Exhibit 10.3
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
TCI06 BURNSVILLE MN LLC, a
Delaware limited liability company,
BORROWER
IN FAVOR OF
CIBC INC.,
LENDER
DATED: AS OF DECEMBER 22, 2006

              Property Address
 
            Telex Building     12000 Portland Avenue S.     Burnsville,
Minnesota 55337
 
       
 
  Tax Parcel Nos.:   02-20400-010-01 and 02-64304-052-01
 
  County:   Dakota
 
  State:   Minnesota

 

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Notwithstanding anything to the contrary herein, enforcement of this Mortgage is
limited to a principal amount of $16,940,000.00 under Chapter 287 of Minnesota
Statutes, together with amounts advanced by Lender to protect the collateral or
the lien of this Mortgage.
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL PROPERTY RECORDS AND IS
ALSO TO BE INDEXED IN THE CHATTEL RECORDS UNDER THE NAMES OF TCI06 BURNSVILLE MN
LLC, AS “DEBTOR”, AND CIBC INC., AS “SECURED PARTY” — SEE GRANTING CLAUSE OF
THIS INSTRUMENT FOR DESCRIPTION OF COLLATERAL AND OTHER DETAILS.
This Instrument Prepared by and when Recorded, Return to:
Cassin Cassin & Joseph LLP
711 Third Avenue, 20th Floor
New York, New York 10017
Attn: Michael J. Hurley, Jr., Esq.

 

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     THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this
“Mortgage”) is made as of the 22nd day of December, 2006, by TCI06 BURNSVILLE MN
LLC, a Delaware limited liability company, with an address c/o Gladstone
Commercial Corporation, 1521 Westbranch Drive, McLean, Virginia 22102, as
mortgagor (“Borrower”), in favor of CIBC INC., a Delaware corporation, as
mortgagee (“Lender”), whose address is Attn: Real Estate Finance Group, 300
Madison Avenue, 8th Floor, New York, New York 10017.
W I T N E S S E T H:
     WHEREAS, Borrower, HMBF05 NEWBURYPORT MA LLC, a Delaware limited liability
company and SVMMC05 TOLEDO OH LLC, a Delaware limited liability company
(collectively, “Borrower Parties”) have requested that Lender make a loan to the
Borrower in the principal amount of TWENTY ONE MILLION EIGHT HUNDRED FORTY SIX
THOUSAND AND 00/100 DOLLARS ($21,846,000.00) (the “Loan”);
     NOW THEREFORE, in consideration of the making of the Loan and other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Borrower hereby agrees, covenants, represents and warrants
with and to Lender as follows:
     THAT FOR THE PURPOSES OF SECURING:
     (1) The Loan together with interest thereon evidenced by that certain
promissory note (such promissory note, together with any and all renewals,
modifications, consolidations and extensions thereof, is hereinafter referred to
as the “Note”) of even date with this Mortgage, made by Borrower Parties to the
order of Lender in like amount;
     (2) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations herein contained and contained in any
other agreements, documents or instruments now or hereafter evidencing, securing
or otherwise relating to the indebtedness evidenced by the Note, whether
executed or delivered by Borrower, Borrower Parties or by any indemnitor or
guarantor with respect to any obligation of Borrower under the Loan Documents
(each, hereinafter, an “Indemnitor”), as defined herein, or jointly and
severally (the Note, this Mortgage, Assignment of Leases and Rents, Assignment
of Warranties and Other Contract Rights, Hazardous Substances Indemnity
Agreement, Indemnity & Guaranty Agreement, Manager’s Subordination Agreement,
Closing Certificate, Cash Management Agreement, Clearing Bank Instruction
Letter, and FIRPTA Certificate, together with any and all renewals, amendments,
extensions and modifications thereof, are hereinafter collectively referred to
as the “Loan Documents”) excluding only the obligations pursuant to that certain
Hazardous Substances Indemnity Agreement of even date herewith by Borrower
Parties and Gladstone Commercial Corporation, a Maryland corporation, jointly
and severally, for the benefit of Lender (the “Hazardous Substances Indemnity”)
and the Indemnity and Guaranty Agreement of even date herewith by Gladstone
Commercial Corporation for the benefit of Lender (the “Guaranty Indemnity”);
     (3) Any and all additional advances made by Lender to protect or preserve
the Property (as defined herein) or the lien or security interest created hereby
on the Property, or for Taxes and Other Charges (each as defined in Section 1.5)
or Insurance Premiums (as defined in Section 1.6) as hereinafter provided or for
performance of any of Borrower’s obligations hereunder or Borrower Parties’
obligations under the other Loan Documents or for any other purpose provided
herein or in the other Loan Documents (whether or not the original Borrower
named herein remains the owner of the Property at the time of such advances),
and any and all out of pocket third party costs and expenses (including
reasonable attorney’s fees) incurred by Lender hereunder in performing the
obligations required to be performed by Borrower or Borrower Parties or
otherwise incurred by Lender pursuant to the terms of this Mortgage, together
with interest on each such advance, cost or expense (which interest shall accrue
at the Default

 

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Interest Rate (as defined in the Note) from the date such amounts are advanced
or paid by Lender until the date repaid by Borrower); and
     (4) Any and all other indebtedness now owing or which may hereafter be
owing by Borrower and Borrower Parties to Lender in connection with the Loan,
the Loan Documents and/or the Property, including, without limitation, all
prepayment fees, however and whenever incurred or evidenced, whether express or
implied, direct or indirect, absolute or contingent, or due or to become due,
and all renewals, modifications, consolidations, replacements and extensions
thereof;
(All of the sums referred to in Paragraphs (1) through (4) above are herein
sometimes referred to as the “Obligations”)
and for and in consideration of the sum of Ten and no/100 Dollars ($10.00), and
other valuable consideration, the receipt and sufficiency of which are hereby
conclusively acknowledged, BORROWER HEREBY IRREVOCABLY MORTGAGES, GRANTS,
BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, AND GRANTS
A SECURITY INTEREST, TO LENDER, ITS SUCCESSORS AND ASSIGNS, with power of sale,
in all of Borrower’s estate, right, title and interest in, to and under any and
all of the following described property, whether now owned or hereafter acquired
(collectively, the “Property”):
     A. All that certain real property referenced on the cover page of this
Mortgage and situated in the County of Dakota, State of Minnesota, more
particularly described on Exhibit A attached hereto and incorporated herein by
this reference (the “Real Estate”) together with all of the easements, rights,
privileges, franchises, tenements, hereditaments and appurtenances now or
hereafter thereunto belonging or in any way appertaining thereto, and all of the
estate, right, title, interest, claim and demand whatsoever of Borrower therein
or thereto, either at law or in equity, in possession or in expectancy, now or
hereafter acquired;
     B. All structures, buildings and improvements of every kind and description
now or at any time hereafter located or placed on the Real Estate (the
“Improvements”);
     C. All furniture, furnishings, fixtures, goods, equipment, inventory or
personal property owned by Borrower and now or hereafter located on, attached to
or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Borrower as are now and hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and equipment hereafter situated on or about the Real Estate or Improvements,
and all warranties and guaranties relating thereto, and all additions thereto
and substitutions and replacements therefor (exclusive of any of the foregoing
owned or leased by tenants of space in the Improvements) (hereinafter, all of
the foregoing items described in this paragraph C, collectively, the
“Equipment”);
     D. All easements, rights-of-way, strips and gores of land, vaults, streets,
ways, alleys, passages, sewer rights, air rights and other development rights
now or hereafter located on the Real Estate or under or above the same or any
part or parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Real Estate and/or Improvements
or any part thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by Borrower;

