annum determined by Buyer in its sole good faith discretion in accordance with the following formula (rounded upwards to the nearest 1/100th of one percent), which rate as determined by Buyer shall be conclusive absent manifest error by Buyer:

 

“ Eurodollar Rate Spread ” means (A) as to each Purchase Rate the applicable Eurodollar Rate Spread set forth below opposite such Purchase Rate for the applicable “Transaction Asset Type” (as set forth in the chart below), or such other Eurodollar Rate Spread as may be mutually agreed to by Seller and Buyer:

 

* In the event that at any time, and for so long as, the quotient of (a) the outstanding amount of the Repurchase Price of the Initial Transaction Asset divided by (b) the outstanding principal amount of the Initial Transaction Asset, shall be less than fifty percent (50%), the Eurodollar Rate Spread with respect to the Initial Transaction Asset shall be 1.00% (100 bps). In the event that a Rate Step-Up shall become effective pursuant to the terms of this Agreement, the Eurodollar Rate Spread for the Initial Transaction Asset shall be 1.00% (100bps) higher (for each day that such Rate Step-Up is in effect) than the Eurodollar Rate Spread that would otherwise be in effect.

“ Eurodollar Substitute Rate ” means a rate of interest equal to (a) the Base Rate plus (b) the Eurodollar Rate Spread.

“ Event of Default ” shall have the meaning provided in Section 9 hereof.

 

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“ FDICIA ” shall have the meaning provided in Section 12.17(d) hereof.

“ Federal Funds Rate ” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by a money-center bank designated by the Buyer from three federal funds brokers of recognized standing selected by Buyer.

“ Fiscal Quarter ” shall mean the three-month period ending on March 31, June 30, September 30 and December 31 of each year, or such other fiscal quarter of Seller as Seller may select from time to time with the prior consent of Buyer, such consent not to be unreasonably withheld.

“ Forced Amortization Payment ” shall have the meaning provided in Section 3.06 hereof.

“ Funding Costs ” shall mean, collectively, the actual costs to Buyer of breaking a Eurodollar contract prior to the expiration of the Eurodollar Contract Period applicable thereto in connection with (a) any prepayment (whether voluntary or involuntary) of all or any portion of an Asset-Specific Transaction Balance or other principal repayments required or permitted under the Security Documents or Transfer Documents, that is made at any time other than at the expiration of the related Eurodollar Contract Period, (b) any voluntary or involuntary acceleration of the Repurchase Date, such that the Repurchase Date occurs on any date that is not the expiration date of the Eurodollar Contract Period with respect to any Asset-Specific Transaction Balance, and (c) any other set of circumstances not attributable solely to Buyer’s acts. Subject to the foregoing, Funding Costs shall not include any diminution in yield suffered by Buyer upon re-lending or re-investing the principal of the aggregate Repurchase Price of the Transaction Assets after any prepayment thereof.

“ GAAP ” shall mean generally accepted accounting principles consistently applied as in effect from time to time in the United States.

“ Governmental Authority ” shall mean any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over Seller or any of its properties.

“ GS Asset ” shall mean (a) any Transaction Asset sold to Seller by Buyer or an Affiliate of Buyer contemporaneously with any Transaction, including the Initial Transaction Asset, and (b) any DYT Asset that has been sold by Buyer to Seller or any other Affiliate of Guarantor prior to the date such DYT Asset becomes part of the DYT Asset Pool.

“ GS Asset Representations ” shall mean the representations that were made to Seller (or, with respect to any DYT Assets, to Seller or any other Affiliate of Guarantor that is the owner of a DYT Asset) by Buyer or an Affiliate of Buyer in the conveyance document pursuant to which Seller (or, with respect to any DYT Assets, Seller or any other Affiliate of Guarantor) acquired a GS Asset.

“ GS Indebtedness ” shall mean any indebtedness of Seller hereunder and under any other arrangement between Seller , Guarantor, and their respective Subsidiaries on the one hand, and Buyer or an Affiliate of Buyer on the other hand.

“ Guarantee ” shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any

 

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Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include (i) endorsements for collection or deposit in the ordinary course of business, or (ii) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of an Underlying Property, to the extent required by Buyer. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

“ Guarantor ” shall mean KBS Real Estate Investment Trust, Inc., a Maryland corporation that has elected to be taxed as a real estate investment trust, and that is the indirect owner of all of the equity interest in the Seller.

“ Hedge Value ” shall mean, with respect to any Business Day and a specific Interest Rate Protection Agreement, the amount, if any, that is equal to the amount that would be paid to Seller (expressed as a positive number) or paid by Seller (expressed as a negative number) in consideration of an agreement between Seller and an unaffiliated third party, that would have the effect of preserving for Seller the net economic equivalent, as of such Business Day, of all payment and delivery requirements payable to and by Seller under such Interest Rate Protection Agreement until the termination thereof, as determined by Buyer absent manifest error.

“ Hedging Transactions ” shall mean, with respect to any or all of the Transaction Assets, other than the Initial Transaction Asset, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller or by the underlying obligor with respect to any Transaction Asset and pledged to Seller as collateral for such Transaction Asset, with one or more counterparties whose unsecured debt is rated at least AA (or its equivalent) by S&P or Moody’s or, with respect to any Hedging Transaction pledged to Seller as additional collateral for a Transaction Asset, such other rating requirement applicable to such Hedging Transaction set forth in the related Transaction Asset Documents or which is otherwise reasonably acceptable to Buyer; provided that Seller shall not grant or permit any liens, security interests, charges, or encumbrances with respect to any such hedging arrangements for the benefit of any Person other than Buyer.

“ Income ” shall mean, with respect to any Transaction Asset at any time, any principal repaid and all interest, dividends or other distributions thereon.

“ Indebtedness ” shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person;

 

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(e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; and (i) Indebtedness of general partnerships of which such Person is a general partner.

“ Indemnified Party ” shall have the meaning provided in Section 12.03 hereof.

“ Initial Cure Period ” shall have the meaning provided in Section 9(a)(i) hereof.

“ Initial DYT Notice ” shall have the meaning provided in Section 3.04 hereof.

“ Initial Transaction Asset ” shall mean that certain Eligible Transaction Asset commonly known as the “GKK/AFR Mezz Participation A” and evidenced by the Participation Documents, and as more particularly described on Schedule 4 hereto.

“ Initial Transaction Asset Purchase Price ” shall mean the then outstanding and unpaid aggregate Purchase Price with respect to the Initial Transaction Asset on the date of determination.

“ Interest Rate Protection Agreement ” shall mean, with respect to any or all of the Transaction Assets other than the Initial Transaction Asset, any short sale of US Treasury Securities, futures contract, mortgage related security, Eurodollar futures contract, options related contract, interest rate swap, cap or collar agreement or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller and any other counterparty acceptable to Buyer.

