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III.           REPRESENTATIONS AND WARRANTIES

 

Section 3.1.           Borrower Representations.

 

Borrower represents and warrants to Lender as of the Closing Date (and as of such other dates specified below) that:

 

3.1.1       Organization.

 

(a)           Each of Borrower and Sole Member is, and since the date of its respective formation has been, duly organized, validly existing and in good standing with full power and authority to own its assets and conduct its business, and is, and since the date of its respective formation has been, duly qualified and in good standing in all jurisdictions in which the ownership or leasing of its property or the conduct of its business requires such qualification (except where the failure to be so qualified would not have a Material Adverse Effect) and Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents by it, and has the power and authority to execute, deliver and perform under this Agreement, the other Loan Documents and all the transactions contemplated hereby and thereby.

 

(b)           Borrower’s exact legal name is correctly set forth in the first paragraph of this Agreement.  Borrower is an organization of the type specified in the first paragraph of this Agreement.  Borrower is incorporated or organized under the laws of the state specified in the first paragraph of this Agreement.  Borrower’s principal place of business and chief executive office, and the place where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the medium of recording, including software, writings, plans, specifications and schematics, has been for the preceding four (4) months (or, if less than four (4) months, the entire period of the existence of Borrower) and will continue to be the address of Borrower set forth in the first paragraph of this Agreement (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date of such change).  Borrower’s organizational identification number, if any, assigned by the state of its incorporation or organization is 6460062.  Borrower’s federal tax identification number is 33-0336973.

 

3.1.2       Proceedings.  This Agreement and the other Loan Documents have been duly authorized, executed and delivered by or on behalf of Borrower and, to Borrower’s knowledge, constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

 

3.1.3       No Conflicts.  The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any asset or property of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of Borrower’s assets or properties is subject, nor will such action result in any violation of the provisions of any Legal Requirements of any Governmental Authority having jurisdiction over Borrower or any of Borrower’s assets or properties.

 

3.1.4       Litigation.  There is no action, suit, proceeding or investigation pending or, to Borrower’s knowledge, threatened against Borrower, Sole Member, Guarantor, Manager or the Property in any court or by or before any other Governmental Authority that is reasonably likely to have a Material Adverse Effect.

 

3.1.5       Agreements.  Borrower is not a party to any agreement or instrument or subject to any restriction which could materially and adversely affect Borrower or the Property, or Borrower’s business, assets or properties, operations or condition (financial or otherwise).  Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it is a party or by which Borrower or the Property is bound.  Borrower has no material financial obligation (contingent or otherwise) under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property as permitted under Section 3.1.24(d) hereof and (b) obligations under the Loan Documents.

 

3.1.6       Consents.  Each consent, approval, authorization, order, registration or qualification of or with any court or any other Governmental Authority required for the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents has been obtained and is in full force and effect.

 

3.1.7       Title.  Borrower has good, marketable and insurable fee simple title to the real property comprising part of the Property and good title to the balance of the Property, free and clear of all Liens whatsoever except the Permitted Encumbrances.  The Security Instrument, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, when properly recorded in the appropriate records, will create (a) a valid, perfected first priority lien on the Property, subject only to Permitted Encumbrances, and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to the Permitted Encumbrances.  There are no claims for payment or mechanic’s, materialman’s or other similar liens or claims which have been filed for work, labor or materials affecting the Property which are or may become Liens prior to, or of equal priority with, the Lien of the Security Instrument and the other Loan Documents.  None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Security Instrument and the other Loan Documents, materially and adversely affect the value of the Property, impair the use or operation of the Property or impair Borrower’s ability to perform its Obligations in a timely manner.

 

3.1.8       No Plan Assets.  As of the date hereof and throughout the Term, (a) Borrower does not sponsor, is not obligated to contribute to and is not itself and will not be an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA or Section 4975 of the Code, (b) none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (c) Borrower is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA, and (d) transactions by or with Borrower are not and will not be subject to any statute, rule or regulation regulating investments of, or fiduciary obligations with respect to, “governmental plans” within the meaning of Section 3(32) of ERISA which is similar to the provisions of Section 406 of ERISA or Section 4975 of the Code and which prohibit or otherwise restrict the transactions contemplated by this Agreement (including, but not limited to, the exercise by Lender of any of its rights under the Loan Documents).

 

3.1.9       Compliance.  Borrower and the Property and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes.  In the event that all or any part of the Improvements are destroyed or damaged, said Improvements can be legally reconstructed in all material respects to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits.  No legal proceedings are pending or, to the knowledge of Borrower, threatened in writing with respect to the zoning of the Property.  Neither the zoning nor any other right to construct, use or operate the Property is in any way dependent upon or related to any property other than the Property.  Borrower is not in default or violation of any order, regulation, writ, injunction, decree or demand of any Governmental Authority, the violation of which could have a Material Adverse Effect.  There has not been committed by Borrower or any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording the federal government, any state or local government or any other Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s Obligations under any of the Loan Documents.

 

3.1.10     Financial Information.  All financial data, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Lender in respect of the Property or otherwise in connection with the Loan (i) are true, correct and complete in all material respects, (ii) accurately represent the financial condition of Borrower and the Property, as applicable, as of the date of such reports, and (iii) have been prepared in accordance with the Acceptable Accounting Basis and consistently applied throughout the periods covered.  Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and that could have a Material Adverse Effect.  Since the date of such financial statements, there has been no material adverse change in the financial condition, operation or business of Borrower or the Property from that set forth in said financial statements.

 

3.1.11     Condemnation.  No Condemnation or other similar proceeding has been commenced or, to Borrower’s best knowledge, has been threatened or is contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.

 

3.1.12     Easements; Utilities and Public Access.  The Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property for its intended uses.  All public utilities necessary or convenient to the continued use and enjoyment of the Property are located either in the public right‑of‑way abutting the Property (which are connected so as to serve the Property without passing over any other property) or in recorded easements serving the Property and such easements are set forth in and insured by the Title Insurance Policy.  All roads necessary for the use of the Property for its current purposes have been completed and dedicated to public use and accepted by all applicable Governmental Authorities.

 

3.1.13     Separate Lots.  The Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of the Property.

 

3.1.14     Assessments.  There are no pending or, to Borrower’s best knowledge, proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

 

3.1.15     Enforceability .  The Loan Documents are not subject to any right of rescission, set‑off, counterclaim or defense by Borrower, Sole Member or Guarantor, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject only to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and, as to enforceability, to principles of equity), and neither Borrower, Sole Member nor Guarantor has asserted any right of rescission, set‑off, counterclaim or defense with respect thereto.

 

3.1.16     Assignment of Leases.  The Assignment of Leases creates a valid assignment of, or a valid security interest in, certain rights under the Leases, subject only to a license granted to Borrower to exercise certain rights and to perform certain obligations of the lessor under the Leases, as more particularly set forth therein.  No Person other than Lender has any interest in or assignment of the Leases or any portion of the Rents due and payable or to become due and payable thereunder.

 

3.1.17     Insurance.  Borrower has obtained and has delivered to Lender (a) original or certified copies of the Policies or certificates of insurance reasonably acceptable to Lender reflecting the insurance coverages, amounts and other requirements set forth in this Agreement and (b) evidence reasonably acceptable to Lender that all premiums thereunder have been prepaid.  No claims have been made under any of the Policies, and no Person, including Borrower, has done, by act or omission, or anything which would impair the coverage of any of the Policies.

 

3.1.18     Licenses.  All approvals, authorizations, certifications, licenses and permits, including, without limitation, certificates of completion and occupancy, required by any Governmental Authority or otherwise necessary for the legal ownership, use, occupancy and operation of the Property in the manner in which the Property is currently being owned, used, occupied and operated have been obtained by or on behalf of Borrower and are in full force and effect.

 

3.1.19     Flood Zone.  None of the Improvements on the Property is located in an area identified by the Federal Emergency Management Agency as a special flood hazard area (or, if so located, the flood insurance required pursuant to Section 5.1.1(a)(i) is in full force and effect with respect to the Property).

 

3.1.20     Physical Condition.  The Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects; to Borrower’s knowledge, there exists no structural or other material defects or damages in the Property, whether latent or otherwise; and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or any termination or threatened termination of any policy of insurance or bond.

 

3.1.21    Boundaries.  All of the improvements which were included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvements on adjoining properties encroach upon the Property.  No easements or other encumbrances affecting the Property encroach upon any of the Improvements so as to affect the value, marketability, use or operation of the Property except those which are insured against by the Title Insurance Policy, each of which, whether or not insured against by the Title Insurance Policy, is shown on the Survey.

 

3.1.22     Leases .  Borrower represents and warrants to Lender with respect to the Leases that:  (a) the rent roll attached hereto as Schedule 3.1.22 is true, correct and complete and the Property is not subject to any Leases other than the Ionis Lease, (b) the Ionis Lease is in full force and effect and there are no defaults thereunder by any party thereto and there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder by any party thereto, (c) the copies of the Leases delivered to Lender are true, correct and complete, and there are no oral agreements with respect thereto, (d) no Rent (including security or other deposits) has been paid more than one (1) month in advance of its due date, (e) all work to be performed by the landlord under each Lease has been performed as required and has been accepted by the applicable Tenant, (f) any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by the landlord to any Tenant has already been received by such Tenant, (g) all security or other deposits are being held in accordance with the applicable Leases and all applicable Legal Requirements, (h) Borrower has no knowledge of any notice of termination or default with respect to any Lease, (i) Borrower has not assigned or pledged any of the Leases, the rents or any interest therein except to Lender, (j) no Tenant or other Person has an option, right of first refusal or offer or any other preferential right to purchase all or any portion of, or interest in, the Property, (k) no Tenant has any right or option for additional space in the Improvements, (l) no Tenant has assigned its Lease or sublet all or any portion of the premises demised thereby, (m) no Tenant has the right to terminate its Lease prior to expiration of the stated term of such Lease, (n) to Borrower’s knowledge, no  Hazardous Substances have been disposed, stored or treated by any Tenant on, under or about the Property, other than in compliance with all Legal Requirements and Environmental Laws, (o) Borrower does not have any knowledge of any Tenant’s intention to use its leased premises for any activity which, directly or indirectly, involves the use, generation, treatment, storage, disposal or transportation of any petroleum product or any other Hazardous Substances, other than in compliance with all legal requirements and Environmental Laws, and (p) all existing Leases are subordinate to the Security Instrument either pursuant to their terms or a recorded subordination agreement.  Borrower acknowledges and agrees that the Ionis Lease is a “true lease” and does not represent a financing arrangement and Borrower covenants and agrees that it will reflect the Ionis Lease in all applicable books, records and reports in a manner consistent with true lease treatment.

 

3.1.23     Filing, Recording and Other Taxes.  All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid under the applicable Legal Requirements in connection with the transfer of the Property to Borrower have been paid or are being paid simultaneously herewith.  All mortgage, mortgage recording, stamp, intangible or other similar taxes required to be paid under the applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Security Instrument, have been paid or are being paid simultaneously herewith.  All taxes and governmental assessments due and owing in respect of the Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established under the Loan Documents.

 

3.1.24     Single Purpose.

 

Borrower hereby represents and warrants to, and covenants with, Lender that since the date of its formation and at all times on and after the date hereof and until such time as the Debt shall be paid in full:

 

(a)           Borrower (i) has been, is, and will be organized solely for the purpose of acquiring, owning, leasing, managing and operating the Property, entering into and performing its obligations under the Loan Documents, refinancing the Property in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing, and (ii) has not owned, does not own, and will not own any asset or property other than (A) the Property, and (B) incidental personal property necessary for the  ownership, leasing, management or operation of the Property.

 

(b)           Borrower has not engaged and will not engage in any business or activity other than the acquisition, ownership, leasing, management and operation of the Property and Borrower will conduct and operate its business as presently conducted and operated.

 

(c)           Borrower has not entered and will not enter into any contract or agreement with any Affiliate of Borrower, any constituent party of Borrower or any Affiliate of any constituent party, except in the ordinary course of business and upon terms and conditions that are intrinsically fair, commercially reasonable, and substantially similar to those that would be available on an arm’s-length basis from an unrelated third party.

 

(d)           Borrower has not incurred and will not incur any Indebtedness other than (i) the Debt and (ii) unsecured trade payables and operational debt not evidenced by a note and in an aggregate amount not exceeding three percent (3%) of the Outstanding Principal Balance at any one time; provided that any Indebtedness incurred pursuant to clause (ii) shall be (A) outstanding not more than sixty (60) days and (B) incurred in the ordinary course of business.  No Indebtedness, other than the Debt, may be secured (senior, subordinate or pari passu) by the Property.

 

(e)           Borrower has not made and will not make any loans or advances to any other Person (including any Affiliate of Borrower, any constituent party of Borrower or any Affiliate of any constituent party), and has not acquired and shall not acquire obligations or securities of its Affiliates.

 

(f)            Borrower has been, is, and will endeavor to remain solvent and Borrower has paid its debt and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same became due and will pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due; provided that the foregoing shall not create an obligation on the part of any direct or indirect member, partner, shareholder, beneficiary or other beneficial interest holder in Borrower, or any officer, director, employee, trustee, beneficiary or Affiliate of any of the foregoing to make capital contributions, equity infusions or loans to Borrower.

 

(g)           Borrower has done or caused to be done, and will do and cause to be done, all things necessary to observe its organizational formalities and preserve its separate existence, (ii) Borrower has not terminated or failed to comply with and will not terminate or fail to comply with the provisions of its Organizational Documents, (iii) Borrower has not amended, modified or otherwise changed its Organizational Documents and (iv) unless (A) Lender has consented in writing and (B) following a Securitization of the Loan, the Rating Agencies have issued a Rating Agency Confirmation in connection therewith, Borrower will not amend, modify or otherwise change its Organizational Documents except:  (i) to cure any obvious ambiguity or (ii) to correct or supplement any provision in a manner consistent with the intent of this Agreement and the other Loan Documents.

 

(h)           Borrower has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates and any other Person.  Borrower’s assets have not been listed as assets on the financial statement of any other Person; provided, however, that Borrower’s assets may have been included in a consolidated financial statement of its Affiliates; provided that, if applicable, (i) appropriate notation (e.g., footnote) were made on such consolidated financial statements to indicate the separateness of Borrower and such Affiliates and to indicate that Borrower’s assets and credit were not available to satisfy the debts and other obligations of such Affiliates or any other Person, and (ii) such assets were listed on Borrower’s own separate balance sheet.  Borrower’s assets will not be listed as assets on the financial statement of any other Person; provided, however, that Borrower’s assets may be included in a consolidated financial statement of its Affiliates provided that (A) appropriate notation (e.g., footnote) shall be made on such consolidated financial statements to indicate the separateness of Borrower and such Affiliates and to indicate that Borrower’s assets and credit are not available to satisfy the debts and other obligations of such Affiliates or any other Person, and (B) such assets shall be listed on Borrower’s own separate balance sheet.  Borrower shall file its own tax returns (except to the extent that Borrower is treated as a “disregarded entity” for tax purposes and was or is not required to file tax returns under applicable law), has not filed and shall not file a consolidated federal income tax return with any other Person, and has paid and shall pay any taxes required to be paid under applicable law.  Borrower has maintained and shall maintain its books, records, resolutions and agreements as official records.

 

(i)             Borrower (i) has been, will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of Borrower or any constituent party of Borrower), (ii) has corrected and shall correct any known misunderstanding regarding its status as a separate entity, (iii) has conducted and shall conduct business solely in its own name, (iv) has not identified and shall not identify itself or any of its Affiliates as a division or department or part of the other (except as required under Acceptable Accounting Basis with respect to a disregarded entity for tax purposes) and (v) has maintained and utilized and shall maintain and utilize separate stationery, invoices and checks bearing its own name.

 

(j)             Borrower has maintained and will endeavor to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; provided, that the foregoing shall not create an obligation on the part of any direct or indirect member, partner, shareholder, beneficiary or other beneficial interest holder in Borrower, or any officer, director, employee, trustee, beneficiary or Affiliate of any of the foregoing to make capital contributions, equity infusions or loans to Borrower.

 

(k)           Neither Borrower nor any constituent party of Borrower has sought and, to the fullest extent permitted by applicable law, neither Borrower nor any constituent party of Borrower will seek or effect the liquidation, dissolution, winding up, consolidation or merger, in whole or in part, of Borrower, any sale or other transfer of all or substantially all of its assets or any sale or other transfer outside the ordinary course of business.

 

(l)             Borrower has not commingled and will not commingle funds or other assets of Borrower with those of any Affiliate or constituent party or any other Person, and has held and will hold all of its assets solely in its own name.

 

(m)           Borrower has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any other Person.

 

(n)           Borrower did not assume, guarantee or become obligated for the debts or obligations of any other Person and did not hold itself out to be responsible for or have its credit or assets available to satisfy the debts or obligations of any other Person.  Borrower will not assume, guarantee or become obligated for the debts or obligations of any other Person and does not and will not hold itself out to be responsible for or have its credit or assets available to satisfy the debts or obligations of any other Person.

 

(o)           The Organizational Documents of Borrower shall provide that the business and affairs of Borrower shall be managed by Sole Member and at all times shall have at least one (1) Independent Director designated by Sole Member.  As used herein, the term “Independent Director” shall refer to a duly appointed individual, who has at least three (3) years prior employment experience and continues to be employed as an independent director, independent manager or independent member by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Wilmington Trust National Association, Wilmington Trust SP Services, Inc., Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional independent directors, independent managers and independent members, another nationally-recognized company that provides such services and which is reasonably approved by Lender; (ii) is not, and has never been, and will not, while serving as an Independent Director be, any of the following: (A) a director, manager, officer, employee, partner, member, attorney or counsel of Borrower, any Affiliate of Borrower any direct or indirect equity holder of any of them, (B) a creditor, supplier, service provider (including provider of professional services) to Borrower or any Affiliate of Borrower (other than a nationally-recognized company that routinely provides professional independent directors, independent managers or independent members and other corporate services to Borrower or any Affiliate of Borrower in the ordinary course of its business), (C) a member of the immediate family of any such director, manager, officer, employee, partner, member, creditor, supplier, service provider or other Person, or (D) a Person Controlling or under common Control with any of the Persons described in clause (A), (B) or (C) above.  A natural person who satisfies the foregoing definition other than clause (ii) shall not be disqualified as a result of clause (ii)(A) by reason of (I) being, having been or becoming an Independent Director of an Affiliate of Borrower that is not in the direct chain of ownership of Borrower or Sole Member and that is required by a creditor to be a “single purpose entity”; provided that such Independent Director is, was or will be employed by a company that routinely provides professional independent directors, independent managers or independent members, or (II) being, having been or becoming a member of Borrower pursuant to an express provision in Borrower’s operating agreement providing for the appointment of such Independent Director as a member of Borrower upon the occurrence of any event pursuant to which Sole Member ceases to be a member of Borrower (including the withdrawal or dissolution of Sole Member).  A natural person who satisfies the foregoing definition other than clause (ii) shall not be disqualified as a result of clause (ii)(A) or (ii)(B) by reason of being, having been or becoming an Independent Director of a “single purpose entity” affiliated with Borrower; provided that the fees or other compensation that such individual earns by serving as an Independent Director of one or more Affiliates of Borrower in any given year constitute, in the aggregate, less than five percent (5%) of such individual’s income for such year.  The Organizational Documents of Borrower shall provide that no Independent Director of Borrower may be removed or replaced without Cause, and unless Borrower provides Lender with not less than three (3) Business Days’ prior notice of (1) any proposed removal of any Independent Director, together with a statement as to the reasons for such removal, and (2) the identity of the proposed replacement Independent Director, together with a certification that such replacement satisfies the requirements set forth in the Organizational Documents of Borrower relating to an Independent Director.  In addition, the Organizational Documents of Borrower shall provide an express acknowledgment that Lender is an intended third-party beneficiary of the “special purpose” and “separateness” provisions of such Organizational Documents.  As used in this paragraph, the term “single purpose entity” shall mean a Person whose Organizational Documents contain, and who covenants that such Person shall comply or cause compliance with, provisions substantially similar to those set forth in this Section 3.1.24.