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     E. All water, ditches, wells, reservoirs and drains and all water, ditch,
well, reservoir and drainage rights which are appurtenant to, located on, under
or above or used in connection with the Real Estate or the Improvements, or any
part thereof, whether now existing or hereafter created or acquired;
     F. All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Real Estate;
     G. All cash funds, deposit accounts and other rights and evidence of rights
to cash, now or hereafter created or held by Lender pursuant to this Mortgage or
any other of the Loan Documents, including, without limitation, all funds now or
hereafter on deposit in the Impound Account, as defined in Section 1.6, and in
the reserves required pursuant to Section 1.28 (all such funds, together with
the Impound Account, collectively, the “Reserves”);
     H. All leases, subleases (including, without limitation, oil, gas and
mineral leases, and that certain Lease Agreement for the entire Property dated
March 16, 2000 between Borrower, as landlord, and Telex Communications, Inc., a
Delaware corporation (“Principal Tenant”), as tenant, (as subsequently amended
and assigned, the “Principal Lease”, the Principal Lease, all subleases,
licenses, concessions and occupancy agreements of all or any part of the Real
Estate or the Improvements now or hereafter entered into and any guaranty
thereof are each referred to as a “Lease”, and collectively, the “Leases”) and
all rents, subrents, sub-subrents, royalties, issues, profits, revenue, income,
claims, judgments, awards, settlements and other benefits (collectively, the
“Rents and Profits”) of the Real Estate or the Improvements, now or hereafter
arising from the use or enjoyment of all or any portion thereof or from any
present or future Lease or other agreement pertaining thereto or arising from
any of the Contracts (as hereinafter defined) or any of the General Intangibles
(as hereinafter defined) and all cash or securities deposited to secure
performance by the tenants, lessees, subtenants, sub-subtenants, sublessees,
sub-sublessees or licensees, as applicable (each, a “Tenant” and collectively,
the “Tenants”), of their obligations under any such Leases, whether said cash or
securities are to be held until the expiration of the terms of said Leases or
applied to one or more of the installments of rent coming due prior to the
expiration of said terms, subject to, however, the provisions contained in
Section 1.9 hereinbelow;
     I. All rights of the Borrower under contracts, agreements and documents now
or hereafter entered into relating to the ownership or operation or management
of the Real Estate or the Improvements or any portion of either of them
(collectively, the “Contracts”) including, without limitation, service
contracts, maintenance contracts, equipment leases, personal property leases and
any contracts or documents relating to construction on any part of the Real
Estate or the Improvements (including plans, drawings, surveys, tests, reports,
bonds and governmental approvals) or to the management or operation of any part
of the Real Estate or the Improvements and any and all warranties and
guaranties, to the extent assignable, relating to the Real Estate or the
Improvements or any fixtures, equipment or personal property owned by Borrower
and located on and/or used in connection with the Property, together with all
revenue, income and other benefits thereof and all claims, judgments, awards and
settlements arising thereunder;
     J. All present and future monetary deposits given to any public or private
utility with respect to utility services furnished to any part of the Real
Estate or the Improvements;
     K. All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including
without limitation, trademarks, trade names, servicemarks and symbols now or
hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known,

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all rights to carry on business under such names, and all rights, interest and
privileges which Borrower has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the Real
Estate or the Improvements) and all notes or chattel paper, to the extent
assignable, now or hereafter arising from or by virtue of any transactions
related to the Real Estate or the Improvements (collectively, the “General
Intangibles”);
     L. All water taps, sewer taps, certificates of occupancy, permits,
licenses, franchises, certificates, consents, approvals and other rights and
privileges now or hereafter obtained in connection with the Real Estate or the
Improvements and all present and future warranties and guaranties relating to
the Improvements or to any equipment, fixtures, furniture, furnishings, personal
property or components of any of the foregoing now or hereafter located or
installed on the Real Estate or the Improvements, to the extent assignable;
     M. All building materials, supplies and equipment now or hereafter placed
on the Real Estate or in the Improvements and all architectural renderings,
models, drawings, plans, specifications, studies and data now or hereafter
relating to the Real Estate or the Improvements;
     N. Any insurance policies or binders now or hereafter relating to the
Property including any unearned premiums thereon;
     O. All proceeds, products, substitutions and accessions (including claims
and demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards and proceeds of refunds of any
Taxes or Other Charges with respect to any period from and after the date hereof
until the Loan is indefeasibly paid or defeased in full;
     P. All of Borrower’s claims and rights to damages and any other remedies in
connection with or arising from the rejection of the Principal Lease by tenant,
or any trustee, custodian or receiver pursuant to the Bankruptcy Code in the
event that there shall be filed by or against tenant any petition, action or
proceeding under the Bankruptcy Code or under any other similar federal or state
law now or hereafter in effect; and
     Q. All other or greater rights and interests of every nature in the Real
Estate or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Borrower.
     TO HAVE AND TO HOLD the Property unto Lender, its successors and assigns
forever, for the purposes and uses herein set forth.
ARTICLE I
COVENANTS OF BORROWER
     For the purpose of further securing the Obligations and for the protection
of the security of this Mortgage, for so long as the Obligations or any part
thereof remains unpaid, Borrower represents, warrants, covenants and agrees as
follows:
     1.1 Representations and Warranties of Borrower. Borrower, for itself and
its successors and assigns, does hereby represent, warrant and covenant to and
with Lender, its successors and assigns, that:

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     (a) Organization and Existence. Borrower is duly organized and validly
existing as a limited liability company in good standing under the laws of the
State of Delaware and is qualified to do business in the State of Minnesota and
in all other jurisdictions in which Borrower is transacting business.
     (b) Authorization. Borrower has the power and authority to execute, deliver
and perform the obligations imposed on it under the Loan Documents and to
consummate the transactions contemplated by the Loan Documents. Borrower has
obtained or made all necessary consents, approvals, authorizations, orders or
filings required by any partners or members of Borrower whose approval is
required by the terms of Borrower’s organizational documents and such partners
and members have duly approved the transactions contemplated by the Loan
Documents and have authorized execution and delivery thereof by the respective
signatories.
     (c) Valid Execution and Delivery. All of the Loan Documents requiring
execution by Borrower have been duly and validly executed and delivered by
Borrower.
     (d) Enforceability. All of the Loan Documents executed by Borrower
constitute valid, legal and binding obligations of Borrower and are fully
enforceable against Borrower in accordance with their terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors rights generally and statutory or other laws (including common law)
now or hereafter in effect regarding fraudulent conveyances or preferential
transfers and general principles of equity.
     (e) No Defenses. The Note, this Mortgage and the other Loan Documents are
not subject to any right of rescission, set-off, counterclaim or defense, nor
would the operation of any of the terms of the Note, this Mortgage or any of the
other Loan Documents, or the exercise of any right thereunder, render this
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense.
     (f) Defense of Usury. Borrower knows of no facts that would support a claim
of usury to defeat or avoid its obligation to repay the principal of, interest
on, and other sums or amounts due and payable by the Borrower under, the Loan
Documents.
     (g) No Conflict/Violation of Law. The execution, delivery and performance
of the Loan Documents by the Borrower will not cause or constitute a default
under or conflict with the organizational documents of Borrower, any Indemnitor
or any Constituent Entity (as defined in Section 1.27) of either of them. The
execution, delivery and performance of the obligations imposed on Borrower under
the Loan Documents will not cause Borrower or any Indemnitor or any Constituent
Entity of either of them to be in default, including after due notice or lapse
of time or both, under the provisions of any agreement, judgment or order to
which Borrower or any Indemnitor or any Constituent Entity of either of them is
a party or by which Borrower or any Indemnitor or any Constituent Entity of
either of them is bound.
     (h) Compliance with Applicable Laws and Regulations. To the knowledge of
Borrower, after due and diligent inquiry and investigation, all of the
Improvements and the use of the Property by the Borrower comply in all material
respects with, and shall remain in material compliance with, all applicable
statutes, rules, regulations and private covenants now or hereafter relating to
the ownership, construction, use or operation of the Property, including all
applicable health, fire and building codes, and all applicable statutes, rules
and regulations pertaining to requirements for environmental protection, zoning
and land use (collectively, “Applicable Laws”). To the knowledge of Borrower,
after due and diligent inquiry and investigation, all certifications, permits,
licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Property and for the use currently being made thereof have been
obtained and are in

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full force and effect. To the knowledge of Borrower, after due and diligent
inquiry and investigation, all of the Improvements comply with all material
requirements of any applicable zoning and subdivision laws and ordinances.
     (i) Consents Obtained. All consents, approvals, authorizations, orders or
filings with any court or governmental agency or body, if any, required for the
execution, delivery and performance of the Loan Documents by Borrower have been
obtained or made.
     (j) No Litigation. There are no pending actions, suits or proceedings,
arbitrations or governmental investigations against Borrower, or to the
knowledge of Borrower, after due and diligent inquiry, the Property, any
Indemnitor or any Constituent Entity of Borrower or any Indemnitor, an adverse
outcome of which could reasonably be expected to materially affect the
Borrower’s performance under the Note, the Mortgage or the other Loan Documents.
     (k) Title. Borrower has good and marketable fee simple title to the Real
Estate and Improvements, subject only to those matters expressly listed as
exceptions to title or subordinate matters in the title insurance policy (the
“Permitted Exceptions”) accepted by Lender in connection with this Mortgage (the
“Title Insurance Policy”). Borrower’s title to the Property has been peaceful
and undisturbed and to the best of Borrower’s knowledge title thereto has not
been disputed or questioned. Further, Borrower has full power and lawful
authority to grant, bargain, sell, convey, assign, transfer and mortgage its
interest in the Property in the manner and form hereby done or intended.
Borrower will preserve its interest in and title to the Property and will
forever warrant and defend the same to Lender against any and all claims
whatsoever and will forever warrant and defend the validity and priority of the
lien and security interest created herein against the claims of all persons and
parties whomsoever, subject, in each case, to the Permitted Exceptions. The
foregoing warranty of title shall survive the foreclosure of this Mortgage and
shall inure to the benefit of and be enforceable by Lender in the event Lender
acquires title to the Property pursuant to any foreclosure.
     (l) Permitted Exceptions. The Permitted Exceptions do not materially and
adversely affect (1) the ability of the Borrower to pay in full the principal
and interest on the Note in the manner provided for therein or (2) the use of
the Property for the use currently being made thereof, the operation of the
Property as currently being operated or the value of the Property.
     (m) First Lien. Upon the execution by the Borrower and the recording of
this Mortgage in the land records of Dakota County, State of Minnesota, and upon
the execution and filing of UCC-1 financing statements or amendments thereto
with the State of Delaware Secretary of State, the Lender will have a valid
first lien on the Property and a valid security interest in all personal
property encumbered hereby, subject to no liens, charges or encumbrances other
than the Permitted Exceptions.
     (n) ERISA. Borrower is not an entity subject to regulation or restriction
under ERISA, and no assets of Borrower are “plan assets” (as defined in ERISA).
     (o) Contingent Liabilities. Neither Borrower nor any Indemnitor has any
known material contingent liabilities, except for contingent liabilities of
Borrower or any Indemnitor explicitly set forth on the financial statements of
Borrower and Indemnitor that were delivered to Lender in connection with the
Loan.
     (p) No Other Obligations. The Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Borrower is a party or by which the Borrower or the
Property is otherwise bound, other than