“ Knowledge ” or “aware” or correlative expressions with respect to the knowledge or awareness of Seller shall mean the actual knowledge of a Responsible Officer of Seller or the receipt by Seller of notice given with respect to a matter in accordance with the Transaction Documents or the Transaction Asset Documents.

“ Late Fee ” shall have the meaning set forth in Section 3.05(b) hereof.

“ Late Fee Rate ” shall mean, in respect of any Repurchase Price amount or any other amount under this Agreement, the Confirmation or any other Transaction Document that is not paid when due to Buyer (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 4% per annum plus the Base Rate.

“ Lien ” shall mean any mortgage, lien, pledge, charge, security interest or similar encumbrance. or any property interest similar to the foregoing, including, without limitation, the right of any vendor, lessor or similar party under any conditional sale agreement or title retention agreement or lease (including where the effect thereof is such that the assets or properties subject thereto do not constitute assets or properties of the obligor or lessee under such agreement or lease under applicable generally accepted accounting principles.

“ Loan-to-Value Ratio ” or “ LTV ” shall mean, as to any Eligible Transaction Asset or Transaction Asset, as applicable, the ratio that (x) the aggregate outstanding principal balance of all Indebtedness secured in whole or in part by the related Underlying Property or direct or indirect beneficial interests therein relating to such Eligible Transaction Asset or Transaction Asset, as applicable, bears to (y) the value, determined by an Appraisal reasonably acceptable to Buyer, of the related Underlying Property (together with all applicable appurtenant interests and subject to all applicable liens, encumbrances and

 

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tenancies), or direct or indirect beneficial interests therein which form the basis of such Eligible Transaction Asset or Transaction Asset.

“ Loss Proceeds ” means amounts, awards or payments payable to Seller or any other Affiliate of Guarantor that is the owner of a DYT Asset, any Transaction Asset Obligor, any mortgage lender, or Buyer in respect of all or any portion of any of the Underlying Properties in connection with a casualty or condemnation thereof (after the deduction therefrom and payment to Seller or any other Affiliate of Guarantor that is the owner of a DYT Asset, any Transaction Asset Obligor, any mortgage lender or Buyer, respectively, of any and all reasonable expenses incurred by Seller or any Affiliate of Guarantor that is the owner of a DYT Asset and Buyer in the recovery thereof, including all attorneys’ fees and disbursements, the fees of insurance experts and adjusters and the costs incurred in any litigation or arbitration with respect to such casualty or condemnation).

“ Market Value ” shall mean, as of any date in respect of any Eligible Transaction Asset or Transaction Asset, the price at which such Eligible Transaction Asset or Transaction Asset could readily be sold as determined in Buyer’s sole good faith discretion based upon objective criteria, which price may be determined to be zero; it being understood and agreed that Buyer’s determination of Market Value shall be conclusive upon the parties.

“ Material Adverse Effect ” shall mean a material adverse effect on (a) the Property, business, operations, financial condition or prospects of Seller and/or Guarantor or any of their respective Subsidiaries, (b) the ability of Seller and/or Guarantor or any of their respective Subsidiaries to perform its obligations under any of the Transaction Documents to which it is a party, (c) the validity or enforceability of any of the Transaction Documents, (d) the rights and remedies of Buyer or any of its Affiliates under any of the Transaction Documents, (e) the timely payment of the Periodic Advance Repurchase Payments for the Transactions or other material amounts payable in connection therewith or (f) the Asset Value of the Transaction Assets taken as a whole.

“ Maximum Purchase Price ” shall mean One Hundred Sixty-Seven Million Four Hundred Thirteen Thousand One Hundred Sixty-Two and 50/100 Dollars ($167,413,162.50).

“ Mezzanine B Note ” shall mean the original executed subordinated promissory note or other evidence (including a participation certificate and/or participation agreement) of a subordinated interest owned by Seller with respect to a Mezzanine Loan.

“ Mezzanine Loan ” shall mean a loan (including a participation therein) secured by a pledge of Equity Interests in one or more entities holding direct or indirect beneficial interests in an entity owning (or having a ground lease interest in) a commercial (including hospitality and retail) or multi-family residential property.

“ Mezzanine Loan Participation ” shall mean (a) a junior participation interest or participation certificate in a Mezzanine Loan or (b) a Mezzanine B Note.

“ Minimum Debt Yield ” shall mean for any Test Period, the applicable rate set forth on Schedule 7 hereto.

“ Monthly Initial Transaction Asset Statement ” shall mean, for each calendar month during which this Agreement shall be in effect, monthly and year-to-date unaudited financial statements prepared for the applicable month with respect to the Underlying Properties underlying the Initial Transaction Asset, including a balance sheet and operating statement as of the end of such month, together with related statements of income (and Net Operating Income), which statements shall be accompanied by an

 

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Officer’s Certificate certifying that the same are true and correct and were prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from audit and normal year-end audit adjustments. Each such monthly report shall be accompanied by the following (provided, that such items need only be provided to the extent such items are either (A) generated by KBS Debt Holdings, LLC (in its sole discretion, it being agreed that KBS Debt Holdings, LLC shall have no obligation to generate any such items) or (B) generated by Persons other than KBS Debt Holdings, LLC and are received by KBS Debt Holdings, LLC or its successor as mezzanine lender under the Senior Mezzanine Loan):

(i)      a summary of material leases (and, to the extent prepared by Seller or its property manager in the ordinary course of business, each other lease) signed during such month, which summary shall include the tenant’s name, lease term, base rent, escalations, tenant improvements, leasing commissions paid, free rent and other concessions;

(ii)     then current rent roll and occupancy reports;

(iii)    to the extent not otherwise described in this definition, copies of all financial statements and similar reports delivered to Encumbered Property Lenders (as defined in the Senior Mezzanine Loan Agreement); and

(iv)    such other information as Buyer shall reasonably request, to the extent readily available to Seller without material cost or expense.

“ Moody’s ” shall mean Moody’s Investors Service, Inc.

“ Mortgage ” shall mean the mortgage, deed of trust or other instrument securing a Mortgage Note, which creates a first lien on the fee or leasehold interest in real property securing the Mortgage Note and the assignment of rents and leases related thereto.

“ Mortgage B Note ” shall mean the original executed subordinated promissory note or other evidence (including a participation certificate and/or participation agreement) of a subordinated interest owned by Seller with respect to a Mortgage Loan.

“ Mortgage Loan ” shall mean a performing whole first mortgage loan (including a participation therein) encumbering one or more commercial (including hospitality and retail) or multi-family residential properties which Custodian has been instructed to hold for Buyer pursuant to the Custodial Agreement, and which includes, without limitation (i) the indebtedness evidenced by a Mortgage Note and secured by a related Mortgage, and (ii) all right, title and interest of the Seller in and to the Mortgaged Property covered by such Mortgage.

“ Mortgage Note ” shall mean the original executed promissory note or other evidence of the indebtedness of a Transaction Asset Obligor with respect to a Mortgage Loan.

“ Mortgaged Property ” shall mean the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the debt evidenced by a Mortgage Note or Mortgage B Note, as applicable.