 

(p)           The Organizational Documents of Borrower shall provide that Borrower will not (and Borrower agrees that it will not), without the consent of the Independent Director, (i) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, (ii) seek or consent to the appointment of a receiver, liquidator or any similar official for Borrower or a substantial portion of its assets or properties, (iv) make an assignment for the benefit of creditors, (v) admit in writing Borrower’s inability to pay its debts generally as they become due, or (vi) take any action in furtherance of any of the foregoing.  In addition, the Organizational Documents of Borrower shall provide that, when voting with respect to any of the matters set forth in the immediately preceding sentence of this Section 3.1.24(p), the Independent Director shall consider only the interests of Borrower, including its creditors.

 

(q)           The Organizational Documents of Borrower shall provide that, as long as any portion of the Debt remains outstanding, upon the occurrence of any event that causes the sole member of Borrower (“Sole Member”) to cease to be a member of Borrower (other than (i) upon an assignment by Sole Member of all of its limited liability company interests in Borrower and the admission of the transferee, if permitted pursuant to the Organizational Documents of Borrower and the Loan Documents, or (ii) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the Organizational Documents of Borrower and the Loan Documents), the person acting as an Independent Director of Borrower shall, without any action of any Person and simultaneously with Sole Member ceasing to be a member of Borrower, automatically be admitted as a member of Borrower (a “Special Member”) and shall preserve and continue the existence of Borrower without dissolution.  The Organizational Documents of Borrower shall further provide that for so long as any portion of the Debt is outstanding, no Special Member may resign or transfer its rights as a Special Member unless (A) a successor Special Member has been admitted to Borrower as a Special Member, and (B) such successor Special Member has also accepted its appointment as an Independent Director of Borrower.

 

(r)            The Organizational Documents of Borrower shall provide that, as long as any portion of the Debt remains outstanding, except as expressly permitted pursuant to the terms of the Loan Documents, (i) Sole Member may not resign, and (ii) no additional member shall be admitted to Borrower.

 

(s)           The Organizational Documents of Borrower shall provide that, as long as any portion of the Debt remains outstanding: (i) Borrower shall be dissolved, and its affairs shall be wound up, only upon the first to occur of the following: (A) the termination of the legal existence of the last remaining member of Borrower or the occurrence of any other event which terminates the continued membership of the last remaining member of Borrower in Borrower unless the business of Borrower is continued in a manner permitted by its operating agreement or the Delaware Limited Liability Company Act (the “Act”), or (B) the entry of a decree of judicial dissolution under Section 18-802 of the Act; (ii) upon the occurrence of any event that causes the last remaining member of Borrower to cease to be a member of Borrower or that causes Sole Member to cease to be a member of Borrower (other than (A) upon an assignment by Sole Member of all of its limited liability company interests in Borrower and the admission of the transferee, if permitted pursuant to the Organizational Documents of Borrower and the Loan Documents, or (B) the resignation of Sole Member and the admission of an additional member of Borrower, if permitted pursuant to the Organizational Documents of Borrower and the Loan Documents), to the fullest extent permitted by applicable law, the personal representative of such last remaining member shall be authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in Borrower, agree in writing (1) to continue the existence of Borrower, and (2) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower, effective as of the occurrence of the event that terminated the continued membership of such member in Borrower; (iii) the bankruptcy of Sole Member or a Special Member shall not cause such Sole Member or Special Member to cease to be a member of Borrower and upon the occurrence of such event, the business of Borrower shall continue without dissolution; (iv) in the event of the dissolution of Borrower, Borrower shall conduct only such activities as are necessary to wind up its affairs (including the sale of its assets and properties in an orderly manner), and its assets and properties shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act; and (v) to the fullest extent permitted by applicable law, each of Sole Member and Special Members shall irrevocably waive any right or power that they might have to cause Borrower or any of its assets or properties to be partitioned, to cause the appointment of a receiver for all or any portion of the assets or properties of Borrower, to compel any sale of all or any portion of the assets or properties of Borrower pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of Borrower.

 

(t)            Borrower shall conduct its business so that the assumptions made with respect to Borrower in the Insolvency Opinion shall be true and correct in all respects.  In connection with the foregoing, Borrower hereby covenants and agrees that it will comply with or cause the compliance with, (i) all of the facts and assumptions (whether regarding Borrower or any other Person) set forth in the Insolvency Opinion, (ii) all of the representations, warranties and covenants in this Section 3.1.24, and (iii) all of the Organizational Documents of Borrower.

 

(u)           Borrower has not permitted and will not permit any Affiliate (other than Sole Member pursuant to the terms of the Organizational Documents of Borrower) or constituent party independent access to its bank accounts.

 

(v)           Borrower has paid and shall pay its own liabilities and expenses, including the salaries of its own employees (if any) from its own funds, and has maintained and shall maintain a sufficient number of employees (if any) in light of its contemplated business operations; provided that the foregoing shall not create an obligation on the part of any direct or indirect member, partner, shareholder, beneficiary or other beneficial interest holder in Borrower, or any officer, director, employee, trustee, beneficiary or Affiliate of any of the foregoing to make capital contributions, equity infusions or loans to Borrower.

 

(w)          Borrower has compensated and shall compensate each of its consultants and agents from its funds for services provided to it and Borrower has paid and shall pay from its assets all obligations of any kind incurred; provided that the foregoing shall not create an obligation on the part of any direct or indirect member, partner, shareholder, beneficiary or other beneficial interest holder in Borrower, or any officer, director, employee, trustee, beneficiary or Affiliate of any of the foregoing to make capital contributions, equity infusions or loans to Borrower.

 

(x)            Borrower has not (i) filed a bankruptcy, insolvency or reorganization petition or otherwise instituted insolvency proceedings or otherwise sought any relief under any laws relating to the relief from debts or the protection of debtors generally, (ii) sought or consented to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for Borrower or for all or any portion of Borrower’s assets or properties, (iii) made any assignment for the benefit of Borrower’s creditors or (iv) admitted in writing Borrower’s inability to pay its debts generally as they become due.  Without the unanimous consent of all of its directors or managers: (including the Independent Director), as applicable, Borrower will not (A) file a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for Borrower or for all or any portion of Borrower’s assets or properties, (C) make any assignment for the benefit of Borrower’s creditors or (D) admit in writing Borrower’s inability to pay its debts generally as they become due.

 

(y)           Borrower has maintained and will maintain an arm’s-length relationship with its Affiliates.

 

(z)            Borrower has allocated and will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including, without limitation, shared office space.

 

(aa)         Except to Lender in connection with the Loan, Borrower has not pledged and will not pledge its assets or properties for the benefit of, or to secure the obligations of, any other Person.

 

(bb)        Borrower has had, has and will have no obligation to indemnify its directors, managers, officers, members or Special Members, as the case may be, or, if applicable, has such an obligation that is fully subordinated to the Debt and that will not constitute a claim against Borrower if cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation.

 

(cc)         The Organizational Documents of Borrower shall provide that Borrower will not:  (i) dissolve, merge, liquidate, consolidate; (ii) sell, transfer, dispose, or encumber (except in accordance with the Loan Documents) all or substantially all of its assets or properties or acquire all or substantially all of the assets or properties of any other Person; or (iii) engage in any other business activity, or amend its Organizational Documents with respect to any of the matters set forth in this Section 3.1.24, without the prior consent of Lender in its sole discretion.

 

(dd)        Borrower and the Independent Director will consider the interests of Borrower’s creditors in connection with all actions.

 

(ee)         Borrower has not had and, except in connection with the Loan, does not have and will not have any of its obligations guaranteed by any Affiliate.

 

(ff)           Borrower has not owned or acquired and will not own or acquire any stock or securities of any Person (except to the extent expressly permitted under the Loan Documents).

 

(gg)         Borrower has not bought or held and will not buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities).

 

(hh)         Borrower has not formed, acquired or held and will not form, acquire or hold any subsidiary (whether corporation, partnership, limited liability company or other entity), and Borrower has not owned and will not own any equity interest in any other entity.

 

3.1.25     Tax Filings.  To the extent required, Borrower has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower.  Borrower believes that its tax returns (if any) properly reflect the income and taxes of Borrower for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.

 

3.1.26     Solvency.  Borrower (a) has not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents.  Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  The fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become or may become absolute and matured.  Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower).

 

3.1.27     Federal Reserve Regulations.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purposes prohibited by any Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents.

 

3.1.28     Organizational Chart.  The organizational chart attached hereto as Schedule 3.1.28, relating to Borrower and certain Affiliates and other Persons, is true, correct and complete on and as of the date hereof.  No Person, other than those Persons shown on Schedule 3.1.28, has any ownership interest in, or right of Control, directly or indirectly, in Borrower, and no Prohibited Entity holds any direct and/or indirect ownership interest in Borrower or the Property.

 

3.1.29     Bank Holding Company.  Borrower is not a “bank holding company” or a direct or indirect subsidiary of a “bank holding company” as defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the Board of Governors of the Federal Reserve System.

 

3.1.30     No Other Debt.  Borrower has not borrowed or received debt financing (other than permitted pursuant to this Agreement) that has not been heretofore repaid in full.

 

3.1.31     Investment Company Act.  Borrower is not (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; or (b) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

 

3.1.32     Intentionally Omitted. 

 

3.1.33    No Bankruptcy Filing.  No petition in bankruptcy has ever been filed against Borrower or any constituent party of Borrower, and neither Borrower nor any constituent party of Borrower has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors.  Neither Borrower nor any of its constituent parties is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrower’s or such constituent party’s assets or properties, and Borrower has no knowledge of any Person contemplating the filing of any such petition against Borrower or any of its constituent parties.

 

3.1.34     Full and Accurate Disclosure.  No information contained in this Agreement, the other Loan Documents, or any written statement or document furnished by or on behalf of Borrower in connection with the Loan (or, to the best of Borrower’s knowledge, contained in any third party report obtained by Borrower with respect to the Property (other than any third party reports obtained by Lender in connection with the closing of the Loan)) or pursuant to the terms of this Agreement or any other Loan Document contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.  There is no fact or circumstance presently known to Borrower which has not been disclosed to Lender and which is reasonably likely to have a Material Adverse Effect.

 

3.1.35     Foreign Person.  Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.

 

3.1.36     No Change in Facts or Circumstances; Disclosure.  All information submitted by and on behalf of Borrower to Lender and in all financial statements, rent rolls (including the rent roll attached hereto as Schedule 3.1.22), reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms of this Agreement or the other Loan Documents and all statements of fact made by or on behalf of Borrower in this Agreement or in any other Loan Document, are true, correct and complete in all material respects.  To the best of Borrower’s knowledge, there has been no material adverse change in any condition, fact, circumstance or event that would make any such information or statement of fact inaccurate, incomplete or otherwise misleading in any material respect or that otherwise has or could have a Material Adverse Effect.

 

3.1.37     Management Agreement.  As of the date hereof, the Property is not subject to any Management Agreement and is self-managed by the Borrower.

 

3.1.38     Perfection of Accounts.  Borrower hereby represents and warrants to Lender that:

 

(a)           This Agreement, together with the other Loan Documents, creates a valid and continuing security interest (as defined in the Uniform Commercial Code) in the Clearing Account and the Cash Management Account in favor of Lender, which security interest is prior to all other Liens, and is enforceable as such against creditors of and purchasers from Borrower.  The Clearing Account and the Cash Management Account are not in the name of any Person other than Borrower, as pledgor, and Lender, as pledgee.  Other than in connection with the Loan Documents, Borrower has not sold, pledged, transferred or otherwise conveyed the Clearing Account and the Cash Management Account;

 

(b)           The Clearing Account and the Cash Management Account constitute “deposit accounts” or “securities accounts” within the meaning of the Uniform Commercial Code; and

 

(c)           Borrower has not consented to Clearing Bank or Cash Management Bank complying with instructions with respect to the Clearing Account or the Cash Management Account from any Person other than Lender.

 

3.1.39     Intentionally Omitted.

 

3.1.40     REA. Borrower hereby represents and warrants to Lender with respect to the REA:

 

(a)           Borrower is a party to the REA and, to the best of Borrower’s knowledge, after due inquiry, the REA is in full force and effect and has not been amended or modified and Borrower’s interest therein has not been assigned pursuant to any assignment which survives the Closing Date except the assignment to Lender pursuant to the Loan Documents.

 

(b)           Borrower is not in default under the REA and, to the best of Borrower’s knowledge, no other party to the REA is in default thereunder and there is no existing condition which, but for the passage of time or the giving of notice or both, could result in a default under the REA.

 

(c)           To the best of Borrower’s knowledge, after due inquiry, the current addresses to which notices are sent to Borrower or any other party to the REA are correctly set forth in the REA.

 

(d)           There are no set-offs, claims, counterclaims or defenses being asserted or capable of being asserted after giving the requisite notice, if any, required under the REA or otherwise known by Borrower or any other party to the REA for the enforcement of the obligations of any party under the REA.

 

(e)           There are no Liens capable of being asserted for amounts due under the provisions of the REA which, if unpaid, may be asserted as a Lien prior to the Lien of the Security Instrument.

 

(f)            All common charges and other sums due from Borrower under the REA have been paid to the extent they are payable on or prior to the date hereof.

 

(g)           Lender is a “Mortgagee” for purposes of the REA and is entitled to all rights of a “Mortgagee” or holder of a “Mortgage” as defined in the REA.

 

3.1.41     Patriot Act.

 

(a)           None of Borrower, Guarantor or any Person who Controls Borrower or Guarantor, and to the best of Borrower’s knowledge, any of their respective brokers or other agents acting or benefiting in any capacity in connection with the Loan is a Prohibited Person.

 

(b)           None of Borrower, Guarantor or any Person who Controls Borrower or Guarantor and, and to the best of Borrower’s knowledge, any of their respective brokers or other agents acting in any capacity in connection with the Loan, (i) has conducted or will conduct any business or has engaged or will engage in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (ii) has dealt or will deal in, or otherwise has engaged or will engage in, any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224; or (iii) has engaged or will engage in or has conspired or will conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Patriot Act.

 

(c)            Borrower covenants and agrees to deliver to Lender any certification or other evidence requested from time to time by Lender in its sole discretion, confirming Borrower’s compliance with this Section 3.1.41.

 

3.1.42     Intentionally Omitted..

 

3.1.43     No Casualty.  The Property has suffered no material Casualty which has not been fully repaired and the cost thereof fully paid.

 

3.1.44     Purchase Options.  Neither the Property, any part thereof nor any interest therein is subject to any purchase options, rights of first refusal to purchase, rights of first offer to purchase or other similar rights in favor of any Person.

 

3.1.45    Use of Property.  The Property consists solely of an office building, research and development facilities and related operations and is used for no other purpose.

 

3.1.46     Fiscal Year.  Each fiscal year of Borrower commences on January 1.

 

3.1.47     Material Agreements.

 

(a)           Borrower has not entered into, and is not bound by, any Material Agreement which continues in existence, except those previously disclosed in writing to Lender.

 

(b)           Each of the Material Agreements is in full force and effect, there are no monetary or other defaults by Borrower thereunder and, to the best knowledge of Borrower, there are no monetary or other defaults thereunder by any other party thereto.  None of Borrower or any other Person acting on Borrower’s behalf has given or received any notice of default under any Material Agreement that remains outstanding or in dispute.

 

(c)           Borrower has delivered true, correct and complete copies of the Material Agreements (including all amendments and supplements thereto) to Lender.

 

(d)           No Material Agreement has as a party an Affiliate of Borrower.

 

3.1.48    Other Obligations and Liabilities.  Borrower has no liabilities or other obligations that arose or accrued prior to the date hereof that, either individually or in the aggregate, could have a Material Adverse Effect that has not been disclosed to Lender in writing prior to the Closing Date.  Borrower has no known contingent liabilities.

 

3.1.49     Illegal Activity.  No portion of the Property has been or will be purchased with proceeds of any illegal activity.

 

3.1.50     Underwriting Representations.  Borrower hereby represents that it:

 

(a)           has no judgments or liens of any nature against it except for tax liens not yet due;

 

(b)           is not involved in any dispute with any taxing authority;

 

(c)           is not now, nor has ever been, a party to any lawsuit, arbitration, summons, or legal proceeding that is still pending or that resulted in a judgment against it or its assets or properties that has not been paid in full;

 

(d)           has obtained a current Phase I environmental site assessment (and, if applicable, a current Phase II environmental assessment) (collectively, the “ESA”) for the Property prepared consistent with ASTM Practice E 1527 and the ESA has not identified any recognized environmental conditions that require further investigation or remediation; and

 

(e)           each amendment and restatement of Borrower’s Organizational Documents has been accomplished in accordance with, and was permitted by, the relevant provisions of said documents prior to such amendment or restatement from time to time.

 

3.1.51     Employees.  Borrower has no direct employees.

 

3.1.52    Acquisition Documents.  Borrower has delivered to Lender true, correct and complete copies of (a) the agreement pursuant to which Borrower is acquiring the Property on the date hereof (including all amendments and supplements thereto) (collectively, the “Purchase and Sale Agreement”) and (b) the settlement statement related to the sale of the Property to Borrower (the “Settlement Statement”).  There is no agreement (other than the Purchase and Sale Agreement) related to the sale of the Property to Borrower.  The Settlement Statement sets forth all payments, credits, prorations and other considerations related to the sale of the Property to Borrower.

 

Section 3.2.           Survival of Representations. The representations and warranties set forth in Section 3.1 hereof shall survive for so long as any amount remains payable to Lender under this Agreement or any of the other Loan Documents.

 

IV.           BORROWER COVENANTS

 

Section 4.1.          Borrower Affirmative Covenants.

 

Borrower hereby covenants and agrees with Lender that:

 

4.1.1       Existence; Compliance with Legal Requirements.  Each of Borrower and Sole Member shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and the Property.  There shall never be committed by Borrower, and Borrower shall use commercially reasonable efforts not to permit any other Person in occupancy of or involved with the operation or use of the Property to commit, any act or omission affording the federal government, any state or local government or any other Governmental Authority the right of forfeiture against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Borrower hereby covenants and agrees not to commit, and to use commercially reasonable efforts not to permit or suffer to exist, any act or omission affording such right of forfeiture.  Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all of its assets and properties used or useful in the conduct of its business and shall keep the Property in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the Security Instrument.  Borrower shall keep the Property insured at all times by financially sound and reputable insurers, to such extent and against such risks, and maintain liability and such other insurance, as is more fully provided in this Agreement.  After prior notice to Lender, Borrower, at its sole cost and expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or the Property or any alleged violation of any Legal Requirement; provided that (a) no Default or Event of Default has occurred and remains outstanding; (b) Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the Security Instrument; (c) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower or the Property is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (d) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (e) Borrower shall promptly upon final determination thereof comply with such Legal Requirement determined to be valid or applicable or cure any violation of such Legal Requirement; (f) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or the Property; (g) Borrower shall furnish such cash or other security as may be required in the proceeding, or as may be requested by Lender, to ensure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith; and (h) such contest by Borrower is not in violation of the Leases.  Lender may apply any such security or part thereof as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the Lien of the Security Instrument being primed by any related Lien.  Upon the final resolution of any such contest in favor of Borrower determining that Borrower is not in violation of the applicable Legal Requirement, Lender shall return any remaining portion of such security to Borrower.