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(i) obligations incurred in the ordinary course of the operation of the Property
that do not violate Section 1.27, (ii) the Obligations, and (iii) the Principal
Lease.
     (q) Fraudulent Conveyance. The Borrower (1) has not entered into the Loan
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (2) the Borrower Parties have received reasonably equivalent value
in exchange for their obligations under the Loan Documents. Giving effect to the
Loan contemplated by the Loan Documents, the fair saleable value of the Borrower
Parties’ assets exceed and will, immediately following the execution and
delivery of the Loan Documents, exceed the Borrower Parties’ total liabilities,
including, without limitation, subordinated, unliquidated, disputed or
contingent liabilities. The fair saleable value of the Borrower Parties’ assets
is and will, immediately following the execution and delivery of the Loan
Documents (including the Loan Documents as defined in those certain Mortgages
given by the two other Borrower Parties to secure the Note (collectively, the
“Other Loan Documents”), be greater than the Borrower Parties’ probable
liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured. To the Borrower’s knowledge,
after due and diligent inquiry and investigation, the Borrower Parties’ assets
do not and, immediately following the execution and delivery of the Loan
Documents and the Other Loan Documents will not, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
The Borrower Parties do not intend to, and do not believe that they will, incur
debts and liabilities (including, without limitation, contingent liabilities and
other commitments) beyond their ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of the Borrower Parties).
     (r) Investment Company Act. Borrower is not (1) an “investment company” or
a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; (2) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (3) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
     (s) Access/Utilities. The Property has vehicular and pedestrian access to
and from public ways that is adequate for the use of the Property as of the date
hereof, and such access is pursuant to either access easements for the benefit
of the Property or as a result of the Real Property abutting a public way. The
Property is served by water, sewer, sanitary sewer and storm drain facilities
that provide such utilities in amounts that are adequate for the use of the
Property as of the date hereof. All public utilities necessary to the continued
use and enjoyment of the Property as presently used and enjoyed are located in
the public right-of-way abutting the Property, or enter the Property via
permanent easements not subject to termination except with the consent of
Borrower, and all such utilities are connected so as to serve the Property. All
roads providing vehicular and pedestrian access from the Property to public ways
are located on either access easements for the benefit of the Property or the
Property. All such roads necessary for the full utilization of the Property for
its current purpose have been completed.
     (t) Taxes Paid. Borrower has filed all federal, state, county and municipal
tax returns required to have been filed by Borrower, and has paid all taxes
which have become due pursuant to such returns or to any notice of assessment
received by Borrower. Borrower has no knowledge of any basis for additional
assessment with respect to such Taxes and Other Charges. Further, the Property
is free from any liens for delinquent Taxes and Other Charges.
     (u) Single Tax Lot. The Real Estate consists of a single lot or multiple
tax lots; no portion of said tax lot(s) covers property other than the Real
Estate or a portion of the Real Estate and no portion of the Real Estate lies in
any other tax lot.

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     (v) Special Assessments. Except as disclosed in the Title Insurance Policy,
to the knowledge of Borrower, there are no pending or, to the knowledge of
Borrower, proposed special or other assessments for public improvements or
otherwise affecting the Property, nor, to the knowledge of Borrower, are there
any contemplated improvements to the Property that may result in such special or
other assessments.
     (w) Flood Zone. The Property is not located in a flood hazard area as
defined by the Federal Insurance Administration.
     (x) Seismic Exposure. The Real Estate is not located in Zone 3 or Zone 4 of
the “Seismic Zone Map of the U.S.”
     (y) Misstatements of Fact. No statement of fact made in the Loan Documents
contains any untrue statement of a material fact. All reports, certificates,
affidavits, representations, statements and other data furnished by or on behalf
of Borrower, Indemnitor and each Constituent Entity of each of them to Lender,
or their respective agents, in connection with the Loan are true and correct in
all material respects.
     (z) Condition of Improvements. The Property has not been materially damaged
by fire, water, wind or other cause of loss since the date of the inspection of
the Property by Lender’s property consultant as set forth in the property
condition report prepared by said consultant and delivered to Lender in
connection with the Loan (the “Property Condition Report”). Except as set forth
in the Property Condition Report, the Improvements are structurally sound, in
good repair and free of defects in materials and workmanship. Except as set
forth in the Property Condition Report, to Borrower’s knowledge after due and
diligent inquiry and investigation all major building systems located within the
Improvements, including, without limitation, the heating and air conditioning
systems and the electrical and plumbing systems, are in good working order and
condition.
     (aa) No Insolvency or Judgment. Neither Borrower, nor any Indemnitor, nor
any Constituent Entity of Borrower or any Indemnitor, (a) has been or is
currently the subject of or a party to any completed or pending bankruptcy,
reorganization or insolvency proceeding; or (b) is currently the subject of any
judgment unsatisfied of record or docketed in any court of the state in which
the Property is located or in any other court located in the United States. The
proposed Loan will not render the Borrower and the Borrower Parties
(collectively) or any general partner or member of Borrower insolvent. As used
in this Mortgage, the term “insolvent” means that the sum total of all of an
entity’s liabilities (whether secured or unsecured, contingent or fixed, or
liquidated or unliquidated) is in excess of the value of all such entity’s
non-exempt assets, i.e., all of the assets of the entity that are available to
satisfy claims of creditors.
     (bb) No Condemnation. No proceeding for the partial or total condemnation
or taking of the Property is pending, or the knowledge of Borrower, threatened.
     (cc) No Labor or Materialmen Claims. All parties furnishing labor and
materials to Borrower or the Property (on behalf of Borrower) have been paid in
full (or will be paid in the ordinary course of business, provided that the
amount due such parties are not due and payable as of the date hereof) and,
except for such liens or claims expressly disclosed in, and insured against by
the Title Insurance Policy, there are no mechanics’, laborers’ or materialmen’s
liens or claims outstanding for work, labor or materials affecting the Property,
whether prior to, equal with or subordinate to the lien of the Mortgage.

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     (dd) No Purchase Options. No Tenant, person, party, firm, corporation or
other entity has an option, right of first offer, or right of first refusal, to
purchase the Property, any portion thereof or any interest therein, except as
specifically described in the Title Insurance Policy or the Principal Lease.
     (ee) Leases. The Property is not subject to any leases, subleases,
licenses, concessions or other agreements related to the leasing or renting of
the Property or any portion thereof, except for the Principal Lease (as amended
from time to time), or as set forth on the Rent Roll (as defined herein). No
person has any possessory interest in the Property or right to occupy the same,
other than pursuant to the Principal Lease disclosed in the Rent Roll. Borrower
hereby represents that: (i) Borrower has delivered a schedule (the “Rent Roll”)
of all Leases affecting the Property, which is attached to the Closing
Certificate, which accurately and completely sets forth in all material respects
for each Lease, the following: the name of the Tenant, the Lease expiration
date, the space demised and amount of rent, which Rent Roll is true, correct and
complete as of the date hereof; and (ii) the Borrower is the owner and holder of
the landlord’s interest under the Leases, and there are no prior assignments of
all or any portion of the Leases or any portion of the Rents and Profits which
are presently outstanding and have priority over the assignment of leases and
rents contained herein in Section 1.9 given by Borrower to Lender; and
(iii) each Lease constitutes the legal, valid and binding obligation of
Borrower; and (iv) to Borrower’s knowledge, after due and diligent inquiry and
investigation no default exists, or with the passing of time or the giving of
notice or both would exist, under any Lease which would, in the aggregate, have
a material adverse effect on Borrower or the Property; and (v) except as
disclosed in writing in an estoppel certificate by such Tenant that has been
delivered to Lender in connection with the Loan, to the Borrower’s knowledge,
after due and diligent inquiry and investigation, no Tenant has any offset or
defense to the payment of rent under its Lease; and (vi) except as disclosed in
writing in an estoppel certificate by such Tenant that has been delivered to
Lender in connection with the Loan, no Tenant has, as of the date hereof, paid
rent under its Lease more than one (1) month in advance, and the rents under
such Lease has not been waived, released, or otherwise discharged or
compromised; and (vii) except as disclosed in writing in the estoppel
certificate delivered to Lender in connection with the Loan all work to be
performed by Borrower under each Lease has been substantially performed, all
contributions to be made by Borrower to the Tenant thereunder have been made and
all other conditions precedent to each Tenant’s obligations thereunder have been
satisfied; and (viii) except as disclosed in writing in an estoppel certificate
by such Tenant that has been delivered to and accepted by Lender in connection
with the Loan, each Tenant under a Lease has entered into occupancy of the
demised premises; and (ix) Borrower has delivered to Lender true, correct and
complete copies of all Leases described in the Rent Roll; and (x) to the best of
Borrower’s knowledge and belief, each Tenant is free from bankruptcy,
reorganization or arrangement proceedings or a general assignment for the
benefit of creditors; and (xi) except as specifically described in the Title
Insurance Policy, no Lease provides any party with the right to obtain a lien or
encumbrance upon the Property superior to the lien of this Mortgage.
     (ff) Appraisal. All information provided by or on behalf of Borrower to the
appraiser in connection therewith was true, correct and complete in all material
respects at the time such information was provided.
     (gg) Boundary Lines. Except as disclosed on the survey of the Property
delivered to Lender in connection with the Loan, 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 except as
specifically described in the Title Insurance Policy, no improvements on
adjoining properties encroach upon the Property and no easements or other
encumbrances upon the Real Estate encroach upon any of the Improvements, in each
case so as to affect the value or marketability of the Property.
     (hh) Survey. The survey of the Property does not fail to reflect any
material matter affecting the Property or the title thereto of which the
Borrower has knowledge.