“ Mortgagor ” shall mean the obligor on a Mortgage Note.

 

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“ Multiemployer Plan ” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions are, have been, or were required to have been, made by Seller or any ERISA Affiliate at any relevant time.

“ Net Income ” shall mean, with respect to any Person, for any period, the consolidated net income for such period of such Person as reported in such Person’s financial statements prepared in accordance with GAAP.

“ Net Operating Income ” shall mean, with respect to any Test Period, the excess of (i) Operating Income for such Test Period, minus (ii) Operating Expenses for such Test Period.

“ Net Underwritable Cash Flow ” shall mean the net operating income (making certain assumptions regarding minimum vacancy levels, the lesser of actual and “market” rental rates, management fees and other factors) less structural reserves and reserves for tenant improvements and leasing commissions (whether these three types of reserves are actually impounded or not), the calculation of which shall be satisfactory to Buyer.

“ Non-Table Funded ” shall mean, with respect to any Transaction Asset, that the Transaction Asset was not originated or acquired by Seller through a Table Funding.

“ Officer’s Certificate ” shall mean the certificate of a Responsible Officer as set forth in Section 6.02(b) hereof.

“ Operating Expenses ” means, for any period, all operating, renting, administrative, management, legal and other ordinary expenses of Transaction Asset Obligors during such period, determined in accordance with GAAP; provided , however , that such expenses shall not include (i) depreciation, amortization or other noncash items (other than expenses that are due and payable but not yet paid), (ii) Price Differential, Repurchase Price or any other sums due and owing with respect to the Transactions hereunder, (iii) income taxes or other taxes in the nature of income taxes, (iv) Capital Expenditures, or (v) equity distributions.

“ Operating Income ” means, for any period, all operating income of Transaction Asset Obligors, from each of the Underlying Properties during such period, determined in accordance with GAAP (but without straight-lining of rents), other than (i) Loss Proceeds (but Operating Income will include rental loss insurance proceeds to the extent allocable to such period), (ii) any revenue attributable to a lease to the extent it is paid more than thirty (30) days prior to the due date, (iii) any interest income from any source, (iv) any repayments received from any third party of principal loaned or advanced to such third party by Seller, (v) any proceeds resulting from the transfer of all or any portion of such Underlying Property, (vi) sales, use and occupancy or other taxes on receipts required to be accounted for by Seller to any government or governmental agency, (vii) termination fees, and (viii) any other extraordinary or non-recurring items.

“ Other Approved Transaction Asset ” shall mean such other Property of Seller as Buyer shall accept as Transaction Assets for the Transactions.

“ Outside Person ” shall mean any Person that is not an Affiliate of Guarantor.

“ Parent Guaranty ” shall mean that certain Parent Guaranty and Indemnity dated of even date herewith executed by Guarantor for the benefit of Buyer.

 

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“ Participation Agreement ” means that certain participation agreement dated as of August 22, 2008, among KBS Debt Holdings, LLC, as mezzanine lender, Seller, as Participant A, Citigroup Seller, as Participant B, and Servicer, and evidencing the creation of the certificated participation interest constituting the Initial Transaction Asset.

“ Participation Certificate “ means that certain participation certificate issued to Seller under the Participation Agreement and more particularly described on Schedule 4 hereto.

“ Participation Documents ” means the Participation Agreement and the Participation Certificate.

“ Payment Date ” shall have the meaning set forth in Section 3.05(d) hereof.

“ PBGC ” shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“ Periodic Advance Repurchase Payment ” shall have the meaning set forth in Section 3.05(b) hereof.

“ Person ” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).

“ Plan ” means an employee benefit or other plan established or maintained by Seller or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.

“ Post-Closing DYT Asset Certificate ” shall mean a certificate signed by a Responsible Officer of Seller, setting forth, with respect to each DYT Asset described on Schedule 5 and Schedule 8 , those of the items set forth in the definition of “ Preliminary Due Diligence Package ” and in Section 3.02(b)(i)-(vi) hereof that are in Seller’s possession or control.

“ Preferred Equity Interest ” shall mean any interest in a Person constituting a preferred share of stock or a preferred partnership or membership interest or other preferred right or interest in a Person that is not characterized as indebtedness under GAAP.

“ Preliminary Due Diligence Package ” means with respect to any proposed Transaction Asset (except with respect to (a) GS Assets, as to which the Preliminary Due Diligence Package need include only the summary memorandum described in clause (i) below, and (b) DYT Assets, as to which the items set forth below are referred to solely for the purpose of the definition herein of “ DYT Asset Due Diligence Package ”), the following due diligence information relating to such proposed Transaction Asset to be provided by Seller to Buyer pursuant to this Agreement:

(i)      a summary memorandum outlining the proposed transaction, including potential transaction benefits (and for all Eligible Transaction Assets other than GS Assets, all material underwriting risks and all Underwriting Issues) and all other characteristics of the proposed transaction that Seller has identified and considered, including, without limitation, internal credit memoranda for approval and underwriting (including a credit approval memorandum representing the final terms of the proposed transaction), and current financial statements for the proposed transaction;

(ii)     current rent roll, if applicable;

(iii)    cash flow pro-forma, plus historical information, if available;

 

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(iv)     description of the Transaction Asset (real property lien, pledged loan or other Transaction Asset);

(v)      indicative Debt Service Coverage Ratios;

(vi)     indicative Loan-to-Value Ratio;

(vii)    Seller’s or any Affiliate’s relationship with its potential underlying borrower or any affiliate;

(viii)   Phase I environmental site assessment (including asbestos and lead paint report);

(ix)     engineering and structural reports, if available;

(x)      third party reports, including:

(1)      a current Appraisal;

(2)      Phase II environmental site assessment or other follow-up environmental report if recommended in Phase I;

(3)      seismic reports, if available; and

(4)      operations and maintenance plan with respect to asbestos-containing materials, if available;

(xi)     evidence of terrorism insurance coverage (unless waived by Buyer in its sole good faith discretion);

(xii)    in the case of a B Note, Mezzanine Loan, Mezzanine Loan Participation or Preferred Equity Interest, all information which would otherwise be provided if the Transaction Asset were a Mortgage Loan, and in addition, all documentation evidencing or otherwise relating to the B Note, Mezzanine Loan, Mezzanine Loan Participation or Preferred Equity Interest, including, without limitation, intercreditor agreements, participation agreements, and shareholder agreements, as applicable;

(xiii)  in the case of CMBS, (a) a copy of the applicable pooling and servicing agreement, trust agreement, participation agreement or similar document governing the issuance and administration of the CMBS; (b) a copy of any new issue asset summary books; (c) copy of the applicable prospectus or offering memorandum; (d) to the extent that the CMBS is certificated, an original of the relevant certificate duly endorsed in blank to Buyer; (e) to the extent that the CMBS is not certificated, all documents requested by Buyer to confirm that the CMBS is being held in a security account under the control of Buyer, or such other evidence of confirmation of the sale to Buyer as Buyer shall require; (f) a copy of the documents specified above relating to, directly or indirectly, the subject Transaction Asset, to the extent obtained by the originating lender and available to Seller; and (g) a copy of any other agreement or instrument evidencing or otherwise governing the CMBS;

(xiv)   analyses and reports with respect to such other matters concerning the Transaction Asset as Buyer may in its sole good faith discretion require;

(xv)    documents comprising such Transaction Asset, or current drafts thereof, including, without limitation, underlying debt and security documents, intercreditor agreements,

 

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participation agreements, shareholder agreements, guaranties, underlying borrower’s organizational documents, warrant agreements, and loan and collateral pledge agreements, as applicable;

(xvi)      a list that specifically and expressly identifies any Transaction Asset Documents that relate to such Transaction Asset that are not in Seller’s possession and with respect to which a copy thereof has not been previously delivered to Buyer; and

(xvii)     the Purchase Rate that Seller requests with respect to the subject Eligible Transaction Asset.