 

4.1.2       Taxes and Other Charges.  Borrower shall pay, or cause Tenant to pay, all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof as the same become due and payable.  Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges no later than ten (10) Business Days prior to the date the same shall become delinquent.  Borrower shall not permit or suffer and shall promptly cause to be paid and discharged any Lien or charge against the Property.  After prior notice to Lender, Borrower, at its sole cost and expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges; provided that (a) no Default or Event of Default has occurred and remains outstanding; (b) Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the Security Instrument; (c) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or the Property is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable Legal Requirements; (d) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (e) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (f) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the Property; (g) Borrower shall furnish such cash or other security as may be required in the proceeding, or as may be requested by Lender, to ensure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon; and (h) such contest by Borrower is not in violation of the Leases.  Lender may pay over, assign or transfer any such security or part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement of such claimant is established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the Lien of the Security Instrument being primed by any related Lien.  Upon the final resolution of any such contest in favor of Borrower, Lender shall return any remaining portion of such security to Borrower.

 

4.1.3       Litigation.  Borrower shall give prompt notice to Lender of any litigation or governmental proceedings pending or threatened against the Property, Borrower, Sole Member or Guarantor which, if adversely determined, is reasonably likely to have a Material Adverse Effect.  Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

 

4.1.4       Access to Property.  Borrower shall permit agents, representatives and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice, subject to rights of Tenants under their Leases.

 

4.1.5       Further Assurances; Supplemental Mortgage Affidavits.  Borrower shall, at Borrower’s sole cost and expense:

 

(a)           furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested by Lender in connection therewith;

 

(b)           cure, or cause to be cured, any defects in the execution and delivery by Borrower and Guarantor of the Loan Documents;

 

(c)           execute and deliver, or cause to be executed and delivered, all such documents, instruments, certificates, assignments and other writings and do, or cause to be done, such other acts necessary or desirable (i) to correct any omissions in the Loan Documents, (ii) to evidence and more fully describe the collateral at any time securing or intended to secure the Obligations, (iii) to perfect, protect or preserve any Liens created under any of the Loan Documents or (iv) to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in connection therewith; and

 

(d)           do and execute, or cause to be done and executed, all such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time (provided the foregoing does not materially increase Borrower’s obligations or materially decrease its rights under the Loan Documents).

 

4.1.6       Financial Reporting.

 

(a)           Acceptable Accounting Basis.  Borrower shall keep and maintain, or shall cause to be kept and maintained, in accordance with the Acceptable Accounting Basis and, if applicable, the requirements of Regulation AB, proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Property.  All financial statements delivered to Lender pursuant to this Section 4.1.6 shall be prepared in accordance with the Acceptable Accounting Basis and consistently applied and, if applicable, the requirements of Regulation AB.

 

(b)           Monthly Reports.  Prior to a Securitization, and at the request of Lender, Borrower shall furnish, or cause to be furnished, to Lender on or before twenty (20) days after the end of each calendar month the following items, accompanied by an Officer’s Certificate stating that such items are true, correct and complete and fairly present the financial condition and results of the operations of Borrower and the Property (subject to normal year-end adjustments) as applicable:  (i) a rent roll for the subject month; (ii) monthly and year-to-date operating statements prepared for such month, noting Gross Income from Operations, Operating Expenses, Capital Expenditures, Net Operating Income, Net Cash Flow and such other information necessary and sufficient to fairly represent the financial position and results of operation of the Property during such month, all in form satisfactory to Lender; and (iii) a calculation reflecting the Debt Service Coverage Ratio as of the last day of such month for such month and for the immediately preceding twelve (12) month period.  In addition, such Officer’s Certificate shall also state the representations and warranties of Borrower set forth in Section 3.1.24 are true and correct in all material respects as of the date of such certificate and that there are no trade payables and operational debt outstanding for more than sixty (60) days.

 

(c)           Quarterly Reports.  Borrower shall furnish, or cause to be furnished, to Lender on or before sixty (60) days after the end of each calendar quarter the following items, accompanied by an Officer’s Certificate stating that such items are true, correct and complete and fairly present the financial condition and results of the operations of Borrower and the Property (subject to normal year-end adjustments) as applicable:  (i)  a rent roll for the subject quarter; (ii) (A) a balance sheet for Borrower as of the last day of such quarter prepared by a certified public accountant reasonably acceptable to Lender (provided, however, for so long as the Ionis Lease is in full force and effect and no Event of Default exists, such certified public accountant may be an employee of Sponsor) and (B) quarterly and year-to-date operating statements prepared by a certified public accountant reasonably acceptable to Lender (provided, however, for so long as the Ionis Lease is in full force and effect and no Event of Default exists, such certified public accountant may be an employee of Sponsor) for such quarter, noting Gross Income from Operations, Operating Expenses, Capital Expenditures, Net Operating Income, Net Cash Flow and such other information necessary and sufficient to fairly represent the financial position and results of operation of the Property during such quarter, all in form satisfactory to Lender; and (iii) a calculation reflecting the Debt Service Coverage Ratio as of the last day of such quarter for such quarter and for the last four quarters.  In addition, such Officer’s Certificate shall also state that the representations and warranties of Borrower set forth in Section 3.1.24 are true and correct in all material respects as of the date of such certificate and that there are no trade payables and operational debt outstanding for more than sixty (60) days.

 

(d)           Annual Reports.  Borrower shall furnish, or cause to be furnished, to Lender annually, within ninety (90) days following the end of each Fiscal Year of Borrower, a complete copy of Borrower’s annual financial statements audited by a “Big Four” accounting firm or other independent certified public accountant reasonably acceptable to Lender in accordance with the Acceptable Accounting Basis and, if applicable, the requirements of Regulation AB covering the Property for such Fiscal Year and containing statements of profit and loss for Borrower and the Property and a balance sheet for Borrower.  Such statements shall set forth the financial condition and the results of operations for the Property for such Fiscal Year and shall include, but not be limited to, amounts representing annual Gross Income from Operations, Operating Expenses, Capital Expenditures, Net Operating Income and Net Cash Flow.  Borrower’s annual financial statements shall be accompanied by (i) an Officer’s Certificate stating that each such annual financial statement presents fairly the financial condition and the results of operations of Borrower and the Property being reported upon and has been prepared in accordance with the Acceptable Accounting Basis and, if required, the requirements of Regulation AB, (ii) an unqualified opinion of a “Big Four” accounting firm or other independent certified public accountant reasonably acceptable to Lender, (iii) a rent roll for the subject Fiscal Year, (iv) unless shown on the rent roll delivered to Lender pursuant to clause (iii) above, a list of tenants, if any, occupying more than ten percent (10%) of the total floor area of the Improvements, (v) unless shown on the rent roll delivered to Lender pursuant to clause (iii) above, a breakdown showing the year in which each Lease then in effect expires and the percentage of total floor area of the Improvements and the percentage of base rent with respect to which Leases shall expire in each such year, each such percentage to be expressed on both a per year and cumulative basis, and  (vi) a schedule audited by such accounting firm or independent certified public accountant reconciling Net Operating Income to Net Cash Flow, which shall itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow deemed material by such accounting firm or independent certified public accountant.  Notwithstanding the immediately preceding sentence, for so long as the Ionis Lease is in full force and effect and no Event of Default exists, Borrower shall only be required to furnish, or cause to be furnished, to Lender annually, within ninety (90) days following the end of each Fiscal Year of Borrower, a complete copy of Borrower’s annual financial statements prepared by a certified public accountant acceptable to Lender (it being understood that such certified public accountant may be an employee of Sponsor) in accordance with the Acceptable Accounting Basis and, if applicable, the requirements of Regulation AB covering the Property for such Fiscal Year and containing statements of profit and loss for Borrower and the Property and a balance sheet for Borrower.  Such statements shall set forth the financial condition and the results of operations for the Property for such Fiscal Year and shall include, but not be limited to, amounts representing annual Gross Income from Operations, Operating Expenses, Capital Expenditures, Net Operating Income and Net Cash Flow.  Borrower’s annual financial statements shall be accompanied by (i) an Officer’s Certificate stating that each such annual financial statement presents fairly the financial condition and the results of operations of Borrower and the Property being reported upon and has been prepared in accordance with the Acceptable Accounting Basis and, if required, the requirements of Regulation AB, (ii) intentionally omitted, (iii) a rent roll for the subject Fiscal Year, (iv) unless shown on the rent roll delivered to Lender pursuant to clause (iii) above, a list of tenants, if any, occupying more than ten percent (10%) of the total floor area of the Improvements, (v) unless shown on the rent roll delivered to Lender pursuant to clause (iii) above, a breakdown showing the year in which each Lease then in effect expires and the percentage of total floor area of the Improvements and the percentage of base rent with respect to which Leases shall expire in each such year, each such percentage to be expressed on both a per year and cumulative basis, and (vi) a schedule prepared by the applicable certified public accountant or certified public accounting firm reconciling Net Operating Income to Net Cash Flow, which shall itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow deemed material by such certified public accountant or accounting firm.

 

(e)           Certification; Supporting Documentation.  Each such financial statement shall be in scope and detail satisfactory to Lender and certified by the chief financial officer or representative of Borrower.

 

(f)            Access.  Lender shall have the right from time to time, upon prior notice unless an Event of Default has occurred and is continuing, during normal business hours to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire.  During the continuation of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower’s accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

 

(g)           Format of Delivery.  Any reports, statements or other information required to be delivered under this Agreement shall be delivered (i) in electronic form such as PDF via e-mail, if acceptable to Lender and Servicer (it is being understood and agreed that such format is acceptable to UBS AG), (ii) if requested by Lender, in paper form, and (iii) if requested by Lender, on a diskette, compact disk or another portable memory storage device.

 

(h)           Annual Budget.  For the partial year period commencing on the date hereof, and for each Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget not later than thirty (30) days prior to the commencement of such period or Fiscal Year, which Annual Budget shall set forth, on a month-by-month basis, in reasonable detail, each line item of Borrower’s good faith estimate of Gross Income from Operations, Operating Expenses and Capital Expenditures (it is being acknowledged and agreed that, for so long as (x) the Ionis Lease Condition is satisfied, and (ii) Borrower does not intend to perform any Capital Expenditures, such estimate may omit Capital Expenditures) for such period or Fiscal Year and shall otherwise be in form reasonably satisfactory to Lender, which budget shall be subject to Lender's prior written approval (not be unreasonably withheld or delayed) (upon Lender's approval, an “Approved Annual Budget”).  In the event that Lender objects to a proposed Annual Budget submitted by Borrower for Lender's approval, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise the same in accordance with the process described in this Section 4.1.6(h) until Lender approves the Annual Budget.  Until such time that Lender approves a proposed Annual Budget, the most recent Approved Annual Budget shall apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums, Other Charges and utility expenses.  In the event that Borrower must incur an extraordinary operating expense or capital expense not set forth in the applicable Approved Annual Budget (each, an “Extraordinary Expense”), then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for Lender’s approval, which approval shall not be unreasonably withheld or delayed.  Notwithstanding anything to the contrary contained in this Section 4.1.6(h), to the extent that Lender's approval is required in connection with any proposed Annual Budget (including any proposed revised Annual Budget) submitted by Borrower, Lender's approval shall be deemed to have been given; provided that (A)(1) Borrower's initial request for approval is submitted with the notation “FIRST NOTICE.  FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN FIFTEEN (15) DAYS AFTER LENDER’S RECEIPT MAY RESULT IN THE REQUEST BEING DEEMED APPROVED BY LENDER” prominently displayed in bold, all caps and fourteen (14) point or larger font and is accompanied by the applicable proposed Annual Budget and such other documents and information as Borrower believes in good faith are reasonably required for Lender to adequately evaluate such request and (2) Lender fails to approve or object to the proposed Annual Budget, or request additional documents and information reasonably required for Lender to adequately evaluate such request, within fifteen (15) days after Lender’s receipt of the first request for approval, and (B)(1) Borrowers submits a second request for approval with the notation “SECOND AND FINAL NOTICE.  IMMEDIATE RESPONSE REQUIRED.  FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN TEN (10) DAYS AFTER LENDER’S RECEIPT SHALL CONSTITUTE DEEMED APPROVAL BY LENDER” prominently displayed in bold, all caps and fourteen (14) point or larger font and such request for approval is accompanied by the applicable proposed Annual Budget and such other documents and information as Borrower believes in good faith are reasonably required for Lender to adequately evaluate such request and (2) Lender fails to approve or object to the proposed Annual Budget, or request additional documents and information reasonably required for Lender to adequately evaluate such request, within ten (10) days after Lender’s receipt of the second request for approval.

 

(i)            Additional Information.  Borrower shall submit to Lender the financial data and financial statements required, and within the time periods required, under Sections 9.1(d), (e) and (f), if and when applicable.

 

(j)            Other Required Information.  Borrower shall furnish to Lender, within five (5) Business Days after request (or as soon thereafter as may be reasonably possible), such further detailed information with respect to the operation of the Property and the financial affairs of Borrower as may be reasonably requested by Lender (including, without limitation, a comparison of the budgeted income and expenses as set forth in the applicable Approved Annual Budget and the actual income and expenses for the applicable month (if required in connection with a Securitization), quarter or year and year-to-date for the Property, together with a detailed explanation of any variances of more than five percent (5%) between budgeted and actual amounts for such periods).

 

(k)           Reporting Default.  If Borrower fails to provide to Lender the financial statements and other information specified in this Section 4.1.6 (except for subclause (j), unless such information is required to comply with Regulation AB) within the respective time period specified, then such failure shall constitute an Event of Default if it continues for ten (10) days after notice to Borrower from Lender.

 

4.1.7       Title to Property.  Borrower shall warrant and defend (a) its title to the Property, subject only to Permitted Encumbrances, and (b) the validity and priority of the Liens of the Security Instrument and the Assignment of Leases on the Property, subject only to Permitted Encumbrances, in each case against the claims of all Persons whomsoever.  Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys’ fees and court costs) incurred by Lender if an interest in the Property or any part thereof is claimed by any other Person except as expressly permitted hereunder.

 

4.1.8       Estoppel Statement.

 

(a)           Borrower shall deliver to Lender, within ten (10) Business Days after Lender’s written request, a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Loan, (ii) the unpaid principal amount of the Loan, (iii) the interest rate of the Loan, (iv) the date installments of principal and/or interest were last paid, (v) any offsets or defenses to the payment and performance of the Obligations, if any, and (vi) that this Agreement and the other Loan Documents are valid, legal and binding obligations of Borrower and have not been modified (or, if modified, giving particulars of such modification).

 

(b)           Borrower shall deliver to Lender, within thirty (30) days after Lender’s request, an estoppel certificate from each Tenant under any Lease in form and substance reasonably satisfactory to Lender; provided that (i) Borrower shall only be required to use commercially reasonable efforts to obtain an estoppel certificate from any Tenant, (ii) such estoppel certificate may be in the form required under such Lease, and (iii) after the final Securitization of the Loan, Borrower shall not be required to deliver such estoppel certificate from any Tenant more frequently than two (2) times in any calendar year.

 

(c)           Borrower shall use commercially reasonable deliver to Lender, within forty-five (45) days after Lender’s request, an estoppel certificate from each party under the REA in form and substance reasonably satisfactory to Lender; provided that (i) Borrower shall only be required to use commercially reasonable efforts to obtain such estoppel certificate and (ii) such estoppel certificate may be in the form required under the REA.

 

4.1.9       Leases.

 

(a)           All Leases and all renewals of Leases executed after the date hereof shall (i) provide for economic terms, including rental rates, comparable to existing local market rates for similar properties, (ii) be on commercially reasonable terms, (iii) have a term of not less than five (5) years (unless Lender approves in writing a shorter term), (iv) have a term of not more than fifteen (15) years, including all extensions and renewals (unless Lender approves in writing a longer term), (v) provide that such Lease is subordinate to the Security Instrument and the Assignment of Leases and that the Tenant thereunder will attorn to Lender and any purchaser at a foreclosure sale, (vi) be with Tenants that are creditworthy as determined by Borrower in the exercise of prudent property management practices, (vii) be written substantially in accordance with a standard form of Lease which shall have been approved in writing by Lender (subject to any commercially reasonable changes made in the course of negotiations with the applicable Tenant), (viii) other than the Ionis Lease, not be with any Affiliate of Borrower, Guarantor or Manager, and (ix) not contain any option to purchase, any right of first option to purchase, any right of first refusal to purchase, any right to terminate (except in the event of destruction or condemnation of all or substantially all of the Property, any requirement for a non-disturbance or recognition agreement (other than on the standard form previously approved by Lender), or any other terms which are reasonably likely to materially adversely affect Lender’s rights under the Loan Documents; provided that, in connection with extensions or renewals of Leases existing on the date hereof, any applicable term that would otherwise breach the requirements set forth in this Section 4.1.9(a) shall be permitted to the extent necessary to implement an extension or renewal term expressly contained in the applicable Lease and with respect to which Borrower has no discretion. Any non‑compliance with the foregoing requirements shall require Lender’s prior written approval, which shall not be unreasonably withheld or delayed.

 

(b)           Borrower (i) shall perform the obligations which Borrower is required to perform under the Leases; (ii) shall enforce in a commercially reasonable manner the obligations to be performed by the Tenants thereunder; (iii) shall promptly furnish to Lender any notice of default or termination received by Borrower from any Tenant, and any notice of default or termination given by Borrower to any Tenant; (iv) shall not collect any Rents for more than one (1) month in advance of the time when the same shall become due, except for bona fide security deposits not in excess of an amount equal to two (2) months’ rent; (v) shall not enter into any ground lease or master lease of any part of the Property; (vi) shall not further assign or encumber any Lease or the Rents (except as contemplated by the Loan Documents); (vii) shall not cancel or terminate, or accept the surrender or termination of, any Lease (except (A) with Lender’s prior written approval, (B) in the case of any Lease that is not a Major Lease, if (1) no Event of Default has occurred and is continuing, or (2) a material event of default by the Tenant under such Lease has occurred and is continuing and (3) such cancellation or termination is consistent with prudent property management practices); and (viii) shall not modify or amend any Lease (except (A) with Lender’s prior written approval or (B) in the case of any Lease that is not a Major Lease, if (1) no Event of Default has occurred and is continuing, (2) such modification or amendment is not material and does not affect the economic terms of the applicable Lease, and (3) such modification or amendment is entered into in the ordinary course of business and is consistent with prudent property management practices).  Any action in violation of clause (v), (vi), (vii) or (viii) of this Section 4.1.9(b) shall be void at the election of Lender.

 

(c)           All Major Leases and all renewals, modifications and amendments thereof  executed after the date hereof shall be subject to Lender’s prior approval, which approval shall not be unreasonably withheld so long as the applicable Tenant is not an Affiliate of Borrower.

 

(d)           [Reserved.]

 

(e)          Borrower shall not permit or consent to any assignment or sublease of any Major Lease without Lender’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed; notwithstanding the foregoing, it is acknowledged and agreed that Lender’s consent shall not be required for an Ionis Sublease, provided each of the following conditions is satisfied: (i) no Event of Default has occurred and is continuing, (ii) the Ionis Lease Condition is satisfied, (iii) Ionis continues to remain liable for all obligations and liabilities of tenant under the Ionis Lease, including, without limitation, any obligations and liabilities of subtenant under the Ionis Sublease (i.e., Ionis is not releaased from any liability under the Ionis Lease as a result of such Ionis Sublease), (iv) such Ionis Sublease, either individually or when taken together with any other Ionis Subleases then in effect, and assuming the exercise of all expansion rights and preferential rights to lease additional space contained in such Ionis Sublease or Ionis Subleases, as applicable, covers twenty-five percent (25%) or less of the total rentable square footage at the Property, and (v) Borrower shall give (or shall cause Ionis to give) to Lender written notice of such proposed Ionis Sublease, together with a copy of such proposed Ionis Sublease, not less than thirty (30) days prior to the effective date of such Ionis Sublease, and provide a true, correct and complete copy of the fully executed Ionis Sublease within five (5) Business Days of the execution thereof.