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     (ii) Intentionally Omitted.
     (jj) Use of Rents and Profits. All Rents and Profits generated by or
derived from the Property shall first be utilized solely for current expenses
directly attributable to the ownership and operation of the Property, including,
without limitation, current expenses relating to Borrower’s liabilities and
obligations with respect to this Mortgage and the other Loan Documents, and none
of the Rents and Profits generated by or derived from the Property shall be
diverted by Borrower or utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property have been
fully paid and satisfied.
     (kk) No Broker. No financial advisors, brokers, underwriters, placement
agents, agents or finders have been dealt with by the Borrower in connection
with the Loan, except for any broker whose full commission is being paid out of
the proceeds of the Loan and is set forth in the written instructions from
Borrower to Lender regarding disbursement of the proceeds of the Loan.
     (ll) Conviction of Criminal Acts. Each of Borrower and Indemnitor has never
been convicted of a crime (which shall not include traffic violations) and is
not currently the subject of any pending or threatened criminal investigation or
proceeding. Borrower has disclosed to Lender in writing any civil action
(whether or not such action resulted in a judgment) and regulatory or
enforcement proceeding to which Borrower and any Indemnitor was a defendant or
respondent in which it was alleged that Borrower or such Indemnitor engaged in
fraud, deception or misrepresentation, or with respect to which Borrower or any
Indemnitor was ordered or agreed not to engage in the banking or securities
industry.
     (mm) Security Agreements. There are no security agreements or financing
statements affecting or encumbering any of the Property other than the security
agreements and financing statements created in favor of Lender.
     (nn) Homestead. The Property forms no part of any property owned, used or
claimed by Borrower as a residence or business homestead and is not exempt from
forced sale under the laws of the State in which the Real Estate is located.
Borrower hereby disclaims and renounces each and every claim to all or any
portion of the Property as a homestead.
     (oo) Contracts. Borrower will comply with all of its obligations under all
Contracts which are material to the operation of the Property in accordance with
Borrower’s current practice (to the extent any non-compliance with the
obligations under such Contracts shall result in an event of default or
adversely affect the respective Contract or the Property in any manner as
determined by Lender in its discretion), and with all material obligations under
all other Contracts.
     (pp) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering
Laws. (i) None of Borrower, Managing Member, any indemnitor or guarantor, or any
Person who owns any direct equity interest in or controls Borrower or Managing
Member currently is identified on the OFAC List or otherwise qualifies as a
Prohibited Person, and Borrower will implement procedures, approved by Managing
Member, to ensure that no Person who now or hereafter owns any direct equity
interest in Borrower or Managing Member is a Prohibited Person or controlled by
a Prohibited Person, and (ii) none of Borrower, Managing Member, or any
indemnitor or guarantor are in violation of any applicable laws relating to
anti-money laundering or anti-terrorism, including, without limitation, any
applicable laws related to transacting business with Prohibited Persons or the
requirements of the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law
107-56, and the related regulations issued thereunder, including temporary
regulations, all as amended from time to time. For purposes hereof: (1) the term
“Managing Member”

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shall mean, if Borrower is a partnership, each general partner of Borrower and,
if Borrower is a limited liability company, each manager or managing member of
Borrower and in each case, if applicable, each general partner or managing
member of such general partner or managing member. In the event that Borrower or
any Managing Member is a single member limited liability company, the term
“Managing Member” shall include such single member; (2) the term “Person” shall
mean any individual, corporation, limited liability company, partnership, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing; (3) the
term “Prohibited Person” shall mean any Person identified on the OFAC List or
any other Person with whom a U.S. Person may not conduct business or
transactions by prohibition of Federal law or Executive Order of the President
of the United States or America; (4) the term “OFAC List” shall mean the list of
specially designated nationals and blocked persons subject to financial
sanctions that is maintained by the U.S. Treasury Department, Office of Foreign
Assets Control and accessible through the internet website
www.treas.gov/ofac/t11sdn.pdf. Notwithstanding the foregoing, no representation
is made as to whether any shareholder of Gladstone Commercial Corporation (A) is
identified on the OFAC List or otherwise qualifies as a Prohibited Person, or
(B) is in violation of any applicable laws relating to anti-money laundering or
anti-terrorism or the requirements of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 and the related regulations issued thereunder, all as amended from time to
time.
     (qq) Principal Lease. (i) The Principal Lease is in full force and effect,
to Borrower’s knowledge, after due and diligent inquiry, there is no existing
default under the Principal Lease, nor is there any event which, with notice or
the passage of time or both, would constitute a default under the Principal
Lease, (ii) to Borrower’s knowledge, after due and diligent inquiry, there is no
defense, offset, claim or counterclaim in favor of any party under the Principal
Lease, (iii) there is no suit, action, proceeding or audit pending, or, to
Borrower’s knowledge, threatened against or affecting the parties to the
Principal Lease or the Property, before or by any court, administrative agency,
or other governmental authority which brings into question the validity of the
Principal Lease or which, if determined adversely to any party, might result in
any adverse change to estates demised under the Principal Lease, (iv) the only
real property presently demised under the Principal Lease is the Land and
Improvements, and, to such person’s knowledge, the only person or entity
presently having an interest in the Principal Lease as tenant under the
Principal Lease is Principal Tenant and (v) neither the execution and delivery
of this Mortgage, nor any modification thereof or assignment of the beneficial
interests thereunder, constitutes a default under the Principal Lease.
     (rr) Financial Condition of Borrower. Borrower is solvent.
     (ss) Leasing. Borrower agrees that, upon the execution of any Lease
approved or deemed approved in accordance with Section 1.10 of this Mortgage,
Borrower shall timely perform all build-out, construction, tenant improvement
work and other work required to be performed by Borrower under such Lease (the
foregoing, “Tenant Improvements”) and timely pay as and when due any and all
commissions to brokers in connection with such Lease (“Leasing Commissions”;
Tenant Improvements and Leasing Commissions collectively are hereinafter
referred to as “Leasing Costs”). Borrower shall perform all Tenant Improvements
in a good and workmanlike manner, in accordance with all applicable codes and
regulations, and each case in a manner satisfactory to Lender and as necessary
to maintain the Property in good condition and in compliance with all applicable
laws, ordinances, rules and regulations.
     1.2 Defense of Title. If, while this Mortgage is in force, the title to the
Property or the interest of Lender therein shall be the subject, directly or
indirectly, of any action at law or in equity, or be attached directly or
indirectly, or endangered, clouded or adversely affected in any manner,
Borrower, at Borrower’s expense, shall take all necessary and proper steps for
the defense of said title or