“ Prepayment Deposit ” shall have the meaning set forth in Section 3.07(b).

“ Price Differential ” shall mean, with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the applicable Pricing Rate in effect from time to time for such Transaction to the outstanding Purchase Price (reduced by any prepayments of Repurchase Price) for such Transaction on each day during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction, including any amounts paid in respect of such Price Differential pursuant to Section 3.05 or any other partial repayments).

“ Pricing Rate ” shall have the meaning provided in Section 3.05(b) hereof.

“ Property ” shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“ Purchase Date ” shall mean, with respect to an Eligible Transaction Asset, the date on which such Eligible Transaction Asset is transferred by Seller to Buyer, or its designee.

“ Purchase Period ” shall have the meaning provided in Section 3.01 hereof.

“ Purchase Price ” means the sum of the price at which a Transaction Asset is purchased by Buyer from the Seller, as specified in the related Confirmation. The Purchase Price for any Eligible Transaction Asset shall be equal to the lesser of (a) the Market Value thereof multiplied by the applicable Purchase Rate and (b) 100% of the outstanding principal balance of the Eligible Transaction Asset, provided , that with respect to the Initial Transaction Asset, Purchase Price shall mean the Maximum Purchase Price.

“ Purchase Rate ” means, for any Eligible Transaction Asset, the ratio, expressed as a percentage, set forth opposite the applicable “Transaction Asset Type” in the chart provided in the definition of Eurodollar Rate Spread or as otherwise defined or limited herein.

“ Quarterly DYT Asset Report ” shall mean a current report as to the DYT Assets in the form of Schedule 5 hereto.

“ Rate Step-Up ” shall mean that the Eurodollar Rate Spread applicable with respect to the Initial Transaction Asset shall be 1.00% (100bps) higher (for each day that a Rate Step-Up is in effect pursuant to this Agreement) than the Eurodollar Rate Spread that would otherwise be in effect with respect to the Initial Transaction Asset pursuant to the provisions of this Agreement.

 

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“ Regulation T, U or X ” shall mean Regulations T, U or X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

“ Replacement Amount ” shall mean the product of (a) the DYT Shortfall multiplied by (b) the sum of the (i) the aggregate Repurchase Price of all Transaction Assets plus (ii) the aggregate “Repurchase Price” of all “Transaction Assets” under the Citigroup MRA.

“ Repurchase Date ” shall mean the date on which Seller is to repurchase the Transaction Assets from Buyer, which date, unless otherwise specified in the related Confirmation shall be the date that is the Termination Date.

“ Repurchase Obligations ” shall have the meaning provided in Section 5.01(c) hereof.

“ Repurchase Price ” shall mean the price at which a Transaction Asset is to be transferred from Buyer, or its designee, to Seller upon termination of the related Transaction, which will equal in each case (including Transactions terminable upon demand) as the sum of (i) the Purchase Price and (ii) the Price Differential, in each case as of the date of such determination, decreased by all cash, Income and Periodic Advance Repurchase Payments (including Late Fees, if any) actually received by Buyer.

“ Requirement of Law ” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other governmental authority whether now or hereafter enacted or in effect.

“ Responsible Officer ” shall mean, as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person.

“ S&P ” shall mean Standard and Poor’s, a division of The McGraw-Hill Companies, Inc.

“ Section 4402 ” shall have the meaning provided in Section 12.19 hereof.

“ Securitization ” shall mean a sale or transfer of loans, including any Transaction Asset, to an Affiliate of Seller or any other entity in which Seller owns an interest, to effect one or more structured finance securitization transactions, including, but not limited to, the creation of a REMIC (as defined in the Code) or offering of collateralized debt obligations or any other transaction involving the issuance and sale of securities backed by the Transaction Assets or other liens on the subject collateral or backed by securities, interests or other obligations backed directly or indirectly by such Transaction Assets.

“ Security Documents ” means this Agreement, the Confirmations, and all other agreements, instruments, assignments, certificates and documents, including Uniform Commercial Code financing statements, delivered by or on behalf of Seller to evidence or secure the Transaction(s) or otherwise in satisfaction of the requirements of this Agreement, or the other documents listed above, as the same may be amended or modified from time to time.

“ Seller ” shall have the meaning provided in the heading hereof.

“ Seller Fee Reimbursement ” shall mean the sum of $75,000.

“ Senior Mezzanine Loan Agreement ” shall mean the Amended and Restated Senior Mezzanine Loan Agreement underlying the Initial Transaction Asset and made among the borrowers named therein, Buyer and Citicorp North America, Inc. as lenders, with an original closing date of April 1, 2008, and

 

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amended as of the date hereof, and assigned by Buyer and Citicorp North America Inc. to KBS Debt Holdings, LLC pursuant to that certain Assignment and Assumption Agreement dated as of the date hereof.

“ Servicer ” shall mean (i) with respect to the Initial Transaction Asset, Archon Group, L.P., a Delaware limited partnership, or, in the event Archon Group, L.P. voluntarily resigns as servicer or is no longer legally able to act as servicer (whether by reason of bankruptcy of Archon Group, L.P. or otherwise), such other third party servicer reasonably acceptable to Buyer, and (ii) with respect to any other Transaction Assets, a third party servicer reasonably acceptable to Buyer and expressly approved by Buyer in writing.

“ Servicer Notice ” shall have the meaning provided in Section 12.14(c) hereof.

“ Servicing Agreement ” shall have the meaning provided in Section 12.14(c) hereof.

“ Servicing Records ” shall have the meaning provided in Section 12.14(b) hereof.

“ Single-Purpose Entity ” shall mean a Person, other than an individual, which is formed or organized solely for the purpose of holding the Transaction Assets, does not engage in any business unrelated to the Transaction Assets and the financing thereof, does not have any assets other than the Transaction Assets and the financing thereof or any indebtedness other than as permitted by this Agreement, has its own separate books and records and its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, holds itself out as being a Person, separate and apart from any other Person.