 

(f)            [Reserved.]

 

(g)           Borrower agrees to bear and shall pay or reimburse Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by Lender in connection with the review of any proposed Lease, any other matter requiring Lender’s consent or approval under this Section 4.1.9 or execution and delivery of any subordination, non-disturbance and attornment agreement in accordance with this Section 4.1.9.

 

(h)           Within ten (10) days after Lender’s request, Borrower shall furnish to Lender (i) a statement of all tenant security or other deposits and (ii) copies of all Leases not previously delivered to Lender, in each case, certified as being true, correct and complete.

 

(i)            All security deposits of Tenants, whether held in cash or any other form, shall be held in compliance with all applicable Legal Requirements, shall not be commingled with any other funds of Borrower and, if cash, shall be deposited by Borrower in a separately designated account under Borrower’s control at Clearing Bank.  After the occurrence of an Event of Default, upon Lender's request, Borrower shall, if permitted by the applicable Legal Requirements, cause all such security deposits (and any interest thereon) to be transferred to Lender to be held by Lender in a separate Eligible Account subject to the terms of the Leases.  Any bond or other instrument which Borrower is permitted to hold in lieu of cash security deposits under the applicable Legal Requirements (i) shall be maintained in full force and effect in the full amount of such deposits unless replaced by cash deposits as described above, (ii) shall be issued by an institution reasonably satisfactory to Lender, (iii) shall, if permitted by the applicable Legal Requirements, name Lender as payee or mortgagee thereunder (or, at Lender’s option, be fully assignable to Lender), and (iv) shall in all respects comply with the applicable Legal Requirements and otherwise be satisfactory to Lender.  Borrower shall, upon request, provide Lender with evidence satisfactory to Lender of Borrower’s compliance with the foregoing.

 

4.1.10     Alterations.  Lender’s prior approval shall be required in connection with any alterations to the Property (a)(i) that is reasonably likely to have a Material Adverse Effect, (ii) the cost of which (including any related alteration, improvement or replacement) is reasonably anticipated to exceed the Alteration Threshold, or (iii) that could adversely affect any structural component of any Improvements, any utility or HVAC system at the Property or the exterior of any building constituting a part of any Improvements or (b) any alterations to the Property during the continuation of any Event of Default, which approval, in each case under clause (a) or (b), may be granted or withheld in Lender’s sole discretion.  Any alteration to the Property shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements.  If the total unpaid amounts incurred and to be incurred with respect to such alterations to the Property shall at any time exceed the Alteration Threshold, Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following:  (A) cash, (B) Letters of Credit, (C) U.S. Obligations or (D) other securities acceptable to Lender, provided that, with respect to clause (D), Lender shall have received a Rating Agency Confirmation as to the form and issuer of same.  Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements (other than such amounts to be paid or reimbursed by Tenants under the Leases; provided that the applicable Leases shall be in full force and effect) over the Alteration Threshold, and, at Lender’s option, Lender shall have the right to apply such security from time to time to pay for such alterations if not otherwise paid by Borrower prior to the date such amounts are due.  Upon substantial completion of any alteration to the Property, Borrower shall provide (or cause Tenant to provide) evidence reasonably satisfactory to Lender that (1) such alteration was constructed in accordance with all applicable Legal Requirements, (2) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with such alteration have been paid in full and have delivered unconditional releases of liens, and (3) all licenses and permits necessary for the use, operation and occupancy of the Improvements have been issued, provided that, if any such license or permit is temporary in nature, Borrower shall diligently pursue procuring a permanent license or permit from the applicable Governmental Authority.  Notwithstanding anything to the contrary contained in this Agreement, Lender’s consent shall not be required in connection with the Existing Project, provided that each of the following conditions is satisfied and remains satisfied at all times until completion of the Existing Project: (i) no Event of Default has occurred and is continuing, (ii) the Ionis Lease Condition is satisfied, (iii) Ionis is solely responsible for the payment for, and performance and completion of the Existing Project, (iv) Borrower provides to Lender written evidence reasonably acceptable to Lender in all respects that the Existing Project complies with all applicable Legal Requirements of all Governmental Authorities having jurisdiction over the Property and all applicable insurance requirements (including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters) and any other restrictions encumbering the Property, including, without limitation, the REAs (to the extent any such approvals are required pursuant to the terms of any REA), (v) all approvals, authorizations, certifications, licenses and permits, including, without limitation, certificates of completion and occupancy, required by any Governmental Authority or otherwise necessary for the use, occupancy and operation of the Property (including any new improvements) in the manner in which the Property was being used, occupied and operated prior to commencement of the Existing Project have been obtained by Ionis and/or Borrower and are in full force and effect (to the extent any of the foregoing are required by any Governmental Authorities having jurisdiction over the Property, Borrower or Tenant), (vi) the Existing Project is being completed in a good and workmanlike manner on a lien free basis in accordance with the terms and conditions of the Ionis Lease and this Agreement, (vii) at Lender’s request, Borrower shall deliver lien waivers or conditioned lien waivers with respect to all work that has been completed, (viii) upon completion of the applicable Existing Project (and to the extent any new building or structure is constructed as part of such Existing Project, and such new building or structure is not depicted on the Survey delivered to Lender in connection with the closing of the Loan), Borrower shall deliver to Lender an updated Survey reasonably acceptable to Lender in all respects, (ix) upon completion of the applicable Existing Project (and to the extent required pursuant to the applicable Legal Requirements), Borrower shall deliver a new or updated certificate of occupancy with respect to the Property, (x) upon completion of the Existing Project, Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the Lien of the Security Instrument and evidence of payment of any premium payable in connection with such endorsement, and (xi) Ionis maintains (x) a Net Worth of not less than $51,350,000.00 plus the estimated cost of the Existing Project (excluding Guarantor’s interest in the Property) and (y) Liquid Assets of not less than $5,135,000.00 plus the estimated cost of the Existing Project.

 

4.1.11     Existing Project.

 

(a)           Borrower shall cause Ionis to complete the Existing Project in a good and workmanlike manner and on a lien-free basis.

 

(b)           The Existing Project and all materials, equipment, fixtures, or any other item comprising a part of the Existing Project shall be constructed, installed or completed, as applicable, free and clear of all liens, claims and other encumbrances not previously approved by Lender.

 

(c)           The Existing Project shall comply with all applicable Legal Requirements of all Governmental Authorities having jurisdiction over the Property and all applicable insurance requirements (including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters) and any other restrictions encumbering the Property, including, without limitation, the REAs.

 

(d)           In addition to any insurance required under the Loan Documents, Borrower shall provide or cause Ionis to provide builder’s risk insurance, workers’ compensation insurance, public liability insurance and other insurance to the extent required by the applicable Legal Requirements in connection with any portion of the Existing Project.  All such policies shall be in form and amount reasonably satisfactory to Lender.  All such policies which can be endorsed with a non-contributing mortgagee clause (or its equivalent) making loss thereunder payable to Lender and its successors and/or assigns shall be so endorsed.  At Lender’s written request, certified copies of such policies shall be delivered to Lender.

 

(e)           Borrower shall provide (or cause Ionis to provide) to Lender copies of such contracts, plans, specifications, budgets, surveys and other information and/or documents with respect to the Existing Project as Lender may reasonably request.

 

(f)            [Reserved].

 

(g)           All of the Existing Projects shall be completed prior to the date that is at least six (6) months prior to the Stated Maturity Date.

 

(h)           Borrower provides (or causes Ionis to provide) to Lender written evidence reasonably acceptable to Lender in all respects that the Existing Project complies with all applicable requirements set forth in the REA, and all approvals required pursuant to the terms of any REA have been obtained by Borrower or Ionis, as applicable (to the extent any such approvals are required pursuant to the terms of any REA).

 

(i)            Upon completion of the Existing Project, Borrower provides to Lender written evidence reasonably acceptable to Lender in all respects that the Property continues to comply with all applicable Legal Requirements of all Governmental Authorities having jurisdiction over the Property and all applicable insurance requirements (including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters) and any other restrictions encumbering the Property, including, without limitation, the REAs.

 

(j)            Upon completion of the applicable Existing Project (and to the extent any new building or structure is constructed as part of such Existing Project), Borrower shall deliver to Lender an updated Survey reasonably acceptable to Lender in all respects.

 

(k)           Upon completion of the applicable Existing Project (and to the extent required pursuant to the applicable Legal Requirements), Borrower shall deliver a new or updated certificate of occupancy with respect to the Property.

 

(l)            Upon completion of the Existing Project, Borrower shall deliver an endorsement to the Title Insurance Policy insuring the continued priority of the Lien of the Security Instrument and evidence of payment of any premium payable in connection with such endorsement.

 

(m)          Upon completion of the Existing Project, Borrower shall deliver to Lender notice of such completion of the applicable Existing Project, together with an Officer’s Certificate certifying that all of the requirements of this Section 4.1.11 have been satisfied.

 

4.1.12     Material Agreements.  Borrower shall (a) promptly perform and/or observe the covenants, agreements and conditions required to be performed and observed by it under each Material Agreement and Operating Agreement to which it is a party, and do all things necessary to preserve and to keep unimpaired its rights thereunder, (b) promptly notify Lender in writing of the giving of any notice of any default by any party under any Material Agreement and Operating Agreement of which it is aware, (c) promptly deliver to Lender copies of all material notices, summonses, pleadings, applications and other documents received in connection with any Material Agreement or Operating Agreement, and (d) promptly enforce the performance and observance in all material respects of all of the covenants, agreements and conditions required to be performed and/or observed by any other party under each Material Agreement and Operating Agreement to which Borrower is a party in a commercially reasonable manner.

 

4.1.13     Performance by Borrower.  Borrower shall, in a timely manner, observe, perform and fulfill each and every covenant, term and provision of each Loan Document executed and delivered by Borrower, and shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by Borrower without the prior consent of Lender.

 

4.1.14     Costs of Enforcement/Remedying Defaults.  In the event (a) that the Security Instrument is foreclosed in whole or in part or the Note or any other Loan Document is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any Lien or mortgage, whether senior or junior to the Security Instrument, in which proceeding Lender is made a party, (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or Guarantor or an assignment by Borrower or Guarantor for the benefit of its creditors, or (d) Lender shall remedy or attempt to remedy any Event of Default, Borrower shall be chargeable with and agrees to pay all reasonable out-of-pocket costs and expenses incurred by Lender as a result thereof, including costs of collection and defense (including reasonable attorneys’, experts’, consultants’ and witnesses’ fees and disbursements) in connection therewith and in connection with any appellate proceeding or post-judgment action, which shall be due and payable on demand, together with interest at the Default Rate from the date such costs and expenses were incurred to and including the date the reimbursement payment is received by Lender.  All such indebtedness shall be secured by the Security Instrument.

 

4.1.15     Business and Operations.  Borrower will continue to engage in the businesses currently conducted by it as and to the extent the same are necessary for the ownership, management and operation of the Property.  Borrower will qualify to do business and will remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, management and operation of the Property.  Borrower shall at all times cause the Property to be maintained as an office building and research and development facilities as currently used (or reasonably related thereto).

 

4.1.16     Landlord Consent Under Ionis Lease.  Borrower acknowledges and agrees that, to the extent the terms of the Ionis Lease expressly require the approval or consent by Borrower with respect to any related matter, then Borrower shall be required to obtain Lender’s prior written consent prior to the granting, withholding or waiving such approval or consent.

 

4.1.17     Intentionally Omitted.

 

4.1.18     Handicapped Access.

 

(a)           Borrower covenants and agrees that the Property shall at all times strictly comply to the extent applicable with the requirements of the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, all federal, state and local laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant thereto including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (collectively, the “Access Laws”).

 

(b)           Notwithstanding anything to the contrary set forth herein or in any other Loan Document, Borrower shall not alter or cause or permit to be altered the Property in any manner which would materially increase Borrower’s responsibilities for compliance with any Access Laws without the prior approval of Lender (provided, however, that such approval shall not be required for so long as the Ionis Lease Condition remains satisfied and no Event of Default has occurred and is continuing).  The foregoing shall apply to tenant improvements constructed by Borrower or by any Tenant.  Lender may condition any such approval upon receipt of a certificate of compliance with the Access Laws from an architect, engineer, or other Person acceptable to Lender.

 

(c)           Borrower covenants and agrees to give prompt notice to Lender of the receipt by Borrower of any complaints related to the violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with any Access Laws.

 

4.1.19     Additional Reports.  Borrower shall deliver to Lender as soon as reasonably available, but in no event later than thirty (30) days after such items become available to Borrower in final form, copies of any final engineering, environmental or seismic reports prepared for Borrower with respect to the Property.

 

4.1.20     Notice of Certain Events.  Borrower shall promptly notify Lender of (a) any Default or Event of Default, together with a detailed statement of the steps being taken to cure such Default or Event of Default; (b) any notice of default received by Borrower under any agreement, document or instrument to which Borrower is a party or to which Borrower or the Property is subject, which is reasonably likely to have a Material Adverse Effect; (c) any notice of default received by Borrower under any other obligations relating to the Property or otherwise material to Borrower’s business; and (d) any pending or threatened in writing legal, judicial, administrative or regulatory proceedings, including any disputes between Borrower and any Governmental Authority, affecting Borrower or the Property.

 

4.1.21     Further Assurances; Power of Attorney.  Borrower irrevocably appoints Lender as its true and lawful attorney-in-fact to do, in its name or otherwise, any and all acts and to execute any and all documents that are necessary for the purpose of exercising, perfecting or preserving any and all rights and remedies available to Lender under the Loan Documents, at law and in equity, including, without limitation, such rights and remedies available to Lender pursuant to Section 10.2, Section 10.3, and Section 10.4 hereof (and the above powers granted to Lender are coupled with an interest and shall be irrevocable).

 

4.1.22     Taxes on Security.  Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender.  If there shall be enacted any law (a) deducting the Loan from the value of the Property for the purpose of taxation, (b) affecting any Lien on the Property, or (c) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof; provided, however, that if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable without any prepayment premium or penalty.

 

4.1.23     Intentionally Omitted.

 

4.1.24     REA.  The Borrower hereby covenants and agrees with Lender with respect to the REA as follows:

 

(a)            Borrower shall pay all charges and other sums to be paid by Borrower pursuant to the terms of the REA as the same shall become due and payable and prior to the expiration of any applicable grace period therein provided.  After prior notice to Lender, Borrower, at its own cost and expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any charges required to be paid by Borrower pursuant to the REA; provided that (i) no Default or Event of Default has occurred and remains outstanding; (ii) Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the Security Instrument; (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of the REA and any other instrument to which Borrower is subject or by which the Property is bound and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable Legal Requirements; (iv) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (v) the REA will not be in danger of being terminated; (vi) Borrower shall promptly upon final determination thereof pay the amount of any such charges, together with all interest and penalties which may be payable in connection therewith; (vii) such proceeding shall suspend the collection of such charges from Borrower and the Property; (viii) Borrower shall furnish such cash or other security as may be required in the proceeding or as may be required by Lender to ensure the payment of any such charges, together with all interest and penalties thereon; and (ix) such contest by Borrower is not in violation of the Leases.  Lender may pay over, assign or transfer any such security or part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement of such claimant is established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the Lien of the Security Instrument being primed by any related Lien.

 

(b)           Borrower shall perform and observe (or cause Tenant to perform and observe) all of the terms, covenants and conditions required to be performed and observed by Borrower pursuant to the terms of the REA.

 

(c)            Borrower shall take all actions as may be necessary from time to time to preserve and maintain the REA in accordance with all applicable Legal Requirements.

 

(d)           Borrower shall enforce, in a commercially reasonably manner and in all material respects, the terms, covenants and conditions to be performed and observed by the parties to the REA (other than Borrower).

 

(e)           Borrower shall promptly furnish to Lender any written notice of default or other communication delivered in connection with the REA by any party to the REA or any third‑party (other than routine correspondences and invoices).

 

(f)            If Lender or its nominee, designee, successor, or assignee acquires title and/or rights of Borrower under the REA by reason of foreclosure of the Security Instrument, deed‑in‑lieu of foreclosure or otherwise, Lender or such other party shall (i) succeed to all of the rights of and benefits accruing to Borrower under the REA, and (ii) be entitled to exercise all of the rights and benefits accruing to Borrower under the REA.  At such time as Lender shall request, Borrower agrees to execute and deliver to Lender such documents as Lender and its counsel may require in order to ensure that the provisions of this Section 4.1.24(f) will be validly and legally enforceable and effective against Borrower and all parties claiming by, through, under or against Borrower.

 

4.1.25     Patriot Act Compliance.  Borrower will use its good faith and commercially reasonable efforts to comply with the Patriot Act and all applicable requirements of Governmental Authorities relating to terrorism and money laundering.  Lender shall have the right to audit Borrower’s compliance with the Patriot Act and all applicable requirements of Governmental Authorities relating to terrorism and money laundering.  In the event that Borrower fails to comply with the Patriot Act or any such requirements of Governmental Authorities, Lender may, at its option, cause Borrower to comply therewith.  All costs and expenses incurred by Lender in connection therewith shall be paid by Borrower to Lender, upon demand, with interest at the Default Rate from the date such costs and expenses were incurred to and including the date the reimbursement payment is received by Lender.  All such indebtedness shall be secured by the Security Instrument.

 

4.1.26     Prohibited Entity.  Borrower hereby represents and warrants to, and covenants with, Lender that until such time as the Debt shall be paid in full, no Prohibited Entity shall hold any direct and/or indirect ownership interest in Borrower or the Property.

 

Section 4.2.           Borrower Negative Covenants.

 

Borrower covenants and agrees with Lender that:

 

4.2.1       Liens.  Borrower shall not create, incur, assume or suffer to exist any Lien on any direct or indirect interest in Borrower or on any portion of the Property except for Permitted Encumbrances.

 

4.2.2       Dissolution.  Borrower shall not (a) engage in any dissolution, winding up, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership, management and operation of the Property, (c) amend, modify, waive or terminate any Organizational Document or any provision thereof, (d) transfer, lease or sell, in one transaction or any combination of transactions, all or substantially all of the assets or properties of Borrower except to the extent expressly permitted by the Loan Documents, or (e) cause, permit or suffer Sole Member to dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which Sole Member would be dissolved, wound up or liquidated in whole or in part.

 

4.2.3       Change in Business.  Borrower shall not (a) enter into any line of business other than the ownership, management and operation of the Property, (b) make any material change in the scope or nature of its business objectives, purposes or operations, or (c) undertake or participate in activities other than the continuance of its present business.

 

4.2.4       Debt Cancellation.  Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.

 

4.2.5       Affiliate Transactions.  Borrower shall not enter into, or be a party to, any transaction with any Affiliate of Borrower or any partner, member, or shareholder, as applicable, of Borrower or any Affiliate of Borrower except in the ordinary course of business and on terms and conditions that are fully disclosed to Lender in advance and that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with an unrelated third party.

 

4.2.6       Zoning.  Borrower shall not initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non‑conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender.

 

4.2.7       Assets.  Borrower shall not purchase or own any asset or property other than the Property and any asset or property necessary for or incidental to the operation of the Property.