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interest, including the employment of counsel approved by Lender (it being
agreed that Lender shall not unreasonably withhold its consent to counsel
appointed pursuant to the Title Insurance Policy for such purposes), the
prosecution or defense of litigation, and the compromise or discharge of claims
made against said title or interest. Notwithstanding the foregoing, in the event
that Lender determines that Borrower is not adequately performing its
obligations under this Section, Lender may, without limiting or waiving any
other rights or remedies of Lender hereunder, take such steps with respect
thereto as Lender shall deem necessary or proper; any and all third party out of
pocket costs and expenses (including reasonable attorney fees) incurred by
Lender in connection therewith, together with interest thereon at the Default
Interest Rate, shall be immediately paid by Borrower on demand.
     1.3 Performance of Obligations. Borrower shall pay when due the principal
of and the interest on and other amounts evidenced by the Note. Borrower shall
also pay and perform all of the Obligations as and when due. Further, Borrower
shall promptly and strictly perform and comply with all covenants, conditions,
obligations and prohibitions required of Borrower in connection with any other
document or instrument affecting title to the Property (to the extent that any
failure to comply with such documents or instruments shall endanger, cloud or
adversely affect title to the Property in any manner as determined by Lender in
its discretion), or any part thereof, regardless of whether such document or
instrument is superior or subordinate to this Mortgage.
     1.4 Insurance. Borrower shall at no cost or expense to Lender, maintain, or
cause to be maintained, in force and effect on the Property at all times while
this Mortgage continues in effect the following insurance.
     (a) Insurance against loss or damage to the Property by fire, windstorm,
tornado and hail and against loss and damage by such other, further and
additional risks as may be now or hereafter embraced by an “all-risk” form of
insurance policy. The amount of such insurance shall be not less than one
hundred percent (100%) of the full replacement (insurable) cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Property and owned by Borrower
from time to time, without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Lender’s election, by
reference to such indices, appraisals or information as Lender determines in its
reasonable discretion. Full replacement cost, as used herein, means, with
respect to the Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of excavations,
foundations and footings below the lowest basement floor, and means, with
respect to such furniture, furnishings, fixtures, equipment and other items, the
cost of replacing the same, in each case, with inflation guard coverage to
reflect the effect of inflation, or annual valuation. Each policy or policies
shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Lender’s approval. The deductible
with respect to such insurance shall not exceed $10,000.00 per claim.
     (b) Comprehensive Commercial General Liability Insurance for personal
injury, bodily injury, death and property damage liability in amounts not less
than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate, together
with umbrella coverage in amounts not less than $5,000,000.00. During any
construction on the Property by Borrower or Principal Tenant, Borrower’s (or
Principal Tenant’s) general contractor for such construction shall also provide
the insurance required in this Subsection (b). Lender hereby retains the right
to periodically review the amount of said liability insurance being maintained
by Borrower and to require an increase in the amount of said liability insurance
should Lender deem an increase to be reasonably prudent under then existing
circumstances. No deductible shall be permitted with respect to such insurance.

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     (c) General boiler and machinery insurance coverage is required if steam
boilers or other pressure-fired vessels are in operation at the Property.
Minimum liability amount per accident must equal the lesser of the replacement
(insurable) value of the Improvements housing such boiler or pressure-fired
machinery or $2,000,000.00. The deductible with respect to such insurance shall
not exceed $10,000.00 per claim.
     (d) If the Property or any part thereof is identified by the Secretary of
Housing and Urban Development as being situated in an area now or subsequently
designated as having special flood hazards (including, without limitation, those
areas designated as Zone A or Zone V), flood insurance in an amount equal to the
lesser of: (i) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Obligations if replacement cost coverage is not available for the type of
building insured); or (ii) the maximum insurance available under the appropriate
National Flood Insurance Administration program. The deductible with respect to
such insurance shall not exceed $25,000.00 per occurrence.
     (e) During the period of any construction on the Property or renovation or
alteration of the Improvements, a so-called “Builder’s All-Risk Completed Value”
or “Course of Construction” insurance policy in non-reporting form for any
Improvements under construction, renovation or alteration in an amount approved
by Lender and Worker’s Compensation Insurance covering all persons engaged in
such construction, renovation or alteration. The deductible for such insurance,
if any, shall be satisfactory to Lender.
     (f) Loss of rents or loss of business income insurance in amounts
sufficient to compensate Borrower for all Rents and Profits following a casualty
until completion of Restoration (as defined in Section 1.7 below) together with
an additional period of not less than twelve (12) months thereafter. The amount
of coverage shall be adjusted annually to reflect the then-current Rents and
Profits or income payable during such period. The deductible for such insurance,
if any, shall be satisfactory to Lender.
     (g) Such other insurance on the Property or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Lender against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated including,
without limitation, Sinkhole, Mine Subsidence, Terrorism, Earthquake and
Environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
     All such insurance shall (i) be with insurers authorized to do business in
the state within which the Property is located and who have and maintain a
rating of at least “A-” from Standard & Poors except that Lender has approved
Affiliated FM Insurance Company as the issuer of the insurance described in
Section 1.4(a) above, which insurer has, and shall maintain, a rating of at
least “A+:XV” from A.M. Best Company (or, alternatively, if the insurers
maintain re-insurance with re-insurers maintaining such rating, Lender will not
unreasonably withhold its consent to satisfying such required rating by means of
a “cut-through” endorsement allowing recourse directly against a reinsurer
maintaining such rating), (ii) contain the complete address of the Property (or
a complete legal description), (iii) be for terms of at least one year, and
(iv) be subject to the approval of Lender as to insurance companies, amounts,
content, forms of policies, method by which premiums are paid and expiration
dates.
     Borrower shall deliver to Lender evidence that said insurance policies have
been paid current as of the date hereof and original certificates of insurance
signed by an authorized agent of the applicable insurance companies evidencing
such insurance satisfactory to Lender. Borrower shall renew

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(or cause to be renewed) all such insurance and deliver (or cause to be
delivered) to Lender certificates evidencing such renewals at least thirty
(30) days before any such insurance shall expire. Without limiting the required
endorsements to the insurance policies, Borrower further agrees that all such
policies shall include a standard, non-contributory, mortgagee clause naming:
CIBC Inc., its successors and/or assigns, as their interests may appear
Attn: Real Estate Finance Group
300 Madison Avenue, 8th Floor
New York, New York 10017
(x) as an additional insured under all liability insurance policies, (y) as the
first mortgagee on all property insurance policies and (z) as the loss payee on
all loss of rents or loss of business income insurance policies. Borrower
further agrees that all such insurance policies: (1) shall provide for at least
thirty (30) days’ prior written notice to Lender prior to any cancellation or
termination thereof and prior to any modification thereof which affects the
interest of Lender; (2) shall contain an endorsement or agreement by the insurer
that any loss shall be payable to Lender in accordance with the terms of such
policy notwithstanding any act or negligence of Borrower which might otherwise
result in forfeiture of such insurance; (3) shall waive all rights of
subrogation against Lender; (4) in the event that the Real Estate or the
Improvements constitutes a legal non-conforming use under applicable building,
zoning or land use laws or ordinances, shall include an ordinance or law
coverage endorsement which will contain Coverage A: “Loss Due to Operation of
Law” (with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: “Demolition Cost” and Coverage C: “Increased Cost of
Construction” coverages; and (5) may be in the form of a blanket policy provided
that, in the event that any such coverage is provided in the form of a blanket
policy, Borrower hereby acknowledges and agrees that failure to pay any portion
of the premium therefor which is not allocable to the Property or by any other
action not relating to the Property which would otherwise permit the issuer
thereof to cancel the coverage thereof, would require the Property to be insured
by a separate, single-property policy. The blanket policy must properly identify
and fully protect the Property as if a separate policy were issued for 100% of
Replacement Cost at the time of loss and otherwise meet all of Lender’s
applicable insurance requirements set forth in this Section 1.4. In the event of
foreclosure of this Mortgage, 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 all unearned insurance premiums and proceeds
payable under such policies then in force concerning the Property shall
thereupon vest in the purchaser at such foreclosure, or in Lender or other
transferee in the event of such other transfer of title whether or not the
damage to the Property occurred prior to such transfer of title. Approval of any
insurance by Lender shall not be a representation of the solvency of any insurer
or the sufficiency of any amount of insurance. In the event Borrower fails to,
or fails to cause Tenant to, provide, maintain, keep in force or deliver and
furnish to Lender the policies of insurance required by this Mortgage or
evidence of their renewal as required herein, Lender may, but shall not be
obligated to, procure such insurance and Borrower shall pay all amounts advanced
by Lender therefor, together with interest thereon at the Default Interest Rate
from and after the date advanced by Lender until actually repaid by Borrower,
promptly upon demand by Lender. Lender shall not be responsible for nor incur
any liability for the insolvency of the insurer or other failure of the insurer
to perform, even though Lender has caused the insurance to be placed with the
insurer after failure of Borrower to furnish (or cause to be furnished) such
insurance. Borrower shall not obtain insurance for the Property in addition to
that required by Lender without the prior written consent of Lender, which
consent will not be unreasonably withheld provided that (i) Lender is a named
insured on such insurance, (ii) Lender receives complete copies of all policies
evidencing such insurance, and (iii) such insurance complies with all of the
applicable requirements set forth herein. To the extent that at any time Lender
agrees to accept insurance from an insurer that is rated less than the
foregoing, Lender may terminate its waiver and reassert the aforesaid minimum
rating requirements upon any renewal of any insurance coverage, or at any time
if the rating of any insurer is reduced.