“ Subsidiary ” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“ Supplemental Due Diligence List ” means, with respect to any Eligible Transaction Asset, information or deliveries concerning such proposed Transaction Asset, such items that Buyer shall request in addition to the Preliminary Due Diligence Package including, without limitation, a final LTV ratio computation and a final Debt Service Coverage Ratio computation for such proposed Transaction Asset.

“ Table Funded ” shall mean, with respect to any Transaction Asset, that the Transaction Asset was originated or acquired by Seller with funds supplied by Buyer pursuant to this Agreement. The term “ Table Funding ” shall have a correlative meaning.

“ Tangible Net Worth ” shall mean, as of a particular date (a) all amounts which would be included under capital of Guarantor and its consolidated Subsidiaries, if any, on a balance sheet of Guarantor and its consolidated Subsidiaries at such date, determined in accordance with GAAP, less (b) intangible assets of Guarantor and its consolidated Subsidiaries, if any.

“ Termination Date ” shall mean the earliest to occur of (a) March 9, 2011, (b) the maturity or sooner termination date of the Initial Transaction Asset (as stated in the Participation Documents, and as

 

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same may be extended), or (c) such earlier date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law.

“ Test Period ” shall mean each three (3) month period ending on the last day of a Fiscal Quarter, which Test Period shall be evaluated by Buyer on the sooner to occur of (a) sixty (60) days after the last day of such Fiscal Quarter and (b) the date on which the financial report for such Fiscal Quarter described in Section 8.01(c) hereof is delivered to Buyer.

“ Total DYT Indebtedness ” shall mean, for any Test Period, the aggregate Indebtedness of Transaction Asset Obligors or their Subsidiaries with respect to the Underlying Properties during such Test Period under (a) the Initial Transaction Asset and (b) any indebtedness with respect to the Underlying Properties underlying the Initial Transaction Asset that is senior in priority of payment and/or priority of lien to the Initial Transaction Asset.

“ Total Indebtedness ” shall mean, for any period, the aggregate Indebtedness of Guarantor during such period.

“ Transaction ” shall have the meaning provided in Section 1 hereof.

“ Transaction Asset ” shall mean any asset which has been sold by Seller to Buyer in a Transaction hereunder, but which has not been repurchased by Seller. The term “Transaction Asset” shall include the Initial Transaction Asset. The term “Transaction Asset” shall also include a “DYT Asset” and an “Eligible Transaction Asset” as the applicable context shall require .

“ Transaction Asset Documents ” shall mean, with respect to any Transaction Asset, the documents comprising the Asset File for such Transaction Asset.

“ Transaction Asset Items ” shall have the meaning provided in Section 5.01(b) hereof.

“ Transaction Asset Note ” shall mean a Mortgage Note or a promissory note, participation certificate, or other evidence of the Indebtedness (or interest therein) of a Transaction Asset Obligor with respect to a Mortgage Loan , Mezzanine Loan, Mezzanine Loan Participation or B Note.

“ Transaction Asset Obligor ” shall mean any obligor under any Eligible Transaction Asset or Transaction Asset, as applicable, and any issuer of any security comprising any portion of the Eligible Transaction Asset or Transaction Asset, as applicable.

“ Transaction Asset Schedule ” shall mean a list of the Transaction Asset Documents with respect to the Eligible Transaction Assets to be sold pursuant to this Agreement, attached to a Custodial Identification Certificate setting forth, as to each Eligible Transaction Asset, the applicable information specified on Annex 1 to the Custodial Agreement.

“ Transaction Asset Schedule and Exception Report ” shall mean the collateral loan schedule and exception report prepared by the Custodian pursuant to the Custodial Agreement.

“ Transaction Asset Tape ” shall mean a computer-readable file containing information with respect to each Eligible Transaction Asset, to be delivered by Seller to Buyer pursuant to Section 3.03(a) hereof, which tape fields are identified on Annex I to the Custodial Agreement.

 

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“ Transaction Costs ” shall mean, with respect to any Transaction, all actual out-of-pocket reasonable costs and expenses paid or incurred by Buyer and relating to the making of such Transaction (including legal fees and other fees described in Section 12.03 hereof).

“ Transaction Documents ” shall mean, collectively, this Agreement, the Confirmation, the Custodial Agreement, the Parent Guaranty, the Servicing Agreement and the Blocked Account Agreement.

“ Transfer Documents ” means this Agreement, the related Confirmation, the related Assignment and Pledge, and all allonges, endorsements, powers, agreements, instruments, certificates and documents delivered by or on behalf of Seller to evidence the Transaction(s) or otherwise in satisfaction of the requirements of this Agreement, or the other documents listed above as same may be amended or modified from time to time.

“ Trust Receipt ” shall mean the receipt delivered by Custodian pursuant to the provisions of Section 4 of the Custodial Agreement acknowledging receipt of a Asset File in connection with a Transaction hereunder in the form of Annex 2 to the Custodial Agreement.

“ Underlying Property ” means (a) any Property owned by a direct or indirect subsidiary of the issuer of a Preferred Equity Interest , or (b) any Mortgaged Property that is the subject of a B Note or a Mortgage Loan, or (c) any Mortgaged Property underlying any Mezzanine Loan that is a Transaction Asset hereunder (including the Initial Transaction Asset).

“ Underwriting Issues ” means with respect to any Transaction Asset as to which Seller intends to request a Transaction, all information that has come to Seller’s attention, based on the making of reasonable inquiries and the exercise of reasonable care and diligence under the circumstances, which would be considered a materially “negative” factor (either separately or in the aggregate with other information), or a material defect in loan documentation or closing deliveries (such as any absence of any material Transaction Asset Document(s)), to a reasonable institutional lender in determining whether to originate or acquire the Transaction Asset in question.

“ Uniform Commercial Code ” or “ UCC ” shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Transaction Asset is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

“ Variance Statement ” shall mean, with respect to any DYT Asset, a list prepared and certified by a Responsible Officer of Seller that specifically and expressly identifies (A) any representations and warranties contained in Schedule 1 hereof that are not true and correct with respect to such DYT Asset , and (B) any Transaction Asset Documents that relate to such DYT Asset that are not in Seller’s or the relevant Servicer’s possession.

“ Wire Delay ” shall mean a delay resulting solely by reason of the “Fedwire Funds Service,” the wire transfer network of the Federal Reserve Board, failing to process in a timely manner a wire transfer payment ( provided , that such wire transfer payment was initiated by the payor on or sufficiently in advance of the due date of such payment so that, but for such failure, the payment would have been timely received).

 

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2.02.       Accounting Terms and Determinations . Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to Buyer hereunder shall be prepared, in accordance with GAAP; provided , that, to the extent that financial statements and certificates and reports as to financial matters from Transaction Asset Obligors are delivered under the Transaction Asset Documents based on cash-based real estate accounting, such accounting basis shall be used in lieu of GAAP for such financial statements and certificates and reports .

Section 3.         Transactions, Confirmations and Prepayments .