 

4.2.8       No Joint Assessment.  Borrower shall not suffer, permit or initiate the joint assessment of the Property (a) with any other real property constituting a tax lot separate from the Property, and (b) with any portion of the Property which may be deemed to constitute personal property, or any other action or procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property or any portion thereof.

 

4.2.9       Principal Place of Business.  Borrower shall not change its principal place of business from the address set forth on the first page of this Agreement without first giving Lender thirty (30) days’ prior notice.

 

4.2.10     ERISA.

 

(a)           Borrower shall not engage in any transaction which would cause any obligation, or any action taken or to be taken, hereunder or under the other Loan Documents (or the exercise by Lender of any of its rights under this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

(b)           Borrower shall deliver to Lender such certifications or other evidence from time to time throughout the Term, as requested by Lender in its sole discretion, that (i) Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to any state statute regulating investments of, or fiduciary obligations with respect to, governmental plans; and (iii) one (1) or more of the following circumstances is true:

 

(A)         Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

 

(B)          Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower is held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

 

(C)          Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

 

4.2.11     Material Agreements.  Borrower shall not, without Lender’s prior consent:  (a) enter into, surrender or terminate any Material Agreement or Operating Agreement to which it is a party or to which Borrower or the Property is subject (unless the other party thereto is in material default and the termination of such agreement would be commercially reasonable), (b) increase or consent to the increase of the amount of any charges under any Material Agreement or Operating Agreement to which it is a party or to which Borrower or the Property is subject, except as provided therein or on an arm’s-length basis and commercially reasonable terms; or (c) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under any Material Agreement or Operating Agreement to which it is a party or to which Borrower or the Property is subject in any material respect, except on an arm’s-length basis and commercially reasonable terms.

 

4.2.12     Change of Name, Identity or Structure.  Borrower will not cause or permit any change to be made to its name, identity (including its trade name or names) or Borrower’s organizational structure (other than as expressly permitted pursuant to the terms and conditions of Section 8.2 hereof) without notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and without first obtaining the prior consent of Lender.  Borrower shall execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or amendment to financing statement required by Lender to establish or maintain the validity, perfection and priority of the security interests granted by the Loan Documents.  At Lender’s request, Borrower shall execute a certificate in form satisfactory to Lender listing each trade name under which Borrower operates or intends to operate the Property, and representing and warranting that Borrower does business under no other trade name with respect to the Property.

 

4.2.13     Special Purpose.  Without in any way limiting the provisions of this Article IV, Borrower shall not take or permit any action that would result in Borrower or Sole Member not being in compliance with the representations, warranties and covenants set forth in Section 3.1.24.

 

4.2.14     Prohibited Person.  At all times throughout the Term, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Sponsor or Guarantor shall constitute property of, or shall be beneficially owned, directly or indirectly, by any Prohibited Person, with the result that the investment in Borrower, Sponsor or Guarantor, as applicable (whether directly or indirectly), would be prohibited by law, or the Loan made by Lender would be in violation of law, (b) no Prohibited Person shall have any interest of any nature whatsoever in Borrower, Sponsor or Guarantor, as applicable, with the result that the investment in Borrower, Sponsor or Guarantor, as applicable (whether directly or indirectly), would be prohibited by law or the Loan would be in violation of law, and (c) none of the funds of Borrower, Sponsor or Guarantor, as applicable, shall be derived from any unlawful activity with the result that the investment in Borrower, Sponsor or Guarantor, as applicable (whether directly or indirectly), would be prohibited by law or the Loan would be in violation of law.

 

4.2.15     Intentionally Omitted.

 

4.2.16     REA.

 

(a)           Borrower shall not, without Lender’s prior consent, modify, amend or supplement, or consent to or suffer any modification, amendment, or supplementation of the REA.

 

(b)           Borrower shall not, without Lender’s prior consent, otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under the REA.

 

(c)           Borrower shall not take (and hereby assigns to Lender any right it may have to take) any action to surrender, terminate, cancel, or accept any surrender, termination or cancellation of the REA.

 

(d)           Borrower shall not assign (other than to Lender) or encumber (other than in favor of Lender as security for the Obligations) any of its rights under the REA.

 

V.             INSURANCE, CASUALTY AND CONDEMNATION

 

Section 5.1.           Insurance.

 

5.1.1       Insurance Policies.

 

(a)           Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Property providing at least the following coverages:

 

(i)            comprehensive all risk insurance (including wind and named storms) on the Improvements and the personal property at the Property (A) in an amount equal to one hundred percent (100%) of the “full replacement cost” of the Property, which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) containing an agreed amount endorsement with respect to the Improvements and personal property at the Property waiving all co-insurance provisions; (C) providing for no deductible in excess of Seventy-Five Thousand and No/100 Dollars ($75,000) for all such insurance coverage (except, in the case of wind and named storms or earthquake insurance coverage, providing for no deductible in excess of 5% of the total insurable value of the Property); and (D) containing “law and ordinance” coverage if any of the Improvements or the use of the Property shall at any time constitute a legal non-conforming structure or use.  In addition, Borrower shall obtain:  (1) if any portion of the Improvements is currently or at any time in the future located in a federally designated “special flood hazard area,” flood hazard insurance in an amount equal to the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended, plus such excess amount as Lender shall require; and (2) if the Property is located in an area with a high degree of seismic activity and the probable maximum loss (PML) or scenario expected loss (SEL) is greater than 20%, earthquake insurance in amounts and in form and substance satisfactory to Lender, provided that the insurance pursuant to clauses (1) and (2) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this Section 5.1.1(a)(i).

 

(ii)           broad form commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, such insurance (A) to be on the so-called “occurrence” form with an occurrence limit of not less than One Million and No/100 Dollars ($1,000,000) and an aggregate limit of not less than Two Million and No/100 Dollars ($2,000,000); (B) to continue at not less than the aforesaid limit until required to be changed by Lender by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards:  (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors; (4) contractual liability for all insured contracts; and (5) contractual liability covering the indemnities contained in Article 9 of the Security Instrument to the extent the same is available;

 

(iii)          business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by insurance pursuant to Sections 5.1.1(a)(i), (iv), (vi), (xi) and (xii) for a period commencing at the time of loss for such length of time as it takes to repair or replace with the exercise of due diligence and dispatch or the expiration of eighteen (18) months from the date of loss, whichever first occurs, and notwithstanding that the Policy may expire prior to the end of such period; (C) in an amount equal to one hundred percent (100%) of the projected gross income from the Property for a period from the date of loss to a date (assuming total destruction) which is eighteen (18) months from the date that the Property is repaired or replaced and operations are resumed; and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and the Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twelve (12) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the Policy may expire prior to the end of such period.  The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross income from the Property for the succeeding twelve (12) month period.  All proceeds payable to Lender pursuant to this Section 5.1.1(a)(iii) shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligation to pay the Debt at the time and in the manner provided for in this Agreement, the Note and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;

 

(iv)          at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the property and liability coverage forms do not otherwise apply, (A) commercial general liability and umbrella liability insurance covering claims related to construction, repair and alteration at the Property not covered by or under the terms or provisions of the commercial general liability insurance and umbrella liability insurance policies required under this Section 5.1.1; and (B) the insurance provided for in Section 5.1.1(a)(i) above written in a so-called builder’s risk completed value form in amounts and with deductibles, terms and conditions required by Lender (1) on a non-reporting basis, (2) covering all risks required to be insured against pursuant to Sections 5.1.1(a)(i), (iii), (vi), (xi) and (xii), (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;

 

(v)           workers’ compensation, subject to the statutory limits of the state in which the Property is located, and employer’s liability insurance with a limit of at least One Million and No/100 Dollars ($1,000,000) per accident and per disease per employee, and One Million and No/100 Dollars ($1,000,000) for disease aggregate in respect of any work or operations on or about the Property, or in connection with the Property or its operation (if applicable);

 

(vi)          comprehensive boiler and machinery insurance in amounts required by Lender and on terms consistent with the insurance required under Section 5.1.1(a)(i) above (if applicable);

 

(vii)         umbrella liability insurance in addition to primary coverage in an amount not less than Twenty-Five Million and No/100 Dollars ($25,000,000) per occurrence on terms consistent with the insurance required under Section 5.1.1(a)(ii) and (viii);

 

(viii)        commercial auto liability coverage for all owned and non-owned vehicles, including rented and leased vehicles, containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000) (if applicable);

 

(ix)           liquor liability insurance or other liability insurance required in connection with the sale of alcoholic beverages (if applicable);

 

(x)            insurance against employee dishonesty with respect to any employee of Borrower in an amount required by Lender and with a deductible not greater than Ten Thousand and No/100 Dollars ($10,000) (if applicable);

 

(xi)           with respect to commercial property, general liability, business income, and umbrella liability insurance required under this Section 5.1.1(a) (including, if applicable, insurance required under Section 5.1.1(a)(iv) above), insurance for loss resulting from perils and acts of terrorism in amounts and with terms and conditions applicable to commercial property, general liability, business income, and umbrella liability insurance required under this Section 5.1.1(a).  The Policy or endorsement providing for such insurance shall be in form and substance satisfactory to Lender and shall satisfy Rating Agency criteria for securitized loans; and

 

(xii)          upon sixty (60) days’ notice, such other insurance and in such amounts as Lender may, from time to time, reasonably request against such other insurable hazards which at the time are commonly insured against for properties similar to the Property located in or around the region in which the Property is located.

 

(b)           All insurance provided for in Section 5.1.1(a) shall be obtained under valid and enforceable policies (each individually, a “Policy” and collectively, the “Policies”) and, to the extent not specified above, shall be subject to the approval of Lender as to insurers, amounts, deductibles, loss payees and insureds.  Not less than fifteen (15) days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of insurance evidencing the Policies (and, upon Lender’s request, certified copies of such Policies) accompanied by evidence satisfactory to Lender of payment of the premiums then due thereunder (the “Insurance Premiums”) shall be delivered by Borrower to Lender.

 

(c)           Any blanket insurance Policy shall be subject to Lender’s approval, which approval shall be conditioned upon, among other things, evidence satisfactory to Lender that such Policy provides the same protection as would a separate Policy insuring only the Property in compliance with the provisions of Section 5.1.1(a).

 

(d)           All Policies of insurance provided for or contemplated by Section 5.1.1(a) shall be primary coverage and shall name Borrower as a named insured and, in the case of liability insurance, except for the Policies referenced in Sections 5.1.1(a)(v) and (viii), shall name Lender and its successors and/or assigns as the additional insured, as its interests may appear, and, in the case of property insurance (including, but not limited to, flood, earthquake, boiler and machinery, and terrorism insurance), shall name Lender and its successors and/or assigns, as their interests may appear, as mortgagee pursuant to a non‑contributing mortgagee clause in favor of Lender and its successors and/or assigns providing that the loss thereunder shall be payable to Lender and its successors and/or assigns.  Borrower shall not procure or permit any of its constituent entities to procure any other insurance coverage which would be on the same level of payment as the Policies or would adversely impact in any way the ability of Borrower or Lender to collect any proceeds under any of the Policies.

 

(e)           All Policies of insurance provided for in Section 5.1.1(a) shall:

 

(i)            contain clauses or endorsements to the effect that, with respect to the Policies of property insurance, (A) no foreclosure or similar action, or act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned, (B) the Policies shall not be canceled without at least thirty (30) days’ written notice to Lender (or, in the case of non-payment of premiums, ten (10) days' notice to Lender) and (C) the issuer(s) of the Policies shall give written notice to Lender if the issuer(s) elect(s) not to renew the Policies prior to the expiration thereof;

 

(ii)           contain clauses or endorsements to the effect that the Policies shall not be canceled or permitted to lapse without at least thirty (30) days’ written notice to Lender and any other party named therein as an additional insured and shall not be materially changed (other than to increase the coverage provided thereby) without such a thirty (30) days’ written notice.  If the issuer(s) cannot or will not provide such notice, Borrower shall be obligated to provide such notice to Lender;

 

(iii)          not contain any clause or provision that would make Lender liable for any Insurance Premiums thereon or subject to any assessments thereunder; and

 

(iv)          contain clauses or endorsements to the effect that the issuer(s) thereof shall give written notice to Lender if the issuer(s) elect(s) not to renew such Policies prior to the expiration thereof.  If the issuer(s) cannot or will not provide such notice, Borrower shall be obligated to provide such notice to Lender.

 

(f)            If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate and all costs and expenses (including any Insurance Premiums) incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand with interest at the Default Rate from the date such costs and expenses were incurred to and including the date the reimbursement payment is received by Lender.  All such indebtedness shall be secured by the Security Instrument.

 

(g)           In the event of foreclosure of the Security Instrument or other transfer of title to the Property in extinguishment in whole or in part of the Obligations, all right, title and interest of Borrower in and to the Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in Lender, the purchaser at such foreclosure or the transferee in the event of such other transfer of title.

 

5.1.2       Insurance Company.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “A” or better by S&P.

 

5.1.3       Ionis Lease.  Notwithstanding the provisions of Section 5.1.1 hereof to the contrary, Borrower shall not be required to maintain the coverages otherwise required pursuant to Section 5.1.1 hereof, provided that each of the following conditions is satisfied and remains satisfied at all times: (i) the Ionis Lease Condition is satisfied, (ii) Ionis, as Tenant under the Ionis Lease, maintains insurance, and with insurance companies, that satisfy the requirements set forth in Sections 5.1.1 and 5.1.2 hereof, which insurance policies name Lender as mortgagee/loss payee and additional insured, and (iii) Ionis performs its obligation under the preceding clause (ii) in a timely manner and Borrower provides evidence to Lender, in form and substance reasonably satisfactory to Lender, of such performance by Ionis in a timely manner.  If at any time any or all of the conditions set forth in the immediately preceding sentence are no longer met, Borrower shall, at Borrower’s sole cost and expense, immediately obtain and shall thereafter continue to maintain insurance, and with insurance companies, that satisfy the requirements set forth in Sections 5.1.1 and 5.1.2 hereof.  Such insurance shall either be (x) “primary” insurance coverage in the event that Ionis does not provide the applicable insurance coverage required by this Section 5.1, or (y) “excess and contingent” insurance coverage, over and above any other valid and collectible coverage then in existence, in the event that Ionis does not have sufficient coverage to meet the requirements set forth in Section 5.1.1 above, in each case, as shall be necessary to bring the insurance coverage for the Property into full compliance with all of the terms and conditions of this Section 5.1.

 

Section 5.2.           Casualty and Condemnation.

 

5.2.1       Casualty.  If the Property shall sustain a Casualty, Borrower shall give prompt notice of such Casualty to Lender and shall promptly commence and diligently prosecute to completion the Restoration of the Property in accordance with Section 5.3 hereof.  Borrower shall pay all costs and expenses of such Restoration whether or not such costs and expenses are covered by insurance.  Lender may, but shall not be obligated to, make proof of loss if not made promptly by Borrower.  In the event of a Casualty where the loss and the applicable Net Proceeds are less than the Restoration Threshold, Borrower may settle and adjust such claim; provided that (a) no Event of Default has occurred and remains outstanding and (b) such adjustment is carried out in a commercially reasonable and timely manner.  In the event of a Casualty where the loss or the applicable Net Proceeds is equal to or greater than the Restoration Threshold or if an Event of Default has occurred and remains outstanding, Borrower may settle and adjust such claim only with the prior consent of Lender (which consent shall not be unreasonably withheld or delayed) and Lender shall have the opportunity to participate, at Borrower’s cost and expense, in any such adjustments.  Notwithstanding any Casualty, Borrower shall continue to pay the Debt at the time and in the manner provided for in this Agreement, the Note and the other Loan Documents.

 

5.2.2       Condemnation.  Borrower shall give Lender prompt notice of any actual or threatened Condemnation by any Governmental Authority of all or any part of the Property and shall deliver to Lender a copy of any and all notices or papers served in connection with such Condemnation or related proceedings.  Borrower may settle and compromise any Condemnation only with the prior consent of Lender (which consent shall not be unreasonably withheld or delayed) and Lender shall have the opportunity to participate, at Borrower’s cost and expense, in any applicable litigation or proceeding and settlement discussions in respect thereof and Borrower shall from time to time deliver to Lender all instruments requested by Lender to permit such participation.  Borrower shall, at its cost and expense, diligently prosecute any such litigations or proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such litigations or proceedings.  Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Award and to make any compromise or settlement in connection with any Condemnation.  Notwithstanding any Condemnation, Borrower shall continue to pay the Debt at the time and in the manner provided for in this Agreement, the Note and the other Loan Documents.  Lender shall not be limited to the interest paid on the Award by any Governmental Authority but shall be entitled to receive interest at the rate or rates provided herein or in the Note.  If any portion of the Property is taken by any Governmental Authority, Borrower shall promptly commence and diligently prosecute to completion the Restoration of the Property and otherwise comply with the provisions of Section 5.3 hereof.  If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award or a portion thereof sufficient to pay the Debt in full.

 

5.2.3       Casualty Proceeds.  Notwithstanding the last sentence of Section 5.1.1(a)(iii) above, and provided that no Event of Default has occurred and remains outstanding, proceeds received by Lender on account of business or rental interruption or other loss of income insurance specified in Section 5.1.1(a)(iii) above with respect to any Casualty shall be (a) during any Cash Management Trigger Event Period, deposited by Lender into the Cash Management Account (in installments from time to time, if applicable) to the extent such proceeds (or a portion thereof) reflects a replacement for lost Rents for the relevant period, as determined by Lender in good faith and (b) during the absence of a Cash Management Trigger Event Period, held by Lender and disbursed to Borrower (in installments from time to time, if applicable) to the extent such proceeds (or a portion thereof) reflects a replacement for lost Rents for the relevant period, as determined by Lender in good faith.  All other such proceeds shall be held by Lender and disbursed in accordance with Section 5.3 hereof.

 

Section 5.3.           Delivery of Net Proceeds.

 

5.3.1       Minor Casualty or Condemnation.  If a Casualty or Condemnation has occurred to the Property and the Net Proceeds shall be less than the Restoration Threshold and the costs and expenses to complete the Restoration shall be less than the Restoration Threshold, the Net Proceeds will be disbursed by Lender to Borrower upon receipt; provided that, subject to Section 5.3.2(i) hereof, all of the conditions set forth in Section 5.3.2(a) hereof are met and Borrower delivers a written undertaking to commence and complete the Restoration in an expeditious and diligent fashion and in accordance with all applicable Legal Requirements.  If any Net Proceeds are received by Borrower and may be retained by Borrower pursuant to the terms hereof, such Net Proceeds shall, until completion of the Restoration, be held by Borrower in trust for Lender and shall be segregated from other funds of Borrower to be used to pay for the costs and expenses of Restoration in accordance with the terms hereof.