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     1.5 Payment of Taxes. Except to the extent funds are held in the Impound
Account therefor pursuant to Section 1.6 of this Mortgage, Borrower shall
(a) pay or cause to be paid all taxes, assessments, water rents, sewer rents,
governmental impositions and other charges, including, without limitation, vault
charges and license fees for the use of vaults, chutes and similar areas
adjoining the Real Estate, now or hereafter levied or assessed or imposed
against, or which are or may become a lien upon, the Property (“Taxes”), and all
ground rents, maintenance charges and similar charges, now or hereafter levied
or assessed or imposed against the Property or any part thereof (the “Other
Charges”) when the same become due and payable, and (b) furnish Lender with
receipts (or if receipts are not immediately available, with copies of canceled
checks evidencing payment with receipts to follow promptly after they become
available) showing payment of such Taxes and Other Charges at least fifteen
(15) days prior to the applicable delinquency date therefor. Notwithstanding the
foregoing, Borrower may in good faith, by appropriate proceedings and upon
notice to Lender, contest the validity, applicability or amount of any asserted
Taxes or Other Charges so long as (x) such contest is diligently pursued,
(y) Lender determines, in its subjective opinion, that such contest suspends the
obligation to pay the Taxes or Other Charges and that nonpayment of such Taxes
or Other Charges will not result in the sale, loss, forfeiture or diminution of
the Property or any part thereof or any interest of Lender therein, and
(z) prior to the earlier of the commencement of such contest or the delinquency
date of the asserted Taxes or Other Charges, Borrower deposits, or causes to be
deposited, adequate security as determined by a court of competent jurisdiction,
or if not required by such court, in the Impound Account an amount determined by
Lender to be adequate to cover the payment of such Taxes or Other Charges and a
reasonable additional sum to cover possible interest, costs and penalties;
provided, however, that Borrower shall promptly cause to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all interest,
costs and penalties thereon, promptly after such judgment becomes final; and
provided, further, that in any event each such contest shall be concluded, the
Taxes or Other Charges, as the case may be, together with any applicable
interest, costs and penalties, shall be paid prior to the date any writ or order
is issued under which the Property may be sold, lost or forfeited.
     1.6 Tax and Insurance Impound Account. (a) Subject to Section 1.6(b) below,
Borrower shall establish and maintain with Lender at all times while this
Mortgage continues in effect an impound account (the “Impound Account”) for
payment of Taxes and Other Charges and for the premiums on the insurance
required to be maintained with respect to Borrower and the Property (“Insurance
Premiums”) and as additional security for the Obligations. In addition to the
initial deposit to the Impound Account required simultaneously with the
execution hereof, commencing on the first Payment Date (as defined in the Note)
and continuing thereafter on each Payment Date until the Note and all other
Obligations are fully paid and performed, Borrower shall pay to Lender, or cause
to be paid to Lender, for deposit to the Impound Account, an amount equal to
one-twelfth (1/12) of the amount of the annual Taxes and Other Charges that will
next become due and payable on the Property, plus one-twelfth (1/12) of the
amount of the annual Insurance Premiums that will next become due and payable,
each as estimated and determined by Lender. So long as no Event of Default (as
defined in Section 2.1 hereunder) has occurred and is continuing, all sums in
the Impound Account shall be held by Lender in the Impound Account to pay said
Taxes and Other Charges, in periodic installments, and Insurance Premiums in one
annual installment, in each case, before the same become delinquent. Borrower
shall be responsible for ensuring the receipt by Lender, at least thirty
(30) days prior to the respective due date for payment thereof, of all bills,
invoices and statements for all Taxes and Other Charges, and all Insurance
Premiums, and so long as no Event of Default has occurred and is continuing,
Lender shall pay the governmental authority or other party entitled thereto
directly to the extent funds are available for such purpose in the Impound
Account. In making any payment from the Impound Account, Lender shall be
entitled to rely on any bill, statement or estimate procured from the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax, assessment,
valuation, sale, forfeiture, tax lien or title or claim thereof. The Impound
Account shall not, unless otherwise

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explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Lender’s option and in Lender’s discretion, may either be held in
a separate account or be commingled by Lender with the general funds of Lender.
No interest on the funds contained in the Impound Account shall be paid by
Lender to Borrower. The Impound Account is solely for the protection of Lender
and entails no responsibility on Lender’s part beyond the payment of Taxes and
Other Charges, and of Insurance Premiums, following receipt of bills, invoices
or statements therefor in accordance with the terms hereof and beyond the
allowing of due credit for the sums actually received. Upon assignment of this
Mortgage by Lender, any funds in the Impound Account shall be turned over to the
assignee and any responsibility of Lender, as assignor, with respect to such
funds shall terminate. If the total funds in the Impound Account are reasonably
determined by Lender to be in excess of the amount of payments required by
Lender for the purposes of the Impound Account, such excess may be credited by
Lender on the subsequent payment to be made hereunder or, if such excess is
greater than the amounts due from Borrower to Lender in the month following such
determination (and if no Event of Default is then continuing and no event has
occurred, and no state of facts exists, which in either case would, with the
giving of notice and/or the passage of time, constitute an Event of Default (any
such event or state of facts, a “Default”) is then continuing), refunded to
Borrower. If at any time Lender determines that, with the making of all monthly
deposits to the Impound Account when due, the Impound Account nonetheless would
not contain sufficient funds to pay the next due periodic installments of all
Taxes and Other Charges at least 30 days prior to the delinquency date thereof,
or to pay the next due annual Insurance Premiums at least 30 days prior to the
due date thereof, Borrower shall, within ten (10) days after receipt of written
notice thereof, deposit with Lender the full amount of any such deficiency. If
the Borrower shall fail to deposit with Lender the full amount of such
deficiency as provided above, Lender shall have the option, but not the
obligation, to make such deposit and all amounts so deposited by Lender,
together with interest thereon at the Default Interest Rate from the date
incurred by Lender until actually paid by Borrower, shall be immediately paid by
Borrower on demand. At any time during the continuance of an Event of Default,
Lender may, but shall not be obligated to, apply at any time the balance then
remaining in the Impound Account against the Obligations in whatever order
Lender shall subjectively determine. No such application of the Impound Account
shall be deemed to cure any Default or Event of Default hereunder, and any such
application shall not limit Borrower’s obligation to deposit any deficiency of
which Lender gives notice. Upon full payment of the Obligations in accordance
with its terms or at such earlier time as Lender may elect, the balance of the
Impound Account then in Lender’s possession shall be paid over to Borrower and
no other party shall have any right or claim thereto.
     (b) Notwithstanding the provisions of Section 1.6(a) to the contrary,
provided and on condition that each and all of the Tax and Insurance Conditions
Precedent (as hereinafter defined) are satisfied and remain satisfied at all
times, Borrower shall not be required to fund the Impound Account on account of
Taxes and Other Charges and Insurance Premiums as provided herein. If at any
time any or all of the Tax and Insurance Conditions Precedent are no longer met
to the satisfaction of Lender, Borrower shall immediately begin and shall
continue to fund the Impound Account on account of Taxes and Other Charges and
Insurance Premiums as provided herein. The “Tax and Insurance Conditions
Precedent” means the following conditions precedent: (i) no Event of Default
exists, (ii) no default has occurred and is continuing under the Principal
Lease, (iii) tenant under the Principal Lease is obligated to pay all Taxes and
Other Charges and Insurance Premiums under the Principal Lease, (iv) Borrower
shall pay or cause to be paid all Taxes and Other Charges and Insurance Premiums
to be paid as required under Sections 1.4 and 1.5 of this Mortgage and
(v) Borrower shall furnish Lender with receipts (or if receipts are not
immediately available, with copies of canceled checks evidencing payment with
receipts to follow promptly after they become available) showing payment of such
Taxes and Other Charges and Insurance Premiums at least fifteen (15) days prior
to the respective applicable delinquency date therefor.
          1.7 Condemnation and Casualty. Borrower shall give Lender prompt
written notice of the occurrence of any casualty (other than a de minimus
casualty) affecting, or the institution of any