3.01.       Transactions . Buyer agrees to enter, from time to time upon Seller’s request, (and, as to the Initial Transaction Asset, on a committed basis), and subject to the conditions of this Agreement, including those set forth in Section 6.01 and Section 6.02 hereof, into Transactions with Seller, to be funded in Dollars, from and including the Effective Date to and including the Termination Date (as the same may be sooner terminated pursuant to the terms hereof, the “ Purchase Period ”) in an aggregate Purchase Price at any one time outstanding up to but not exceeding the Maximum Purchase Price. The Purchase Price with respect to each Transaction Asset shall not exceed the Asset Value of such Transaction Asset. Transactions with respect to any Eligible Transaction Assets other than the Initial Transaction Asset will be on an uncommitted basis in the sole and absolute discretion of Buyer.

3.02.       Confirmations .

(a)      By the time specified in Section 3.03(d), Seller shall execute and deliver to Buyer a confirmation of the related Transaction, substantially in the form attached as Exhibit A hereto (a “ Confirmation ”). The Confirmation shall specify any additional terms or conditions of the Transaction agreed to by Buyer and not inconsistent with this Agreement. Upon the purchase of each Transaction Asset, the Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Transaction to which the Confirmation relates, and Seller’s acceptance of the related Purchase Price shall constitute Seller’s agreement to the terms of such Confirmation. It is the intention of the parties that each Confirmation shall not be separate from this Agreement but shall be made a part of this Agreement. In the event that any terms or conditions of any Confirmation are inconsistent, or in direct conflict, with this Agreement, the terms of this Agreement shall prevail; provided that the Confirmation and this Agreement shall be construed to be cumulative to the extent possible.

(b)      The date, Purchase Price, Repurchase Price and Purchase Rate of each Transaction entered into by Buyer and Seller, and each payment made on account of the Repurchase Price thereof, shall be recorded by Buyer from time to time on its internal books and records (whether electronic or otherwise). Failure of Buyer to make such notation shall not affect the obligations of Seller to make a payment when due of any amount owing hereunder in respect of the Transactions. Seller agrees that Buyer’s books and records showing the amounts payable pursuant to this Agreement and the other Transaction Documents and other GS Indebtedness shall be admissible in any action or proceeding arising therefrom, and shall, absent manifest error, constitute rebuttably presumptive proof thereof, irrespective of whether any such amount payable is also evidenced by a Confirmation or other instrument. Buyer will provide to Seller a monthly statement of Transactions, payments, and other transactions pursuant to this Agreement. Failure by Buyer to provide such monthly statement shall not affect the obligations of Seller to make a payment when due of any amount owing hereunder in respect of the Transactions. Such statement shall be deemed correct, accurate, and binding on Seller absent manifest error.

3.03.       Procedure for Transactions .

 

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(a)         Preliminary Approval of Proposed Transaction Asset .

(i)        Seller may, from time to time during the Purchase Period, submit to Buyer a Preliminary Due Diligence Package for Buyer’s review and approval in order to request a Transaction hereunder with respect to any proposed Transaction Asset that Seller proposes to sell to Buyer. Notwithstanding the foregoing, (A) a complete Preliminary Due Diligence Package for GS Assets need include only the summary memorandum described in clause (i) of the definition of Preliminary Due Diligence Package, and (B) with respect to DYT Assets initially selected by Buyer under Section 3.04(a), Seller shall be required to submit a DYT Asset Due Diligence Package within the time specified in Section 3.04(a). In no event shall Buyer be obligated to enter into any Transaction after the expiration of the Purchase Period.

(ii)        With respect to Eligible Transaction Assets other than DYT Assets, upon Buyer’s receipt of a complete Preliminary Due Diligence Package, Buyer within two (2) Business Days shall have the right (other than with respect to GS Assets) to request, in Buyer’s sole and absolute discretion, additional diligence materials and deliveries that Buyer shall specify on a Supplemental Due Diligence List. Upon Buyer’s receipt of all of the Diligence Materials or Buyer’s waiver thereof, Buyer, within five (5) Business Days, shall either (A) notify Seller of the Asset Value for the proposed Transaction Asset or (B) deny, in Buyer’s sole and absolute discretion, Seller’s request for a Transaction. Buyer’s failure to respond to Seller within five (5) Business Days following receipt of all Diligence Materials or Buyer’s written waiver thereof shall be deemed to be a denial of Seller’s request for a Transaction, unless Buyer and Seller have agreed otherwise in writing. Nothing in this Section 3.03(a)(ii) or elsewhere in this Agreement shall, or be deemed to, prohibit Buyer from determining in its sole discretion the adequacy, correctness and appropriateness of, or from disapproving, any and all financial and other underwriting data required to be supplied by Seller under this Agreement.

(b)         Additional Conditions to Approval of Proposed Transaction Asset . Upon Buyer’s notification to Seller of the Purchase Price and the Asset Value for any proposed Transaction Asset, Seller shall, if Seller desires to obtain a Purchase Price payment with respect to such proposed Transaction Asset (other than with respect to a DYT Asset, as to which no Purchase Price shall be funded by Buyer), satisfy the conditions set forth below (in addition to satisfying the applicable conditions precedent to obtaining such Purchase Price payment, as set forth in Section 6 of this Agreement) as conditions precedent to Buyer’s approval of such proposed Transaction Asset as an Eligible Transaction Asset, all in a manner, and pursuant to documentation, satisfactory in all respects to Buyer and its counsel (provided, however, that with respect to any GS Asset, Seller shall only be required to provide the items set forth in the following requirements to the extent received by Seller or its Affiliate from Buyer or its Affiliate at the time Seller or its Affiliate acquired the GS Asset):

(i)         Environmental and Engineering . If applicable, Buyer shall have received an environmental report and an engineering report, each in form and substance satisfactory to Buyer.

(ii)        Appraisal . Buyer shall have received an Appraisal.

(iii)       Insurance . Buyer shall have received certificates or other evidence of insurance demonstrating insurance coverage in respect of the Mortgaged Property or Underlying Property, as applicable, of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Transaction Asset Documents or the Transfer Documents. Such certificates or other evidence shall indicate that Seller , as lender, will be named as an additional insured as its interest may appear and shall contain a loss payee endorsement in favor of such additional insured with respect to the property policies required to be maintained under the Transaction Asset Documents.

 

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(iv)      Survey . To the extent obtained by Seller from the Transaction Asset Obligor with respect to any Eligible Transaction Asset at the origination thereof, Buyer shall have received a current survey of the Mortgaged Property or Underlying Property, as applicable, in a form satisfactory to Buyer.

(v)       Lien Search Reports . Buyer or its counsel shall have received, as reasonably requested by Buyer, satisfactory reports of UCC, tax lien, judgment and litigation searches and title reports and updates, as applicable, conducted by search firms and/or title companies acceptable to Buyer with respect to the Transaction Asset, Seller and the related underlying Transaction Asset Obligor, such searches to be conducted in each location Buyer shall reasonably designate.