 

5.3.2       Major Casualty or Condemnation.

 

(a)           If a Casualty or Condemnation has occurred to the Property and the Net Proceeds are equal to or greater than the Restoration Threshold or the costs and expenses to complete the Restoration are equal to or greater than the Restoration Threshold, Lender shall make the Net Proceeds available for the Restoration, provided that each of the following conditions is satisfied:

 

(i)            no Event of Default shall have occurred and remain outstanding;

 

(ii)           (A) in the event the Net Proceeds are Insurance Proceeds, less than thirty-five percent (35%) of the total floor area of the Improvements at the Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (B) in the event the Net Proceeds are an Award, less than ten percent (10%) of the land constituting the Property is taken, and such land is located along the perimeter or periphery of the Property, and no portion of the Improvements is the subject of the Condemnation;

 

(iii)          [reserved]

 

(iv)          [reserved]

 

(v)           Leases requiring payment of annual rent equal to not less than seventy-five percent (75%) of the Gross Income from Operations received by Borrower during the twelve (12) month period immediately preceding the Casualty or Condemnation and all Major Leases shall remain in full force and effect during and after the completion of the Restoration without abatement of rent beyond the time required for Restoration, notwithstanding the occurrence of such Casualty or Condemnation;

 

(vi)          Borrower shall commence the process of completing the Restoration as soon as reasonably practicable (but in no event later than ninety (90) days after the occurrence of such Casualty or Condemnation provided however, Lender in its reasonable discretion may extend such time period in the event Borrower is unable to obtain permits with respect to the Restoration within this time period from any applicable Governmental Authority provided that Borrower has commenced and is diligently pursuing the issuance of same) and shall diligently pursue the same to satisfactory completion;

 

(vii)         Lender shall be satisfied that any operating deficits and all scheduled payments under this Agreement and the other Loan Documents (including scheduled payments of principal and interest) will be paid during the period required for Restoration from (A) the Net Proceeds, (B) the Insurance Proceeds of the business or rental interruption or other loss of income insurance specified in Section 5.1.1(a)(iii) hereof or (C) other funds of Borrower;

 

(viii)        Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (A) the date that is six (6) months prior to the Maturity Date, (B) the earliest date required for such completion under the terms of any Lease, (C) the date required for such completion pursuant to the REA, (D) the date, if any, required under the applicable Legal Requirements for such completion, (E) the date required for such completion under the terms of the Ionis Lease or (F) 6 months prior to the expiration of the insurance coverage specified in Section 5.1.1(a)(iii) hereof;

 

(ix)           the Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable Legal Requirements;

 

(x)            the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements;

 

(xi)          such Casualty or Condemnation, as applicable, does not result in the loss of access to the Property or the Improvements;

 

(xii)          the Management Agreement, if any, shall remain in full force and effect, notwithstanding the occurrence of such Casualty or Condemnation;

 

(xiii)         [reserved];

 

(xiv)         all Operating Agreements shall remain in full force and effect, notwithstanding the occurrence of such Casualty or Condemnation;

 

(xv)          after giving effect to such Restoration, the pro forma Debt Service Coverage Ratio shall not be less than the Debt Service Coverage Ratio as of the Closing Date;

 

(xvi)         Lender shall be satisfied that, upon the completion of the Restoration, the Loan-to-Value Ratio shall not be greater than the Loan-to-Value Ratio as of the Closing Date;

 

(xvii)        Borrower shall deliver, or cause to be delivered, to Lender a signed, detailed budget approved in writing by Borrower’s architect or engineer stating all of the costs and expenses of completing the Restoration, which budget shall be acceptable to Lender; and

 

(xviii)      the Net Proceeds, together with any cash or cash equivalent deposited by Borrower with Lender, are sufficient, in Lender’s reasonable judgment, to pay for all costs and expenses of the Restoration in full.

 

(b)           The Net Proceeds shall be paid directly to Lender and held by Lender in an interest-bearing account and, until disbursed in accordance with the provisions of this Section 5.3.2, shall constitute additional security for the Obligations.  The Net Proceeds (including all interest earned thereon) shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (i) all requirements set forth in Section 5.3.2(a) have been satisfied, (ii) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (iii) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property arising out of the Restoration which have not either been fully bonded by a surety company acceptable to Lender and the Rating Agencies to the satisfaction of Lender and discharged of record or, in the alternative, fully insured to the satisfaction of Lender by the title insurance company issuing the Title Insurance Policy.

 

(c)           All plans and specifications in connection with the Restoration shall be subject to the prior approval of Lender, which approval shall not be unreasonably withheld or delayed, and an independent architect or engineer selected by Lender (such selection not be unreasonably delayed) (the “Casualty Consultant”).  The plans and specifications shall require that the Restoration be completed in a first-class workmanlike manner at least equivalent to the quality and character of the original work in the Improvements so that, upon completion thereof, the Property shall be at least equal in value and general utility to the Property prior to the Casualty or Condemnation, as applicable (it being understood, however, that (i) Borrower shall not be obligated to restore the Property to the precise condition of the Property prior to such Casualty or Condemnation, as applicable, and (ii) in the case of a partial Condemnation, the Restoration shall be done to the extent reasonably practicable after taking into account the consequences of such partial Condemnation; provided that the Property shall be restored, to the extent reasonably practicable, to be of at least equal value and of substantially the same character as prior to the Casualty or Condemnation, as applicable).  Borrower shall restore all Improvements such that when they are fully restored and/or repaired, such Improvements and their contemplated use fully comply with all applicable Legal Requirements.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to the prior approval of Lender and the Casualty Consultant.  All costs and expenses incurred by Lender in connection with recovering, holding and disbursing the Net Proceeds for the Restoration (including, without limitation, reasonable attorneys’ fees and expenses and the Casualty Consultant’s fees and disbursements) shall be paid by Borrower.

 

(d)           In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs and expenses actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, less the Casualty Retainage.  The term “Casualty Retainage” shall mean, as to each contractor, subcontractor or materialman engaged in the Restoration, an amount equal to ten percent (10%) of the costs and expenses actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed.  The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 5.3.2(d), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration.  The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 5.3.2 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all applicable Governmental Authorities, and Lender receives evidence satisfactory to Lender that the costs and expenses of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which (i) the Casualty Consultant certifies to Lender that such contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, (ii) such contractor, subcontractor or materialman delivers lien waivers and evidence of payment in full of all sums due to such contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title insurance company issuing the Title Insurance Policy, and (iii) Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the Lien of the Security Instrument and evidence of payment of any premium payable in connection with such endorsement.  If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the applicable contractor, subcontractor or materialman.

 

(e)            Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

 

(f)            If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs and expenses which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made.  The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs and expenses actually incurred in connection with the Restoration on the same terms and conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 5.3.2 shall constitute additional security for the Obligations.

 

(g)           The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after (i) the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 5.3.2 and (ii) the receipt by Lender of evidence satisfactory to Lender that all costs and expenses incurred in connection with the Restoration have been paid in full shall be remitted by Lender to Borrower, provided that no Event of Default has occurred and remains outstanding; provided, however, that, in the case of a Condemnation, the amount returned to Borrower in accordance with this Section 5.3.2(g) shall not exceed the amount of the Net Proceeds Deficiency deposited by Borrower with the balance being applied to the Debt in the manner provided for in Section 5.3.2(h) hereof.

 

(h)           All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 5.3.2(g) hereof may be retained and applied by Lender toward the payment of the Debt in accordance with Section 2.4.2 hereof, whether or not then due and payable, in such order, proportion and priority as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve in its sole discretion.

 

(i)            Notwithstanding anything to the contrary contained herein or in any other Loan Document, if the Loan or any portion thereof or interest therein is included in a REMIC Trust and, immediately following a release of any portion of the Lien of the Security Instrument following a Casualty or Condemnation (but taking into account any proposed Restoration of the remaining Property), the ratio of the unpaid principal balance of the Loan to the value of the remaining Property is greater than 125% (such value to be determined, in Lender’s sole discretion, by any commercially reasonable method permitted to a REMIC Trust, (i) based solely on real property and excluding any personal property and going concern value, if any, and (ii) for purposes of clarification, it being understood and agreed that such value shall be determined by Lender in compliance with Treasury Regulations Section 1.860G-2(a)(2) (i.e., for purposes of such loan-to-value ratio, such value of the remaining Property shall be reduced by (A) the amount of any lien on real property that is senior to the Loan and (B) the proportionate amount of any lien on real property that is in parity with the Loan), the principal balance of the Loan must be paid down by an amount equal to the least of the following amounts:  (1) the Net Proceeds, (2) the fair market value of the released property at the time of the release, or (3) an amount such that the loan-to-value ratio of the Loan (as so determined by Lender) does not increase after the release, unless Lender receives an opinion of counsel that if such amount is not paid, the applicable Securitization will not fail to maintain its status as a REMIC Trust as a result of the related release of such portion of the Lien of the Security Instrument.  If and to the extent the preceding sentence applies, only such amount of the Net Proceeds, if any, in excess of the amount required to pay down the principal balance of the Loan may be released for purposes of Restoration or released to Borrower as otherwise expressly provided in this Section 5.3.

 

VI.           RESERVE FUNDS AND CASH MANAGEMENT

 

Section 6.1.           [Reserved].

 

Section 6.2.           Tax Funds.

 

6.2.1       Deposits of Tax Funds.  (a) On each Monthly Payment Date, Borrower shall deposit with Lender an amount equal to one-twelfth (1/12) of the Taxes (the “Monthly Tax Deposit”) that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due dates.  Amounts deposited pursuant to this Section 6.2.1 are referred to herein as the “Tax Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Tax Account.”  If at any time Lender reasonably determines that the Tax Funds will not be sufficient to pay the Taxes at least thirty (30) days prior to the respective due dates, Lender shall notify Borrower of such determination and the monthly deposits for Taxes shall be increased by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to the respective due dates for the Taxes; provided that if Borrower receives notice of any such deficiency after the date that is thirty (30) days prior to the date that Taxes are due, Borrower will deposit such amount within one (1) Business Day after its receipt of such notice.

 

(b)           Notwithstanding the provisions of Section 4.6(a) hereof to the contrary, provided that each of the Tax Reserve Waiver Conditions Precedent are satisfied and remain satisfied at all times, Borrower shall not be required to make an initial deposit to the Tax Account or the Monthly Tax Deposit on account of Taxes as provided herein.  If at any time any or all of the Tax Reserve Waiver Conditions Precedent are no longer met, Borrower shall immediately commence and shall continue to fund the Tax Account on account of Taxes as provided herein.

 

6.2.2       Release of Tax Funds.

 

(a)           Lender will apply the Tax Funds to payments of Taxes required to be made by Borrower pursuant to Section 4.1.2 hereof and under the Security Instrument.  Borrower shall furnish Lender with all bills, statements and estimates for Taxes at least thirty (30) days prior to the date on which such Taxes first become payable.  In making any payment relating to Taxes, Lender may do so according to any bill, statement or estimate procured from the public office (with respect to Taxes) without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof.  If the amount of the Tax Funds shall exceed the amounts due for Taxes, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax Funds.  Any Tax Funds remaining after the Debt has been paid in full shall be returned to Borrower.

 

(b)           All costs and expenses incurred by Lender in connection with holding and disbursing the Tax Funds (including, without limitation, the costs and expenses of the inspections, if any, required hereunder) shall be paid by Borrower.

 

Section 6.3.           Insurance Funds.

 

6.3.1       Deposits of Insurance Funds.  (a)  On each Monthly Payment Date, Borrower shall deposit with Lender an amount equal to one-twelfth (1/12) of the Insurance Premiums (the “Monthly Insurance Deposit”) that Lender estimates will be payable for the renewal of the coverages afforded by the Policies upon the expiration thereof in order to accumulate sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies.  Amounts deposited pursuant to this Section 6.3.1 are referred to herein as the “Insurance Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Insurance Account.”  If at any time Lender reasonably determines that the Insurance Funds will not be sufficient to pay the Insurance Premiums at least thirty (30) days prior to the expiration of the Policies, Lender shall notify Borrower of such determination and the monthly deposits for Insurance Premiums shall be increased by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to expiration of the Policies; provided that if Borrower receives notice of any such deficiency after the date that is thirty (30) days prior to expiration of the Policies, Borrower will deposit such amount within one (1) Business Day after its receipt of such notice.

 

(b)           Notwithstanding the provisions of Section 6.3.1(a) hereof to the contrary, provided that each of the Insurance Reserve Waiver Conditions Precedent are satisfied and remain satisfied at all times, Borrower shall not be required to make an initial deposit to the Insurance Account nor the Monthly Insurance Deposits on account of Insurance Premiums as provided herein.  If at any time any or all of the Insurance Reserve Waiver Conditions Precedent are no longer met, Borrower shall immediately begin and shall continue to fund the Insurance Account on account of Insurance Premiums as provided herein.

 

6.3.2       Release of Insurance Funds.

 

(a)           Lender will apply the Insurance Funds to payments of Insurance Premiums for the Policies required to be maintained by Borrower pursuant to Section 5.1.1 hereof.  Borrower shall furnish Lender with all bills, invoices and statements for Insurance Premiums at least thirty (30) days prior to the date on which such Insurance Premiums first become payable.  In making any payment relating to Insurance Premiums, Lender may do so according to any bill, invoice or statement procured from the insurance company or its agent, without inquiry into the accuracy of such bill, invoice or statement.  If the amount of the Insurance Funds shall exceed the amounts due for Insurance Premiums, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Insurance Funds.

 

(b)           All costs and expenses incurred by Lender in connection with holding and disbursing the Insurance Funds (including, without limitation, the costs and expenses of the inspections, if any, required hereunder) shall be paid by Borrower.

 

Section 6.4.           Capital Expenditure Funds.

 

6.4.1       Deposits of Capital Expenditure Funds(a).  On each Monthly Payment Date, Borrower shall deposit with Lender an amount equal to Twenty-Nine Thousand Three Hundred Thirty-Three and 33/100 Dollars ($29,333.33) (the “Monthly Capital Expenditure Deposit”) for annual Capital Expenditures set forth in the Approved Annual Budget or otherwise approved by Lender, which approval shall not be unreasonably withheld or delayed.  Amounts deposited pursuant to this Section 6.4.1 are referred to herein as the “Capital Expenditure Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Capital Expenditure Account.”  Lender may reassess its estimate of the amount necessary for Capital Expenditures from time to time and may require Borrower to increase the monthly deposits required pursuant to this Section 6.4.1 upon thirty (30) days’ notice to Borrower if Lender determines in its reasonable discretion that an increase is necessary for proper maintenance and operation of the Property.  Notwithstanding any provisions of Section 6.4.1(a) hereof to the contrary, provided and on condition that each of the Capital Expenditure Reserve Waiver Conditions Precedent are satisfied and remain satisfied at all times, Borrower shall not be required to make the initial deposit to the Capital Expenditure Account on account of Capital Expenditures or make the Monthly Capital Expenditure Deposit on account of Capital Expenditures as provided herein.  If at any time any or all of the Capital Expenditure Reserve Waiver Conditions Precedent are no longer met, Borrower shall immediately begin and shall continue to fund the Capital Expenditure Account on account of Capital Expenditures as provided herein.

 

 

(a)           Lender shall disburse Capital Expenditure Funds only for Capital Expenditures.

 

(b)           Lender shall disburse to Borrower the Capital Expenditure Funds upon satisfaction by Borrower of each of the following conditions:  (i) Borrower shall submit a request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the Capital Expenditures to be paid, (ii) on the date such request is received by Lender and on the date such payment is to be made, no Default or Event of Default shall have occurred and remain outstanding, (iii) Lender shall have received an Officer’s Certificate (A) stating that all items to be funded by the requested disbursement are Capital Expenditures, (B) stating that all Capital Expenditures to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with all applicable Legal Requirements, such certificate to be accompanied by a copy of any license, permit or other approval required by any Governmental Authority in connection with such Capital Expenditures, (C) identifying each Person that supplied materials or labor in connection with the Capital Expenditures to be funded by the requested disbursement, (D) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender, and (E) stating that the Capital Expenditures to be funded by the requested disbursement have not been the subject of a previous disbursement, (iv) at Lender’s option, a title search for the Property indicating that the Property is free from all liens, claims and other encumbrances not previously approved by Lender, and (v) Lender shall have received such other evidence as Lender shall reasonably request that the Capital Expenditures to be funded by the requested disbursement have been completed and are paid for or will be paid for in full upon such disbursement to Borrower.  Lender shall not be required to disburse Capital Expenditure Funds more frequently than once each calendar month, and each disbursement of Capital Expenditure Funds must be in an amount not less than the Minimum Disbursement Amount (or a lesser amount if the total remaining balance of Capital Expenditure Funds is less than the Minimum Disbursement Amount, in which case only one disbursement of the amount remaining in the Capital Expenditure Account shall be made).

 

(c)           Nothing in this Section 6.4 shall (i) make Lender responsible for making or completing any Capital Expenditure Work; (ii) obligate Lender to commence or proceed with any Capital Expenditure Work; (iii) require Lender to expend funds in addition to the Capital Expenditure Funds to complete any Capital Expenditure Work; or (iv) obligate Lender to demand from Borrower additional sums to perform or complete any Capital Expenditure Work.

(d)           If a disbursement of Capital Expenditure Funds will exceed Fifty Thousand and No/100 Dollars ($50,000), Lender may require an inspection of the Property prior to such disbursement in order to verify completion of the Capital Expenditure Work for which reimbursement is sought.  Lender may require that such inspection be conducted by an independent professional selected by Lender and may require a certificate of completion by an independent professional acceptable to Lender prior to such disbursement of Capital Expenditure Funds.

 

(e)           Borrower shall permit Lender and its agents and representatives (including, without limitation, Lender’s engineer or architect) or third parties to enter onto the Property during normal business hours (subject to the rights of Tenants under their Leases) to inspect the progress of any Capital Expenditure Work and all materials being used in connection therewith and to examine all plans, specifications and shop drawings relating to such Capital Expenditure Work.  Borrower shall cause all contractors, subcontractors and materialmen to cooperate with Lender and its agents and representatives or such other Persons described above in connection with the inspections, if any, required by Lender in accordance with this Section 6.4.2.

 

(f)            All Capital Expenditure Works and all materials, equipment, fixtures, or any other item comprising a part of any Capital Expenditure Work shall be constructed, installed or completed, as applicable, free and clear of all liens, claims and other encumbrances not previously approved by Lender.

 

(g)           All Capital Expenditure Works shall comply with all applicable Legal Requirements of all Governmental Authorities having jurisdiction over the Property and all applicable insurance requirements (including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters).

 

(h)           In addition to any insurance required under the Loan Documents, Borrower shall provide or cause to be provided builder’s risk insurance, workers’ compensation insurance, public liability insurance and other insurance to the extent required by the applicable Legal Requirements in connection with any Capital Expenditure Work.  All such policies shall be in form and amount reasonably satisfactory to Lender.  All such policies which can be endorsed with a non-contributing mortgagee clause (or its equivalent) making loss thereunder payable to Lender and its successors and/or assigns shall be so endorsed.  At Lender’s request, certified copies of such policies shall be delivered to Lender.

 

(i)            Any Capital Expenditure Funds remaining after the Debt has been paid in full shall be returned to Borrower.

 

(j)           All reasonable costs and expenses incurred by Lender in connection with holding and disbursing the Capital Expenditure Funds (including, without limitation, the costs and expenses of the inspections, if any, required hereunder) shall be paid by Borrower.

 

6.4.3       Failure to Perform Capital Expenditure Works.  It shall be an Event of Default if Borrower fails to comply with any provision of this Section 6.4 and such failure is not cured within thirty (30) days after notice from Lender.  Upon the occurrence of an Event of Default, Lender may, at its option, use the Capital Expenditure Funds (or any portion thereof) to perform or complete any Capital Expenditure Work as provided in Section 6.4.2 hereof or any other repair or replacement to the Property.  Such right to withdraw and apply the Capital Expenditure Funds shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents.

 

Section 6.5.           Rollover Funds.

 

6.5.1       Deposits of Rollover Funds.

 

(a)           On each Monthly Payment Date, Borrower shall deposit with Lender an amount equal to Two Thousand Nine Hundred Thirty-Three and 33/100 Dollars ($2,933.33) (the “Monthly Rollover Deposit”) for tenant improvements and leasing commissions that may be incurred following the date hereof.  Amounts deposited pursuant to this Section 6.5.1 are referred to herein as the “Rollover Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Rollover Account.”  Notwithstanding any provisions of Section 6.5.1(a) hereof to the contrary, provided and on condition that each of the Rollover Reserve Waiver Conditions Precedent are satisfied and remain satisfied at all times, Borrower shall not be required to make the initial deposit to the Rollover Account on account of tenant improvements or leasing conditions or make the Monthly Rollover Deposit on account of tenant improvements or leasing conditions as provided herein.  If at any time any or all of the Rollover Reserve Waiver Conditions Precedent are no longer met, Borrower shall immediately begin and shall continue to fund the Rollover Account on account of tenant improvements and leasing commissions as provided herein.