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proceedings for eminent domain or for the condemnation of, the Property or any
portion thereof. All insurance proceeds on the Property, and all causes of
action, claims, compensation, awards and recoveries for any damage, condemnation
or taking of all or any part of the Property or for any damage or injury to it
for any loss or diminution in value of the Property, are hereby assigned to and
shall be paid to Lender. Lender may participate in any suits or proceedings
relating to any such proceeds, causes of action, claims, compensation, awards or
recoveries and Lender is hereby authorized, in its own name or in Borrower’s
name, to adjust any loss covered by insurance or any condemnation claim or cause
of action, and to settle or compromise any claim or cause of action in
connection therewith, and Borrower shall from time to time deliver to Lender any
instruments required to permit such participation; provided, however, that so
long as no Event of Default is continuing, Lender shall not participate in the
adjustment of, and Borrower shall have the right to directly receive proceeds
with respect to, any loss which is not in excess of the lesser of (i) ten
percent (10%) of the then outstanding principal balance of the Note and (ii)
$500,000.00. Except as provided in the foregoing sentence, Lender may, at
Lender’s option, (y) hold the balance of any of such proceeds to be used to
reimburse Borrower for the cost of restoring and repairing the Property to the
equivalent of its condition immediately prior to the casualty or, in the case of
condemnation, to a condition approved by Lender (the “Restoration”), and require
Borrower to restore the Property to the equivalent of its original condition or
to a condition approved by Lender, or (z) apply the balance of such proceeds to
the payment of the Obligations, whether or not then due. To the extent Lender,
in accordance with the terms hereof, determines to apply insurance or
condemnation proceeds to Restoration, Lender shall do so in accordance with
Lender’s then-current policies relating to the, as applicable, restoration of
casualty damage on similar properties or restoration or rebuilding of properties
that have been the subject of a partial condemnation. Lender shall not exercise
its option to apply insurance proceeds or condemnation proceeds to the payment
of the Obligations if all of the following conditions are met: (1) no Default or
Event of Default has occurred and is continuing; (2) in the case of casualty,
less than forty percent (40%) of the Improvements have been damaged, or in the
case of a taking, less than twenty-five percent (25%) of the Improvements have
been taken; (3) Lender determines, in its discretion, that there will be
sufficient funds to complete the Restoration (including, without limitation, by
means of a deposit of any shortfall by Borrower with Lender prior to the
commencement of the Restoration or promptly upon Lender’s determination that
such a shortfall exists); (4) Lender determines, in its discretion, that the
rental income from the Property after completion of the Restoration will be
sufficient to meet all operating costs and other expenses, deposits to the
Impound Account, deposits to reserves and loan repayment obligations relating to
the Property and that the debt service coverage ratio for the Property after
Restoration will be the same as on the closing date of the Loan and the ratio of
the loan to value after Restoration will be the same as on the closing date of
the Loan; (5) Lender determines, in its discretion, that (A) the Restoration
will be completed before the earlier of (i) one year before the Maturity Date of
the Note or (ii) one year after the date of the loss or casualty and (B) the
rent loss insurance or business interruption insurance referenced in
Section 1.4(f) above will cover all payments due under the Loan during the
completion of the Restoration; (6) upon Lender’s request, Borrower provides
Lender evidence of the availability during and after the Restoration of the
insurance required to be maintained by Borrower pursuant to Section 1.4; (7)
Borrower provides Lender with written notice within five business (5) days after
settlement of the aforesaid insurance or condemnation claim of its request to
undertake a Restoration; and (8) the Principal Lease is in full force and
effect, the tenant under the Principal Lease does not have the right to
terminate the Principal Lease due to such casualty or taking (as the case may
be), or the tenant under the Principal Lease affirms in writing that it has
waived any right to terminate the Principal Lease as a result of such casualty
or taking (as the case may be).
     Except as provided in the Note any application of any awards or proceeds to
the Obligations shall not extend or postpone the due date of any monthly
installments referred to in the Note or the Loan Documents or change the amount
of such installments. Borrower agrees to execute such further evidence of
assignment of any awards or proceeds as Lender may require. Any reduction in the
Obligations resulting from Lender’s application of any sums received by it
hereunder shall take effect only when

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Lender actually receives such sums and elects to apply such sums to the
Obligations and, in any event, the unpaid portion of the Obligations shall
remain in full force and effect and Borrower shall not be excused in the payment
thereof. Except as provided in the Note, partial payments received by Lender, as
described in the preceding sentence, shall be applied first to the final payment
due under the Note and thereafter to installments due under the Note in the
inverse order of their due date. If Borrower elects to effect a Restoration,
Borrower shall promptly and diligently, at Borrower’s sole cost and expense and
regardless of whether the insurance proceeds or condemnation award, as
appropriate, shall be sufficient for the purpose, restore, repair, replace and
rebuild the Property as nearly as possible to its value, condition and character
immediately prior to such casualty or partial taking in accordance with the
foregoing provisions and Borrower shall pay to Lender all costs and expenses of
Lender incurred in administering said rebuilding, restoration or repair,
provided the Lender makes such proceeds or award available for such purpose.
Borrower agrees to execute and deliver from time to time such further
instruments as may be requested by Lender to confirm the foregoing assignment to
Lender of any award, damage, insurance proceeds, payment or other compensation.
Subject to the preceding provisions of this Section 1.7, Lender is hereby
irrevocably constituted and appointed the attorney-in-fact of Borrower (which
power of attorney shall be irrevocable so long as any Obligations is
outstanding, shall be deemed coupled with an interest, shall survive the
voluntary or involuntary dissolution of Borrower and shall not be affected by
any disability or incapacity suffered by Borrower subsequent to the date
hereof), with full power of substitution, subject to the terms of this section,
to settle for, collect and receive any such awards, damages, insurance proceeds,
payments or other compensation from the parties or authorities making the same,
to appear in and prosecute any proceedings therefor and to give receipts and
acquittances therefor.
     1.8 Mechanics’ Liens. Borrower shall pay or cause to be paid when due all
claims and demands of mechanics, materialmen, laborers and others for any work
performed or materials delivered for the Real Estate or Improvements; provided,
however, that, Borrower shall have the right to contest in good faith any such
claim or demand, so long as it does so diligently, by appropriate proceedings
and without prejudice to Lender, and provided that neither the Property nor any
interest therein would be in any danger of sale, loss or forfeiture as a result
of such proceeding or contest. In the event Borrower shall contest any such
claim or demand, Borrower shall promptly notify Lender of such contest and
thereafter shall, upon Lender’s request, promptly provide a bond, cash deposit
or other security satisfactory to Lender to protect Lender’s interest and
security should the contest be unsuccessful. If Borrower shall fail to
immediately discharge or provide security against any such claim or demand as
aforesaid, Lender may do so and any and all expenses incurred by Lender,
together with interest thereon at the Default Interest Rate from the date
incurred by Lender until actually paid by Borrower, shall be immediately paid by
Borrower on demand.
     1.9 Assignment of Leases and Rents and Profits. As additional and
collateral security for the payment of the Obligations and cumulative of any and
all rights and remedies herein provided for, Borrower hereby absolutely and
presently assigns to Lender all existing and future Leases, and all existing and
future Rents and Profits. Borrower hereby grants to Lender the sole, exclusive
and immediate right, without taking possession of the Property, to demand,
collect (by suit or otherwise), receive and give valid and sufficient receipts
for any and all of said Rents and Profits, for which purpose Borrower does
hereby irrevocably make, constitute and appoint Lender its attorney-in-fact with
full power to appoint substitutes or a trustee to accomplish such purpose (which
power of attorney shall be irrevocable so long as any Obligations is
outstanding, shall be deemed to be coupled with an interest, shall survive the
voluntary or involuntary dissolution of Borrower and shall not be affected by
any disability or incapacity suffered by Borrower subsequent to the date
hereof). Lender shall be without liability for any loss that may arise from a
failure or inability to collect Rents and Profits, proceeds or other payments
except for loss that arises solely and directly from Lender’s gross negligence
or willful misconduct. However, so long as an Event of Default is not continuing
under this Mortgage, Borrower

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shall have a license to collect and receive the Rents and Profits when due and
prepayments thereof for not more than one month prior to due date thereof.
During the continuance of an Event of Default, Borrower’s license shall
automatically terminate without notice to Borrower and Lender may thereafter,
without taking possession of the Property, collect the Rents and Profits itself
or by an agent or receiver. From and after the termination of such license,
Borrower shall be the agent of Lender in collection of the Rents and Profits and
all of the Rents and Profits so collected by Borrower shall be held in trust by
Borrower for the sole and exclusive benefit of Lender and Borrower shall, within
one (1) business day after receipt of any Rents and Profits, pay the same to
Lender to be applied by Lender as hereinafter set forth. Borrower hereby
irrevocably agrees that any Tenant paying Rents and Profits as directed by
Lender shall be deemed to have paid such amount in satisfaction of its
obligation under such Tenant’s Lease, and each Tenant may rely on such agreement
by Borrower. Neither the demand for or collection of Rents and Profits by
Lender, nor the exercise of Lender’s rights as assignee of the Leases, shall
constitute any assumption by Lender of any obligations under any Lease or other
agreement relating thereto. Lender is obligated to account only for such Rents
and Profits as are actually collected or received by Lender. Borrower
irrevocably agrees and consents that the respective payors of the Rents and
Profits shall, upon demand and notice from Lender of an Event of Default
hereunder, pay said Rents and Profits to Lender without liability to determine
the actual existence of any Event of Default claimed by Lender. Borrower hereby
waives any right, claim or demand which Borrower may now or hereafter have
against any such payor by reason of such payment of Rents and Profits to Lender,
and any such payment shall discharge such payor’s obligation to make such
payment to Borrower. All Rents and Profits collected or received by Lender shall
be applied against all third party out of pocket expenses of collection,
including, without limitation, reasonable attorneys’ fees, against third party
out of pocket costs of operation and management of the Property and against the
Obligations, in whatever order or priority as to any of the items so mentioned
as Lender directs in its sole subjective discretion and without regard to the
adequacy of its security. Neither the exercise by Lender of any rights under
this Section nor the application of any Rents and Profits to the Obligations
shall cure or be deemed a waiver of any Default or Event of Default hereunder.
The assignment of Leases and of Rents and Profits hereinabove granted shall
continue in full force and effect during any period of foreclosure or redemption
with respect to the Property.
     1.10 Leases.
     (a) Entering Into Leases. Borrower will not enter into, modify, amend,
consent to the cancellation of or terminate any Lease (including, without
limitation, the Principal Lease), whether now existing or hereafter entered
into, without the prior written consent of Lender which consent may be granted
or withheld in Lender’s sole discretion.
     (b) Covenants Regarding Leases. Borrower (i) shall observe and perform all
the obligations imposed upon the lessor under each Lease in all material
respects, and shall not do or permit to be done anything to impair the value of
any Lease as security for the Obligations; (ii) upon request (which request is
hereby deemed given with respect to any “Major Lease”, as defined below), shall
promptly send copies to Lender of all notices of default which Borrower shall
send or receive thereunder; (iii) shall enforce all of the material terms,
covenants and conditions contained in each Lease upon the part of the Tenant
thereunder to be observed or performed, (iv) shall not collect any of the Rents
more than one (1) month in advance (it being acknowledged that security deposits
shall not be deemed Rents collected in advance); (v) shall not execute any other
assignment of the lessor’s interest in any of the Leases or the Rents and
Profits (other than to Lender as security for the Obligations); and (vi) shall
not consent to any assignment of or subletting under any Lease not in accordance
with the terms of such Lease, in each case without the prior written consent of
Lender. Within 30 days after Lender’s request therefor (which request shall not
be made more than the lesser of twice in any calendar year absent an Event of
Default or the maximum number of estoppel certificates the Tenant under the
Lease is required