(vi)      Title Insurance Policy . (A) With respect to a Mortgage Loan, Seller shall have delivered to Buyer (1) an unconditional commitment to issue title insurance policies in favor of Seller and Seller’s successors and/or assigns with respect to Seller’s interest in the related real property with an amount of insurance that shall be not less than the related Asset-Specific Transaction Balance (taking into account the proposed Purchase Price) or such other amount as Buyer shall require in its sole discretion, or (2) an endorsement or confirmatory letter from the title company that issued the existing title insurance policy in favor of Seller and Seller’s successors and/or assigns that amends the existing title insurance policy by stating that the amount of the insurance is no less than the related Asset-Specific Transaction Balance (taking into account the proposed Purchase Price) or such other amount of title coverage as Buyer shall require in its sole discretion. (B) With respect to a Mezzanine Loan Participation, a B Note, Preferred Equity Interest, CMBS or Other Approved Transaction Asset, Seller shall have delivered to Buyer such evidence as Buyer on a case-by-case basis, in its sole discretion, shall require of the ownership of the real property underlying such Transaction Asset including, without limitation, a copy of a title insurance policy dated a date, and by a title insurer, in each case acceptable to Buyer in its sole discretion, showing that title is vested in the related Transaction Asset Obligor or in an entity in whom such Transaction Asset Obligor holds a beneficial interest.

(vii)     Transfer Documents . Seller shall have executed and delivered to Buyer, in form and substance satisfactory to Buyer and its counsel, all Purchase Documents for the proposed Transaction substantially in the forms attached thereto or as otherwise approved by Buyer, conveying a valid ownership interest in the proposed Transaction Asset(s) to Buyer and perfecting a precautionary first priority security interest of Buyer in the proposed Transaction Asset(s) (and, in each case except with respect to the Initial Transaction Asset, in any Interest Rate Protection Agreements held by Seller with respect thereto) which shall be subject to no Liens except as expressly permitted by Buyer. Each of the Transfer Documents shall contain such representations and warranties concerning the proposed Transaction Asset and such other terms as shall be reasonably satisfactory to Buyer.

(viii)     Opinions of Counsel . Buyer shall have received (A) from counsel to Seller its legal opinion, as to (among other things) enforceability of this Agreement and all documents executed and delivered hereunder in connection with such Transaction, (B) in the event an Eligible Transaction Asset is a Mortgage Loan or Mortgage B Note, at Buyer’s option, an opinion from applicable local counsel as to the enforceability of the assignment of mortgage to Buyer and the perfection of the Eligible Transaction Asset under the laws of the applicable state, to the extent such opinion was issued in connection with the related Mortgage Loan or Mortgage B Note, as applicable, and (C) an opinion to Seller and its successors and assigns from counsel to the underlying obligor on the underlying loan transaction, as applicable, as to enforceability of the loan documents governing such transaction in a form acceptable to Buyer (and shall include, without limitation, opinions as to due formation, authority, choice of law and perfection of security interests). Such legal opinions referred to in clauses (A) and (B) above shall be addressed to Buyer and its successors and assigns (and the opinion referred to in clause (C) above shall state that it may be relied upon by the successors and assigns of Seller in Seller’s capacity as lender

 

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on the underlying loan transaction), dated the related Purchase Date, and in form and substance reasonably satisfactory to Buyer.

(ix)       Additional Real Estate Matters . To the extent obtained by Seller from the Transaction Asset Obligor relating to any Eligible Transaction Asset at the origination thereof, Seller shall have delivered to Buyer such other real estate related certificates and documentation as may have been requested by Buyer, such as (i) certificates of occupancy and letters certifying that the property is in compliance with all applicable zoning laws, each issued by the appropriate Governmental Authority and (ii) abstracts of all leases in effect at the real property relating to such Transaction Asset.

(x)        B Notes, Mezzanine Loans, Mezzanine Loan Participations and Preferred Equity Interests . In the case of a B Note, Mezzanine Loan, Mezzanine Loan Participation or Preferred Equity Interest, Buyer shall have received all documentation specified herein as if the underlying loan were the direct Transaction Asset and, in addition, all documentation evidencing or otherwise relating to the B Note, Mezzanine Loan, Mezzanine Loan Participation or Preferred Equity Interest, as applicable.

(xi)       CMBS . In the case of CMBS, Buyer shall have received (a) a copy of the applicable pooling and servicing agreement, trust agreement, participation agreement or similar document governing the issuance and administration of the CMBS; (b) a copy of any new issue asset summary books; (c) copy of the applicable prospectus or offering memorandum; (d) to the extent that the CMBS is certificated, an original of the relevant certificate duly endorsed in blank to Buyer; (e) to the extent that the CMBS is not certificated, all documents requested by Buyer to confirm that the CMBS is being held in a security account under the control of Buyer, or such other evidence of confirmation of the sale to Buyer as Buyer shall require; (f) a copy of the documents specified above relating to, directly or indirectly, the subject Transaction Asset, to the extent obtained by the originating lender and available to Seller; and (g) a copy of any other agreement or instrument evidencing or otherwise governing the CMBS.

(xii)       Other Documents . Buyer shall have received such other documents as Buyer or its counsel shall reasonably request with respect to each or any Transaction Asset.

(c)         Transaction Asset Final Approval or Disapproval . Not later than two (2) Business Days following the date upon which Seller has tendered performance of the conditions enumerated in Section 3.03(b) or has delivered such items or documents fully executed, if applicable, in final form, Buyer shall either (i) if the Transaction Asset Documents or the Transfer Documents with respect to the proposed Transaction Asset are not reasonably satisfactory in form and substance to Buyer, notify Seller that Buyer has not approved the proposed Transaction Asset as a Transaction Asset or (ii) notify Seller and Bailee, if applicable, that Buyer has approved the proposed Transaction Asset as a Transaction Asset. Buyer’s failure to respond to Seller within two (2) Business Days shall be deemed to be a denial of Seller’s request that Buyer approve the proposed Transaction Asset, unless Buyer and Seller have agreed otherwise in writing.

(d)         Procedure for Purchase of Eligible Transaction Assets . Once Buyer has approved the Transaction Asset in accordance with Section 3.03(c) above, Seller may request a Transaction hereunder, on any Business Day during the period from and including the Effective Date to and including the Termination Date, by delivering to Buyer, with a copy to Custodian, a Confirmation, which Confirmation must be received by Buyer prior to 12:00 p.m., New York City time, one (1) Business Day prior to the requested Purchase Date. Such Confirmation shall have attached to it an Officer’s Certificate signed by a Responsible Officer of Seller as required by Section 6.02(b) hereof, as well as a Transaction Asset Tape. Contemporaneously with the delivery of the Confirmation, Seller shall deliver to Buyer with a copy to Custodian, a Custodial Identification Certificate along with the

 

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accompanying Transaction Asset Schedule with respect to all proposed Transaction Assets to be sold to Buyer on the applicable Purchase Date.