 

(b)           In addition to the deposits required under Section 6.5.1(a), Borrower shall deposit, or cause to be deposited, with Lender all amounts paid to Borrower in connection with (i) any modification or amendment of any Lease, (ii) any consent (including any consent to an assignment or sublease of any Lease) or waiver by Borrower of any term, condition or provision under any Lease, (iii) any settlement of claims of Borrower against third parties in connection with any Lease, (iv) any rejection, termination, surrender, cancellation or buy-out of any Lease (including in connection with any Bankruptcy Action and including any payment relating to unamortized tenant improvements and/or leasing commissions), and (v) any other extraordinary event pursuant to which Borrower receives payment (in whatever form) derived from or generated by the use, ownership or operation of the Property not otherwise covered by this Agreement or the Cash Management Agreement (collectively, the “Extraordinary Lease Payments”), in each case, with respect to clauses (i), (ii), (iii), (iv) and (v), net of reasonable, out-of-pocket costs and expenses, if any, incurred by Borrower.  In connection with any amount required to be deposited with Lender pursuant to this Section 6.5.1(b), Borrower shall provide prior notice to Lender of the amount and the nature thereof and otherwise cooperate with Lender to ensure that such amounts are properly accounted for and held as Rollover Funds.

 

6.5.2       Release of Rollover Funds.

 

(a)           Lender shall disburse to Borrower the Rollover Funds upon satisfaction by Borrower of each of the following conditions:  (i) Borrower shall submit a request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the tenant improvement costs and leasing commissions to be paid or reimbursed, (ii) on the date such request is received by Lender and on the date such payment or reimbursement is to be made, no Default or Event of Default shall have occurred and remain outstanding, (iii) Lender shall have received and, if applicable, approved the Lease in respect of which Borrower is obligated to pay or reimburse certain tenant improvement costs and leasing commissions, (iv) Lender shall have received and, if applicable, approved a budget for tenant improvement costs and a schedule of leasing commission payments and the requested disbursement will be used to pay all or a portion of such costs and payments, (v) Lender shall have received an Officer’s Certificate (A) stating that all tenant improvements at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with all applicable Legal Requirements, such certificate to be accompanied by a copy of any license, permit or other approval required by any Governmental Authority in connection with such tenant improvements, (B) identifying (1) each Person that supplied materials or labor in connection with the tenant improvements to be funded by the requested disbursement and (2) each Person that provided brokerage services in connection with the leasing commissions to be funded by the requested disbursement, (C) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender, and (D) stating that the tenant improvement costs and/or leasing commission payments to be funded have not been the subject of a previous disbursement,  (vi) at Lender’s option, a title search for the Property indicating that the Property is free from all liens, claims and other encumbrances not previously approved by Lender, (vii) Lender shall have received an estoppel certificate from the applicable Tenant stating that (A) (1) all work required to be performed by Borrower have been completed in accordance with the applicable Lease and have been accepted by such Tenant or (2) all work required to be performed by such Tenant have been completed and a reimbursement of the amount specified in such estoppel certificate is due to such Tenant pursuant to its Lease and (B) such Tenant is in occupancy and paying full unabated rent or has taken possession of the demised premises, and (viii) Lender shall have received such other evidence as Lender may reasonably request that (A) the tenant improvements at the Property to be funded by the requested disbursement have been completed and are paid for or will be paid for in full upon such disbursement to Borrower and (B) the leasing commissions to be funded by the requested disbursement have been paid for or will be paid for in full upon such disbursement to Borrower.  Lender shall not be required to disburse Rollover Funds more frequently than once each calendar month, and each disbursement of the Rollover Funds must be in an amount not less than the Minimum Disbursement Amount (or a lesser amount if the total remaining balance of Rollover Funds is less than the Minimum Disbursement Amount, in which case only one disbursement of the amount remaining in the Rollover Account shall be made).  Any Rollover Funds remaining after the Debt has been paid in full shall be returned to Borrower.

 

(b)           All reasonable costs and expenses incurred by Lender in connection with holding and disbursing the Rollover Funds shall be paid by Borrower.

 

Section 6.6.          [Reserved].

 

Section 6.7.           Excess Cash Flow Funds.

 

6.7.1       Deposits of Excess Cash Flow Funds.  During a Cash Sweep Trigger Event Period, Borrower shall deposit with Lender all Excess Cash Flow, which sums shall be held by Lender as additional security for the Loan.  Amounts so deposited shall hereinafter be referred to as the “Excess Cash Flow Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Excess Cash Flow Account.”

 

6.7.2       Release of Excess Cash Flow Funds.

 

(a)           Upon the termination of a Cash Sweep Trigger Event Period and provided that no other Cash Sweep Trigger Event shall have occurred and remain outstanding, all funds on deposit in the Excess Cash Flow Account shall be deposited into the Cash Management Account and applied in accordance with this Agreement and the Cash Management Agreement.

 

(b)           All costs and expenses incurred by Lender in connection with holding and disbursing the Excess Cash Flow Funds shall be paid by Borrower.

 

 

6.8.3       Indemnity.  Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including reasonable attorneys’ fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established.  Borrower shall assign to Lender all rights and claims Borrower may have against all Persons supplying labor, materials or other services which are to be paid or reimbursed from or secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains outstanding.

 

Section 6.9.          [Reserved].

 

Section 6.10.        [Reserved].

 

Section 6.11.        [Reserved].

 

Section 6.12.        [Reserved].

 

Section 6.13.        Material Tenant Rollover Funds.

 

6.13.1     Deposits of Material Tenant Rollover Funds.  Upon the occurrence and during the continuation of a Material Tenant Trigger Event with respect to which a Material Tenant Trigger Event Cure has not occurred, on each Monthly Payment Date, Borrower shall deposit with Lender the Material Tenant Trigger Event Excess Cash Flow (the “Monthly Material Tenant Rollover Deposit”) for tenant improvements and leasing commissions that may be incurred by Borrower following the occurrence of either (a) an Acceptable Material Tenant Lease Extension or (b) an Acceptable Re-tenanting Event with respect to the Material Tenant Space.  Amounts deposited pursuant to this Section 6.13.1 are referred to herein as the “Material Tenant Rollover Funds” and the account in which such amounts are held by Lender shall hereinafter be referred to as the “Material Tenant Rollover Account.”

 

6.13.2     Release of Material Tenant Rollover Funds.

 

(a)           Lender shall disburse to Borrower the Material Tenant Rollover Funds on deposit in the Material Tenant Rollover Account upon satisfaction by Borrower of each of the following conditions, only with respect to specified tenant improvements and leasing commissions with respect to the related Material Tenant Lease:  (i) an Acceptable Material Tenant Lease Extension or an Acceptable Re-tenanting Event shall have occurred; (ii) Borrower shall submit a request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the tenant improvement costs and leasing commissions to be paid or reimbursed, (iii) on the date such request is received by Lender and on the date such payment or reimbursement is to be made, no Event of Default shall have occurred and remain outstanding, (iv) regarding an Acceptable Re-tenanting Event, Lender shall have received and approved the new Lease in respect of which Borrower is obligated to pay or reimburse for certain tenant improvement costs and leasing commissions, (v) regarding an Acceptable Material Tenant Lease Extension, Lender shall have received and approved the written notice of extension of the Material Tenant Lease, in respect of which Borrower is obligated to pay or reimburse for certain tenant improvement costs and leasing commissions, (vi) Lender shall have received and, if applicable, approved a budget for tenant improvement costs and a schedule of leasing commission payments and the requested disbursement will be used to pay all or a portion of such costs and payments, (vii) Lender shall have received an Officer’s Certificate (A) stating that all tenant improvements at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with all applicable Legal Requirements, in the case of a final disbursement with respect to the tenant improvements such certificate to be accompanied by a copy of any license, permit or other approval required by any Governmental Authority in connection with such tenant improvements, (B) identifying (1) each Person that supplied materials or labor in connection with the tenant improvements to be funded by the requested disbursement and (2) each Person that provided brokerage services in connection with the leasing commissions to be funded by the requested disbursement, (C) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender, and (D) stating that the tenant improvement costs and/or leasing commission payments to be funded have not been the subject of a previous disbursement, (viii) at Lender’s option, a title search for the Property indicating that the Property is free from all liens, claims and other encumbrances not previously approved by Lender, (ix) regarding an Acceptable Re-tenanting Event, with respect to the last disbursement for the applicable leased space for which the tenant improvements or leasing commissions are being funded pursuant to this Section 6.13.2, Lender shall have received an estoppel certificate from the applicable replacement Tenant or Tenants stating that (A) (1) all work required to be performed by Borrower have been completed in accordance with the applicable Lease and have been accepted by such Tenant or (2) all work required to be performed by such Tenant have been completed and a reimbursement of the amount specified in such estoppel certificate is due to such Tenant pursuant to its Lease and (B) such Tenant is in occupancy and paying full unabated rent without offset or has taken possession of the demised premises and is paying full unabated rent without offset, (x) regarding an Acceptable Material Tenant Lease Extension, with respect to the last disbursement for the applicable leased space for which the tenant improvements or leasing commissions are being funded pursuant to this Section 6.13.2, Lender shall have received an estoppel certificate from Material Tenant stating that (A) (1) all work required to be performed by Borrower have been completed in accordance with the applicable Lease and have been accepted by Material Tenant or (2) all work required to be performed by Material Tenant has been completed and a reimbursement of the amount specified in such estoppel certificate is due to Material Tenant pursuant to its Lease and (B) Material Tenant is in occupancy and paying full unabated rent without offset or has taken possession of the demised premises and is paying full unabated rent without offset, and (xi) Lender shall have received such other evidence as Lender may reasonably request that (A) the tenant improvements at the Property to be funded by the requested disbursement have been completed and are paid for or will be paid for in full upon such disbursement to Borrower and (B) the leasing commissions to be funded by the requested disbursement have been paid for or will be paid for in full upon such disbursement to Borrower.  Lender shall not be required to disburse Material Tenant Rollover Funds more frequently than once each calendar month, and each disbursement of the Material Tenant Rollover Funds must be in an amount not less than the Minimum Disbursement Amount (or a lesser amount if the total remaining balance of Material Tenant Rollover Funds is less than the Minimum Disbursement Amount, in which case only one disbursement of the amount remaining in the Material Tenant Rollover Account shall be made).

 

(b)           All reasonable costs and expenses incurred by Lender in connection with holding and disbursing the Material Tenant Rollover Funds shall be paid by Borrower.

 

VII.         PROPERTY MANAGEMENT

 

Section 7.1.           Management Agreement.

 

Borrower represents and warrants that Borrower self-manages the Property, and no agent, affiliated or unaffiliated with Borrower, receives a fee or other compensation for managing the Property.  Borrower shall not engage a property manager for the Property without Lender’s prior written consent, which consent may be conditioned on, among other things, such manager being a Qualified Manager.  In the event that Lender determines that the Property is not being managed in accordance with generally accepted management practices for properties similar to such Property, Lender shall deliver written notice thereof to Borrower, which notice shall specify with particularity the grounds for Lender’s determination.  If (A) Lender determines that the conditions specified in Lender’s notice delivered in accordance with the immediately preceding sentence are not remedied to Lender’s satisfaction by Borrower within thirty (30) days from receipt of such notice or that Borrower has failed to diligently undertake correcting such conditions within such thirty (30) day period, or (B) an Event of Default has occurred and is continuing, (C) the Debt Service Coverage Ratio is equal to or less than 1.10 to 1.0 or (D) Borrower notifies Lender in writing that it no longer wishes to self-manage the Property, (i) Borrower shall, at Lender’s direction, engage a professional third party property manager acceptable to Lender and enter into a property management agreement acceptable to Lender with such management company (the “Management Agreement”), (ii) Borrower and such third party manager shall execute Lender’s then standard assignment of management agreement and subordination of management fees reasonably  acceptable to Lender conditionally assigning Borrower’s interest in such management agreement to Lender and subordinating manager’s right to receive fees and expenses under such agreement while the Debt remains outstanding, and (iii) Borrower shall thereafter comply with the terms of Sections 7.2 and 7.3 below.

 

Section 7.2.          Prohibition Against Termination or Modification.

 

(a)           Borrower shall not, without prior consent of Lender, (i) surrender, terminate, cancel, modify, renew, amend, or extend the Management Agreement; provided that Borrower may, without Lender’s consent, replace Manager with a Qualified Manager pursuant to a Replacement Management Agreement, (ii) reduce or consent to the reduction of the term of the Management Agreement, (iii) increase or consent to the increase of the amount of any fees or other charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.  In connection with the replacement of Manager with a Qualified Manager, Borrower shall: (A) execute and cause Qualified Manager to execute an assignment of management agreement and subordination of management fees in the form then used by Lender and (B) execute and cause Qualified Franchisor to execute an assignment of franchise agreement and subordination of franchise fees in the form then used by Lender, as applicable.

 

(b)           In the event that the Management Agreement expires or is terminated (without limiting any obligation of Borrower to obtain Lender’s consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with a Qualified Manager.

 

(c)           Upon the occurrence and during the continuation of an Event of Default, Borrower shall not exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Management Agreement without the prior consent of Lender, which consent may be granted, conditioned or withheld in Lender’s sole discretion.

 

Section 7.3.           Replacement of Manager.

 

Lender shall have the right to require Borrower to replace Manager (if any) with a Qualified Manager pursuant to Replacement Management Agreement, which is not an Affiliate of, but is chosen by, Borrower upon the occurrence of any one or more of the following events:  (a) at any time following the occurrence of an Event of Default, (b) if Manager shall be in default under the Management Agreement beyond any applicable notice and cure period, (c) if Borrower, Guarantor, Sponsor or Manager shall become insolvent or a debtor in any Bankruptcy Action, (d) if at any time Manager has engaged in gross negligence, fraud, willful misconduct or misappropriation of funds, and/or (e) if at any time the Debt Service Coverage Ratio (based upon the trailing twelve (12) month period immediately preceding the date of such determination is less than 1.10 to 1.0.

 

VIII.        TRANSFERS

 

Section 8.1.           Transfer or Encumbrance of Property.

 

(a)           Without the prior consent of Lender, neither Borrower nor any Restricted Party shall do any of the following (each, a “Transfer”): sell, transfer, convey, assign, mortgage, pledge, encumber, alienate, grant a Lien on, grant any option with respect to or grant any other interest in the Property, any part thereof or any interest therein (including any legal, beneficial or economic interest in Borrower or any Restricted Party), directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record, other than Permitted Transfers.

 

(b)           A Transfer shall include (i) an installment sales agreement wherein Borrower agrees to sell the Property, any part thereof or any interest therein for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents; (iii) if Borrower or any Restricted Party is a corporation, the voluntary or involuntary sale, conveyance or transfer of such corporation’s stock (or the stock of any corporation directly or indirectly Controlling such corporation by operation of law or otherwise) or the creation or issuance of new stock such that such corporation’s stock shall be vested in a party or parties who are not now stockholders or any change in the Control of such corporation; (iv) if Borrower or any Restricted Party is a limited or general partnership, joint venture or limited liability company, the change, removal, resignation or addition of a general partner, managing partner, limited partner, joint venturer or member, the voluntary or involuntary transfer of the partnership interest of any general partner, managing partner or limited partner, the creation or issuance of new limited partnership interests, the voluntary or involuntary transfer of the interest of any joint venturer or member or the creation or issuance of new non-managing member interests; (v) if Borrower or any Restricted Party is a trust or nominee trust, the voluntary or involuntary transfer of the legal or beneficial interest in such trust or nominee trust or the creation or issuance of new legal or beneficial interests; and (vi) if Borrower enters into, or the Property is subject to, any PACE Loan.

 

(c)           Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder or under the other Loan Documents in order to declare the Debt immediately due and payable upon a Transfer (other than a Permitted Transfer) without Lender’s prior consent.  This provision shall apply to every Transfer regardless of whether voluntary or not, and whether or not Lender has consented to any previous Transfer.

 

(d)           Lender’s consent to one Transfer shall not be deemed to be a waiver of Lender’s right to require such consent to any future occurrence of same.  Any Transfer made in contravention of this Section 8.1 shall be null and void and of no force and effect.

 

(e)           Borrower agrees to bear and shall pay or reimburse Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses, title search costs and title insurance endorsement premiums) incurred by Lender in connection with the review, approval and/or documentation of any proposed Transfer.  If required by Lender, Borrower shall deposit with Lender an amount equal to Lender’s anticipated costs and expenses in evaluating any proposed Transfer.

 

(f)           No consent to any assumption of the Loan shall occur on or before the first (1^st) anniversary of the first (1^st) Monthly Payment Date.  Thereafter, Lender’s consent to a Transfer of the Property and the assumption of the Loan shall not be unreasonably withheld after consideration of all relevant factors and provided that the following conditions are satisfied:

 

(i)            Lender shall have received a notice from Borrower requesting Lender’s consent to such Transfer not less than sixty (60) days prior to the proposed date of such Transfer;

 

(ii)           No Default or Event of Default shall have occurred and remain outstanding;

 

(iii)          The proposed transferee (“Transferee”) shall be a corporation, partnership or limited liability company that qualifies as a single purpose, bankruptcy remote entity under criteria established by the Rating Agencies (including, without limitation, criteria applicable to Transferee’s SPE Constituent Entities); provided, however, that Transferee shall not be a Prohibited Entity;

 

(iv)        The Organizational Documents of Transferee and Transferee’s SPE Constituent Entities shall be reasonably satisfactory to Lender;

 

(v)           Neither any Transferee’s Sponsor, Transferee nor any other Person owned or Controlled, directly or indirectly, by Transferee’s Sponsors shall have been a debtor in any Bankruptcy Action or taken advantage of any Bankruptcy Law or any law for the benefit of debtors within seven (7) years prior to the date of the proposed Transfer;

 

(vi)          Neither any Transferee’s Sponsor, Transferee nor any other Person owned or Controlled, directly or indirectly, by Transferee’s Sponsors shall have defaulted under its obligations with respect to any Indebtedness in a manner which is not reasonably acceptable to Lender;

 

(vii)         There shall be no material litigation or regulatory action pending or threatened against any Transferee’s Sponsor, Transferee or any other Person owned or Controlled, directly or indirectly, by Transferee’s Sponsors which is not reasonably acceptable to Lender;

 

(viii)        Transferee and Transferee’s Sponsors shall, as of the date of such Transfer, have an aggregate net worth and liquidity reasonably satisfactory to Lender;

 

(ix)          Transferee and Transferee’s Sponsors (together with Transferee’s proposed property manager) shall be experienced owners and operators of properties similar in location, size, class, use, operation and value as the Property, as evidenced by financial statements and other information reasonably satisfactory to Lender (it being understood and agreed that Lender reserves the right to approve Transferee without approving its proposed property manager);

 

(x)           If the Management Agreement (if any) will be terminated as a result of such Transfer, the Property shall be managed by a Qualified Manager in accordance with a Replacement Management Agreement;

 

(xi)          Transferee and Transferee’s SPE Constituent Entities shall have delivered all agreements, certificates and opinions reasonably required by Lender (including, if applicable, an amendment to Section 3.1.24 hereof to incorporate necessary changes based on differences in the organizational structures of Borrower and Transferee);

 

(xii)         No Default or Event of Default shall occur as a result of such Transfer;

 

(xiii)        Transferee shall have assumed all obligations of Borrower under the Loan Documents pursuant to an assumption agreement in form and substance reasonably satisfactory to Lender;

 

(xiv)        Borrower shall have delivered, at its sole cost and expense, an endorsement to the Title Insurance Policy, as modified by the assumption agreement, as a valid first lien on the Property and naming Transferee as owner of the Property, which endorsement shall insure that, as of the date of the recording of the assumption agreement, the Property shall not be subject to any Liens other than those contained in the Title Insurance Policy issued on the date hereof and the Permitted Encumbrances;

 

(xv)         Prior to any release of Guarantor, one (1) or more substitute guarantors reasonably acceptable to Lender shall (A) have assumed all obligations of Guarantor under the Guaranty and the Environmental Indemnity or (B) have executed a replacement guaranty and a replacement environmental indemnity in form and substance reasonably satisfactory to Lender;

 

(xvi)        Borrower or Transferee, at its sole cost and expense, shall have delivered a new bankruptcy non-consolidation opinion reflecting such Transfer reasonably acceptable to Lender and acceptable to the Rating Agencies;

 

(xvii)       If required by Lender, Borrower shall have delivered a Rating Agency Confirmation as to such Transfer and Transferee;

 

(xviii)      The Ionis Lease permits the assignment and sale to Transferee and following the proposed transfer and assumption, the Ionis Lease shall remain in full force and effect;

 

(xix)         Borrower shall have paid to Lender an assumption fee equal to one percent (1%) of the Outstanding Principal Balance; and

 

(xx)          Borrower shall have paid all reasonable out-of-pocket costs and expenses incurred in connection with such Transfer (including reasonable fees and disbursements of Lender’s counsel and fees, costs and expenses of the Rating Agencies).

 

Upon such Transfer of the Property and assumption of the Loan, Borrower and Guarantor shall be relieved of all liability under the Loan Documents for acts, events, conditions, or circumstances first occurring or arising after the date of such Transfer (other than with respect to any liabilities and obligations that specifically stated to survive the repayment of the Loan), except to the extent that such acts, events, conditions, or circumstances are the proximate result of acts, events, conditions, or circumstances that existed prior to the date of such Transfer, whether or not discovered prior or subsequent to the date of such Transfer, and Borrower and Guarantor shall bear the burden of proof that such acts, events, conditions, or circumstances first occurred or arose after the date of such Transfer and/or that such acts, events, conditions, or circumstances were not the proximate result of acts, events, conditions, or circumstances that existed prior to the date of such Transfer, as applicable.

 

Section 8.2.           Permitted Transfers of Interests in Borrower

 

8.2.1       Permitted Transfers Generally.

 

Notwithstanding anything to the contrary contained in Section 8.1 hereof, Lender’s consent shall not be required in connection with (1) the Transfer or issuance of shares of common stock in any Restricted Party that is a publicly traded entity, provided such shares of stock are listed on the New York Stock Exchange or another nationally recognized stock exchange located within the United States, or (2) one or a series of Transfers, of not more than forty-nine percent (49%) in the aggregate of the direct or indirect ownership interests in any Restricted Party; provided that after giving effect to each such Transfer described in clauses (1) and (2) above, the following conditions are satisfied: (a) no Default or Event of Default shall have occurred and remain outstanding or shall occur solely as a result of such Transfer, (b) such Transfer shall not (i) cause the transferee, together with its Affiliates, to acquire Control of any Restricted Party, (ii) result in Borrower no longer being Controlled by Guarantor, or (iii) cause the transferee, together with its Affiliates, to increase its direct or indirect interest in any Restricted Party to an amount which exceeds forty-nine percent (49%) in the aggregate, (c) to the extent the transferee owns twenty percent (20%) or more of the direct or indirect interests in any Restricted Party immediately following such Transfer (provided that such Transferee did not own 20% or more of the direct or indirect ownership interests in such Restricted Party as of the Closing Date), Borrower shall deliver, at Borrower’s sole cost and expense, customary searches (credit, judgment, lien, bankruptcy, etc.) reasonably acceptable to Lender with respect to such transferee and its Affiliates as Lender may reasonably require, (d) after giving effect to such Transfer, Guarantor shall continue to own, directly or indirectly, at least fifty- one percent (51%) of all legal, beneficial and economic interests in each Restricted Party, (e) the Property shall continue to be self-managed by Borrower in accordance with the terms of this Agreement or managed by a Qualified Manager, (f) Borrower shall give Lender notice of such Transfer request, together with copies of all instruments effecting such Transfer and copies of any Organizational Documents that Lender shall require, not less than thirty (30) days prior to the proposed date of such Transfer, (g) Borrower shall continue to comply with the representations, warranties and covenants contained in Sections 3.1.41, 4.1.25, 4.2.10 and 4.2.14 hereof (and upon request of Lender, deliver to Lender a statement signed by an authorized officer of Borrower which certifies to such compliance), and (h) the legal and financial structure of Borrower and its stockholders, partners or members, as applicable, and the single purpose nature and bankruptcy remoteness of Borrower and its stockholders, partners or members, as applicable, after such Transfer, shall satisfy Lender’s the then current applicable underwriting criteria and requirements.

 

8.2.2       Permitted Merger.

 

Additionally, notwithstanding anything to the contrary contained in Section 8.1 or Section 8.2.1 hereof, Lender’s consent shall not be required in connection with a Permitted Merger of Ionis.  As used herein, the term “Permitted Merger” shall mean an acquisition by, merger with or consolidation with or into (any such transaction, the “Merger”) an entity (the “Merged Entity”) in which each of the following conditions have been satisfied as of the date of consummation of the Merger: (a) after giving effect to such Merger, no Default or Event of Default shall have occurred and remain outstanding or shall occur solely as a result of such Merger; (b) [reserved]; (c) to the extent any transferee owns twenty percent (20%) or more of the direct or indirect interests in any Restricted Party immediately following such Merger (provided that such transferee did not own 20% or more of the direct or indirect ownership interests in such Restricted Party as of the Closing Date), Borrower shall deliver, at Borrower’s sole cost and expense, customary searches (credit, judgment, lien, bankruptcy, etc.) reasonably acceptable to Lender with respect to such transferee and its Affiliates as Lender may reasonably require; (d) [reserved]; (e) the Property shall continue to be self-managed by Borrower in accordance with the terms of this Agreement or managed by a Qualified Manager; (f) Borrower shall give Lender notice of such Merger, together with copies of all instruments effecting such Merger and copies of any Organizational Documents that Lender shall require, not less than fifteen (15) days prior to the proposed closing date of such Merger; (g) after giving effect to such Merger, Borrower shall continue to comply with the representations, warranties and covenants contained in Sections 3.1.41, 4.1.25, 4.2.10 and 4.2.14 hereof (and upon request of Lender, deliver to Lender a statement signed by an authorized officer of Borrower which certifies to such compliance); (h) after giving effect to such Merger, the legal and financial structure of Borrower and the single purpose nature and bankruptcy remoteness of Borrower shall satisfy Lender’s the then current applicable underwriting criteria and requirements; (i) the Merged Entity (after giving effect to such Merger) has a credit rating of Investment Grade or better; (j) the Merged Entity is a reputable pharmaceutical company; (k) after giving effect to such Merger, the Merged Entity owns, directly or indirectly, all or substantially all of the assets which Ionis owned immediately prior to the effective date of the Merger; (l) the Merged Entity immediately following such Merger (and after giving effect to such Merger) shall have an aggregate Net Worth of not less than $600,000,000.00 and Liquid Assets of not less than $250,000,000.00; (m) the Merged Entity shall have assumed all obligations of Ionis, as tenant, under the Ionis Lease; (n) the Merged Entity have assumed all obligations of Guarantor under the Guaranty and the Environmental Indemnity or have executed a replacement guaranty and a replacement environmental indemnity in substantially the same form as the Guaranty and Environmental Indemnity; (o) Borrower shall have obtained a Rating Agency Confirmation from the Rating Agencies with respect to such Merger; and (p) Borrower shall have paid all reasonable out-of-pocket costs and expenses incurred in connection with such Merger (including reasonable fees and disbursements of Lender’s counsel and fees, costs and expenses of the Rating Agencies).

 

8.2.3       Corporate Transfer.

 

Furthermore, notwithstanding anything to the contrary contained in Section 8.1 or Section 8.2.1 hereof, Lender’s consent shall not be required in connection with a Transfer of not more than fifty percent (50%) in the aggregate of the direct or indirect ownership interests in a Restricted Party to an entity (the “New Entity”), provided all of the following conditions have been satisfied as of the date of consummation of such Transfer: (a) after giving effect to such Transfer, no Default or Event of Default shall have occurred and remain outstanding or shall occur solely as a result of such Transfer; (b) after giving effect to such Transfer, Ionis will own, directly or indirectly, at least fifty percent (50%) of the direct ownership interests in such New Entity; (c) to the extent any transferee owns twenty percent (20%) or more of the direct or indirect interests in any Restricted Party immediately following such Transfer (provided that such transferee did not own 20% or more of the direct or indirect ownership interests in such Restricted Party as of the Closing Date), Borrower shall deliver, at Borrower’s sole cost and expense, customary searches (credit, judgment, lien, bankruptcy, etc.) reasonably acceptable to Lender with respect to such transferee and its Affiliates as Lender may reasonably require; (d) [reserved]; (e) the Property shall continue to be self-managed by Borrower in accordance with the terms of this Agreement or managed by a Qualified Manager; (f) Borrower shall give Lender notice of such Transfer, together with copies of all instruments effecting such Transfer and copies of any Organizational Documents that Lender shall require, not less than fifteen (15) days prior to the proposed effective date of such Transfer; (g) after giving effect to such Transfer, Borrower shall continue to comply with the representations, warranties and covenants contained in Sections 3.1.41, 4.1.25, 4.2.10 and 4.2.14 hereof (and upon request of Lender, deliver to Lender a statement signed by an authorized officer of Borrower which certifies to such compliance); (h) after giving effect to such Transfer, the legal and financial structure of Borrower and the single purpose nature and bankruptcy remoteness of Borrower shall satisfy Lender’s the then current applicable underwriting criteria and requirements; (i) the New Entity (after giving effect to such Transfer) has a credit rating of Investment Grade or better; (j) the New Entity is a reputable pharmaceutical company; (k) after giving effect to such Transfer, the New Entity will own a significant amount of assets previously owned by Ionis immediately prior to such Transfer; (l) the New Entity immediately following such Transfer (and after giving effect to such Transfer) shall have an aggregate Net Worth of not less than $600,000,000.00 and Liquid Assets of not less than $250,000,000.00; (m) the New Entity shall have assumed all obligations of Ionis, as tenant, under the Ionis Lease; (n) the New  Entity have assumed all obligations of Guarantor under the Guaranty and the Environmental Indemnity or have executed a replacement guaranty and a replacement environmental indemnity in substantially the same form as the Guaranty and Environmental Indemnity; (o) Borrower shall have obtained a Rating Agency Confirmation from the Rating Agencies with respect to such Transfer; and (p) Borrower shall have paid all reasonable out-of-pocket costs and expenses incurred in connection with such Transfer (including reasonable fees and disbursements of Lender’s counsel and fees, costs and expenses of the Rating Agencies).

 

8.2.4      Prohibited Entity.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, in no event shall Borrower be (I) a Prohibited Entity, (II) Controlled (directly or indirectly) by any Prohibited Entity or (II) more than 49% owned (directly or indirectly) by any Prohibited Entity (whether individually or in the aggregate), unless, in the case of each of the foregoing, Lender’s prior written consent is first obtained (which such consent shall be given or withheld in Lender’s sole discretion and may be conditioned on, among other things, Lender’s receipt of a Rating Agency Confirmation).

 

Section 8.3.         Insolvency Opinion.

 

Notwithstanding anything in this Agreement to the contrary, if after giving effect to any Transfer (including, without limitation, a Permitted Transfer and Transfers contemplated under Sections 8.2.2 and 8.2.3), more than forty-nine percent (49%) in the aggregate of direct and/or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than forty-nine percent (49%) direct or indirect interest in Borrower as of the Closing Date, Borrower shall deliver to Lender prior to the effective date of such Transfer an updated Insolvency Opinion reasonably acceptable to Lender and acceptable to the Rating Agencies.

 

IX.          SALE AND SECURITIZATION OF MORTGAGE

 

Section 9.1.         Sale of Mortgage and Securitization.

 

(a)          Lender shall have the right (i) to sell or otherwise transfer the Loan as a whole loan or sell or otherwise transfer any portion thereof or any interest therein, (ii) to sell participation interests in the Loan or (iii) to securitize the Loan or any portion thereof or any interest therein in one or more private or public securitizations.  (The transactions referred to in clauses (i), (ii) and (iii) are each hereinafter referred to as a “Secondary Market Transaction” and the transaction referred to in clause (iii) shall hereinafter be referred to as a “Securitization.”  Any certificates, notes or other securities issued in connection with a Securitization are hereinafter referred to as “Securities.”)

 

(b)          If requested by Lender, Borrower shall assist Lender in satisfying the market standards to which Lender customarily adheres or which may be required in the marketplace, by the Rating Agencies or by any Legal Requirements in connection with any Secondary Market Transactions (including, without limitation, any Exchange Act Filings or any report that is required to be made “available” to holders of the Securities under Regulation AB or applicable Legal Requirements), including, without limitation, to:

 

(i)           (A) provide updated financial and other information with respect to the Property, the business operated at the Property, Borrower, Guarantor, any Affiliate of Borrower or Guarantor and Manager (including, without limitation, the information set forth on Schedule 9.1(b) hereto), (B) provide updated budgets and rent rolls (including itemized percentage of floor area occupied and percentage of aggregate base rent for each Tenant) relating to the Property and (C) provide updated appraisals, market studies, environmental audits, reviews and reports (Phase I’s and, if appropriate, Phase II’s), property condition reports and other due diligence investigations of the Property (the information required under clauses (A), (B) and (C) shall hereinafter be referred to collectively as the “Updated Information”), together with appropriate verification of the Updated Information through letters of auditors, certificates of third party providers or opinions of counsel acceptable to Lender and the Rating Agencies;

 

(ii)          provide opinions of counsel, which may be relied upon by Lender, the NRSROs and their respective counsel, agents and representatives, as to bankruptcy non-consolidation, fraudulent conveyance, and “true lease”, “true sale” or any other opinion customary in Secondary Market Transactions or required by the Rating Agencies with respect to the Property, Borrower, Guarantor and any Affiliate of Borrower or Guarantor, which counsel and opinions shall be satisfactory to Lender and the Rating Agencies;

 

(iii)         provide, and cause to be provided, updated representations and warranties made in the Loan Documents and make, and cause to be made, such additional representations and warranties as may be requested by Lender or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof;

 

(iv)          execute, and cause to be executed, such amendments, replacements or other modifications to Borrower’s Organizational Documents or the Loan Documents as may be requested by Lender or the Rating Agencies to effect the Secondary Market Transactions, including, without limitation, (A) to amend and/or supplement the Independent Director provisions provided herein and therein, in each case, in accordance with the applicable requirements of the Rating Agencies; provided, however, that Borrower shall not be required to amend, restate or otherwise modify any Loan Document if such amendment, restatement or other modification would (A) increase the initial weighted average interest rate or change the amortization of principal set forth herein or in the Note (except that the weighted average interest rate or the amortization of principal may subsequently change due to involuntary prepayments or if an Event of Default shall occur) or (B) amend or otherwise modify any other material economic term of the Loan; and

 

(v)           attend management meetings with respect to Borrower or the Property, provide access to the Property and conduct tours of the Property; and

 

(vi)          provide, and cause to be provided, certificates or other evidence of reliance satisfactory to Lender and the Rating Agencies with respect to any information or third party reports obtained in connection with the origination of the Loan or any Updated Information from Borrower, Guarantor, any Affiliate of Borrower or Guarantor, Manager and any accountants, appraisers, engineers, environmental assessment experts and other experts or third party providers of such information, reports or Updated Information.

 

(c)           If, at the time one or more Disclosure Documents are being prepared for or in connection with a Securitization, Lender expects that Borrower alone or Borrower and one or more Affiliates of Borrower (including any guarantor or other Person that is directly or indirectly committed by contract or otherwise to make payments on all or a part of the Loan) collectively, or the Property alone or the Property and Related Properties collectively, will be a Significant Obligor, Borrower shall furnish to Lender upon request the following financial information:

 

(i)            if Lender expects that the principal amount of the Loan together with any Related Loans, as of the cut-off date for such Securitization, may equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate principal amount of all mortgage loans included or expected to be included in the Securitization, net operating income for the Property and the Related Properties for the most recent Fiscal Year and interim period as required under Item 1112(b)(1) of Regulation AB (or, if the Loan is not treated as a non-recourse loan under Instruction 3 for Item 1101(k) of Regulation AB, selected financial data meeting the requirements and covering the time periods specified in Item 301 of Regulation S-K and Item 1112(b)(1) of Regulation AB), or

 

(ii)            if Lender expects that the principal amount of the Loan together with any Related Loans, as of the cut-off date for such Securitization, may equal or exceed twenty percent (20%) of the aggregate principal amount of all mortgage loans included or expected to be included in the Securitization, the financial statements required under Item 1112(b)(2) of Regulation AB (which includes, but may not be limited to, a balance sheet with respect to the entity that Lender determines to be a Significant Obligor for the two most recent Fiscal Years and applicable interim periods, meeting the requirements of Rule 3-01 of Regulation S-X, and statements of income and statements of cash flows with respect to the Property for the three most recent Fiscal Years and applicable interim periods, meeting the requirements of Rule 3-02 of Regulation S-X (or if Lender determines that the Property is the Significant Obligor and the Property (other than properties that are hotels, nursing homes, or other properties that would be deemed to constitute a business and not real estate under Regulation S-X or other legal requirements) was acquired from an unaffiliated third party and the other conditions set forth in Rule 3-14 of Regulation S-X have been met, the financial statements required by Rule 3-14 of Regulation S-X)).

 

(d)           Further, if requested by Lender, Borrower shall, promptly upon Lender’s request, furnish to Lender financial data or financial statements meeting the requirements of Item 1112(b)(1) or (2) of Regulation AB, as specified by Lender, for any tenant of the Property if, in connection with a Securitization, Lender expects there to be, as of the cut-off date for such Securitization, a concentration with respect to such tenant or group of Affiliated tenants within all of the mortgage loans included or expected to be included in the Securitization such that such tenant or group of Affiliated tenants would constitute a Significant Obligor. Borrower shall furnish to Lender, on an ongoing basis, financial data or financial statements with respect to such tenants meeting the requirements of Item 1112(b)(1) or (2) of Regulation AB, as specified by Lender, but only for so long as such entity or entities are a Significant Obligor and either (i) Exchange Act Filings in connection with or relating to the Securitization are required to be made under applicable Legal Requirements or (ii) comparable information is required to otherwise be “available” to holders of the Securities under Regulation AB or applicable Legal Requirements.

 

(e)           If Lender reasonably determines that Borrower alone or Borrower and one or more Affiliates of any Borrower collectively, or the Property alone or the Property and Related Properties collectively, are a Significant Obligor, then Borrower shall furnish to Lender, on an ongoing basis, selected financial data or financial statements meeting the requirements of Item 1112(b)(1) or (2) of Regulation AB, as specified by Lender, but only for so long as such entity or entities are a Significant Obligor and either (i) Exchange Act Filings are required to be made under applicable Legal Requirements or (ii) comparable information is required to otherwise be “available” to holders of the Securities under Regulation AB or applicable Legal Requirements.