(e)       Delivery of Asset Files and Transfer Documents .

“Non-Table Funded” Transaction Asset :

(1)      By no later than 12:00 p.m., New York City time, two (2) Business Days prior to any Purchase Date, Seller shall deliver to the Custodian as to any Transaction Asset on a case-by-case basis, (i) original counterparts of all Transaction Asset Documents comprising the Asset File, (ii) the Transfer Documents described in Section 3.03(b)(vii) above, and (iii) to the extent applicable, any other documents, reports or updated information as Buyer shall request pursuant to Section 3.03(b) not heretofore finally approved by Buyer.

“Table Funded” Transaction Assets :

(1)      By no later than 12:00 p.m., New York City time, on the Purchase Date, Seller shall cause the Bailee to deliver to the Custodian and the Buyer by facsimile or e-mail (i) as to each Eligible Transaction Asset, the original note evidencing the making of a loan secured by such Transaction Asset, the Transfer Documents described in Section 3.03(b)(vii) above, and a fully executed Bailee Agreement and Bailee’s Trust Receipt and Certification issued by the Bailee thereunder, (ii) evidence satisfactory to Buyer that all documents necessary to (a) transfer title to the Eligible Transaction Asset to Seller and to perfect Seller’s interest in the collateral relating thereto and (b) perfect Buyer’s interest in the Eligible Transaction Assets, have been delivered to a party acceptable to Buyer for recordation and filing, and (iii) copies of all other documents comprising the Asset File for each Eligible Transaction Asset.

(2)      By no later than 12:00 p.m., New York City time, on the third (3rd) Business Day following the applicable Purchase Date, Seller shall cause the Bailee to deliver to the Custodian the Asset File.

(f)       Delivery of Transaction Asset Schedules and Trust Receipts . With respect to “Table Funded” Transaction Assets, by 1:00 p.m. New York City time on each Purchase Date, Custodian shall provide to Buyer a proposed Transaction Asset Schedule for the applicable Eligible Transaction Assets. With respect to “Non-Table Funded” Transaction Assets, by no later than 1:00 p.m., New York City time, on the Purchase Date, Custodian shall deliver to Seller and Buyer a Trust Receipt with a Transaction Asset Schedule in respect of all of the Transaction Assets sold to Buyer on such Purchase Date. With respect to “Table Funded” Transaction Assets, by no later than 1:00 p.m. New York City time on the third (3rd) Business Day following the applicable Purchase Date, the Custodian shall deliver to Buyer a Trust Receipt with a Transaction Asset Schedule in respect of all of the Transaction Assets sold to Buyer on the applicable Purchase Date.

(g)       Entering into Transaction . If Seller shall deliver a Confirmation pursuant to Section 3.03(d) hereof and all conditions precedent set forth in Sections 3.03 and 6.02 (and, in the case of the Initial Transaction, 6.01) have been met, and provided no Default or Event of Default shall have occurred and be continuing, Buyer shall enter into a Transaction with Seller on the requested Purchase Date with a Purchase Price in the amount so requested and approved by Buyer.

 

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(h)       Funding of Transaction . Subject to the timely receipt by Buyer of a Trust Receipt with a Transaction Asset Schedule as provided above, and subject further to the provisions of Section 6 hereof, such Purchase Price payment will then be made available to Seller by Buyer transferring, via wire transfer, to the following account of Seller: Wells Fargo Bank , San Francisco, CA, ABA # 121000248, Account Name: KBS GKK Participation Holdings I, LLC, Account #: 4121 762173, the aggregate Purchase Price amount of such Transaction in funds immediately available to Seller. Buyer may consider on a case-by-case basis alternative funding arrangements requested by Seller, including the funding through an escrow agent acceptable to Buyer in its sole but reasonable discretion.

(i)       Additional Documents . From time to time, Seller shall forward to the Custodian additional original documents or additional documents evidencing (A) any assumption, modification, consolidation or extension of a Transaction Asset permitted pursuant to the terms of this Agreement and the Transaction Documents or (B) any amendment to the operative documents with respect to an Equity Interest, in each case approved by Buyer in accordance with the terms of this Agreement and the Transfer Documents or the Security Documents, and upon receipt of any such other documents, the Custodian shall hold such other documents as Buyer shall request from time to time in accordance with the Custodial Agreement.

(j)       Certified Copies . With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to Seller in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Buyer a true copy thereof with an Officer’s Certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation. Seller shall deliver such original documents to the Custodian promptly when they are received.

3.04.     Debt Yield Test Failure .

(a)      If a Debt Yield Test Failure shall occur, and Buyer and Citigroup Financial Products, Inc. determine, in their sole and absolute discretion,, that the aggregate Debt Yield Test Value on the date of such Debt Yield Test Failure of (i) one or more of the DYT Assets in the DYT Asset Pool that are not yet subject to a Transaction, plus (ii) any DYT Assets that have theretofore become the subject of a Transaction, would be, if such DYT Asset(s) described in clause (i) above were Transaction Asset(s) hereunder, sufficient to result in a Debt Yield Test Cure, Buyer and Citigroup Financial Products, Inc. shall initially select, and shall give Seller written notice of such initial selection within two (2) Business Days thereafter (an “ Initial DYT Notice ”), one or more DYT Assets that Seller may wish to be conveyed by Seller to Buyer and to become Transaction Assets hereunder and under the Citigroup MRA for the sole purpose of effecting such Debt Yield Test Cure. Within three (3) Business Days after the giving of the Initial DYT Notice, Seller shall submit to Buyer and Citigroup Financial Products, Inc. (i) a Variance Statement as to each DYT Asset identified in the Initial DYT Notice and (ii) a complete DYT Asset Due Diligence Package for each DYT Asset specified in the Initial DYT Notice. Within five (5) Business Days after such submission by Seller, Buyer and Citigroup Financial Products, Inc. shall make their selection of the DYT Asset that Buyer and Citigroup Financial Products, Inc. wish to become Transaction Assets hereunder and under the Citigroup MRA to effect such Debt Yield Test Cure and shall notify Seller thereof (a “ DYT Notice ”). Such selection of DYT Assets shall be made in the sole and absolute discretion of Buyer and Citigroup Financial Products, Inc. No Purchase Price shall be funded with respect to any DYT Assets.

(b)      Upon receipt of the DYT Notice, Seller shall (or shall cause Guarantor to require that the Subsidiary of Guarantor that owns such DYT Asset) within two (2) Business Days, enter into a participation agreement with respect to, and create certificated participations in, each such DYT Asset such that a 56.25% participation therein can be conveyed to Buyer pursuant to this Section 3.04 and a

 

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43.75% participation therein can be conveyed to Citigroup Financial Products, Inc. under the Citigroup MRA. Each such participation agreement shall be in form substantially similar to the Participation Agreement and Participation Certificates, with such changes to be made thereto that are reasonably required.

(c)      Prior to 12:00 p.m., New