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to provide), Borrower shall deliver to Lender an estoppel certificate from each
Tenant to the extent Borrower can require Tenant to deliver such estoppel
certificates.
     (c) Amendments to Leases. Borrower shall not, without the consent of
Lender, amend, modify or waive the provisions of any Lease or terminate, reduce
rents under, accept a surrender of space under, or shorten the term of, any
Lease, sublease or sub-sublease (including any guaranty, letter of credit or
other credit support with respect thereto) (the foregoing, collectively, a
“Lease Modification”).
     (d) Security Deposits. All security deposits of tenants, whether held in
cash or in any other form, shall be held in compliance with applicable law. None
of such security deposits shall be commingled with any other funds of Borrower
or any other person. Any bond or other instrument which Borrower is permitted to
hold in lieu of cash security deposits under any applicable legal requirements
shall be maintained in full force and effect in the full amount of such deposits
unless replaced by cash deposits as hereinabove described; shall be issued by an
institution reasonably satisfactory to Lender; shall, if permitted pursuant to
any applicable legal requirements, name Lender as payee or mortgagee thereunder
or, at Lender’s option, be assigned or fully assignable to Lender; and shall, in
all respects, comply with any applicable legal requirements and otherwise be
reasonably satisfactory to Lender. Borrower shall, upon request, provide Lender
with evidence reasonably satisfactory to Lender of Borrower’s compliance with
the foregoing. Upon an Event of Default under this Mortgage, Borrower shall,
immediately upon Lender’s request (if permitted by applicable law), deliver to
Lender the security deposits (and any interest previously earned thereon and not
disbursed to the person(s) lawfully entitled to receive same) with respect to
all or any portion of the Property, to be held by Lender subject to the terms of
the Leases.
     (e) Tenant Financial Information. Borrower shall cause each Lease entered
into on or after the date hereof to require the Tenant under such Lease to
deliver to Borrower periodic operating statements with respect to (i) such
Tenant’s operations at the Property, and (ii) the operations of such Tenant and,
if applicable, any parent or affiliated entity of such Tenant which operates, or
has subsidiaries that operate, comparable businesses (collectively, “Tenant
Financial Information”). Borrower shall, from time to time promptly upon request
of Lender, to the extent permitted under the applicable Lease, request Tenant
Financial Information from the Tenant and promptly upon receipt thereof, deliver
such Tenant Financial Information to Lender, provided, however, that (1) prior
to a Secondary Market Transaction consisting of a securitization, Lender shall
not require Borrower to request Tenant Financial Information more than three (3)
times, and (2) following a Secondary Market Transaction consisting of a
securitization, provided no Event of Default is continuing, Lender shall not
request such information without reasonable cause (which reasonable cause shall
include, without limitation, the occurrence of any default by a Tenant or if
such Tenant ceases to conduct its business in the premises demised by such
Principal Lease).
     1.11 Alienation and Further Encumbrances.
     (a) Notwithstanding anything to the contrary contained in Section 5.6
hereof, neither the Property, nor any part thereof or interest therein
(including without limitation, any fee, leasehold or subleasehold interest
therein), shall be sold, conveyed, disposed of, alienated, hypothecated, leased
(except to Tenants under Leases which are not in violation of Section 1.10
hereof), assigned, pledged, mortgaged, further encumbered or otherwise
transferred, nor shall Borrower be divested of its title to the Property or any
interest therein, in any manner or way, whether voluntarily or involuntarily
(any of the foregoing, a “Transfer”), except as expressly set forth in this
Section 1.11, in each case without the prior written consent of Lender being
first obtained, which consent may be withheld in Lender’s sole discretion. For
the purposes of this Section 1.11, a “Transfer” shall also include (i) transfers
of direct or

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indirect ownership interests in Borrower, and the creation of new or additional
ownership interests in Borrower, or in any Constituent Entity of Borrower, in
each case except as set forth in Section 1.11(c) below, (ii) an installment
sales agreement with respect to the Property or any portion thereof, (iii) a
Lease of all or substantially all of the Property other than for actual
occupancy by a space tenant thereunder, (iv) any sale or assignment of any of
Borrower’s right, title and interest in, to and under any Leases or Rents and
Profits, other than to Lender, (v) if Borrower or any Constituent Entity of
Borrower is a partnership or joint venture, the addition, change, removal or
resignation of any general partner, or the transfer or pledge of any interest
(whether as a general partner or limited partner) of any general partner in such
partnership, and (vi) if Borrower or any Constituent Entity of Borrower is a
limited liability company, the addition, change, removal or resignation of any
manager or managing member, or the transfer or pledge of any interest (whether
as a managing member or otherwise) of such manager or managing member in such
limited liability company, or the transfer of control (as defined in
Section 1.27) of such manager or managing member.
     (b) Notwithstanding the foregoing provisions of this Section, Lender shall
not unreasonably withhold its consent to the sale of the Property in its
entirety (hereinafter, “Sale”) to a single-purpose entity with organizational
documents containing provisions substantially similar to those set forth in
Section 1.27 and otherwise reasonably acceptable to Lender (hereinafter,
“Buyer”) provided that such Sale occurs after the earlier to occur of a
Secondary Market Transaction (as defined herein) and the second (2nd)
anniversary of the date hereof, and each of the following terms and conditions
are satisfied in connection with such Sale:
          (1) No Default or Event of Default is then continuing;
          (2) Borrower gives Lender written notice of the terms of such
prospective Sale not less than thirty (30) days before the date on which such
Sale is scheduled to close, accompanied by all information concerning the
proposed Buyer as Lender would require in evaluating an initial extension of
credit to a borrower and a non-refundable application fee in the amount of
$2,500.00. Lender shall have the right to approve or disapprove the proposed
Buyer in its reasonable discretion (it being acknowledged that Lender may, as a
condition to approving any proposed Buyer, require confirmation in writing from
each of the Rating Agencies (as defined herein) that such Sale will not result
in a qualification, downgrade or withdrawal of any rating in effect immediately
prior to such Sale for any securities issued in connection with a Secondary
Market Transaction), and such approval, if given, may be given subject to such
conditions as Lender may deem appropriate;
          (3) Borrower pays Lender, concurrently with the closing of such Sale,
a non-refundable assumption fee in an amount equal to all third party
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys’ fees, incurred by Lender in connection with the Sale plus an amount
equal to one percent (1.0%) of the then outstanding principal balance of the
Note;
          (4) Buyer assumes and agrees to pay the Obligations (subject to the
provisions of Section 5.25 hereof) and, prior to or concurrently with the
closing of such Sale, the Buyer executes, without any cost or expense to Lender,
such documents and agreements as Lender shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as Lender may
require;
          (5) Borrower and the Buyer execute and cause to be filed in such
public records as Lender deems appropriate, without any cost or expense to
Lender, new financing statements or financing statement amendments and any
additional documents reasonably requested by Lender;

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     (6) Borrower causes to be delivered to Lender, without any cost or expense
to Lender, such endorsements to Lender’s title insurance policy, hazard
insurance endorsements or certificates and other similar materials as Lender may
deem necessary at the time of the Sale, all in form and substance satisfactory
to Lender, including, without limitation, an endorsement or endorsements to
Lender’s title insurance policy insuring the lien of this Mortgage, extending
the effective date of such policy to the date of execution and delivery (or, if
later, of recording) of the assumption agreement referenced above in
subparagraph (4) of this Section, with no additional exceptions added to such
policy and insuring that fee simple title to the Real Estate Property is vested
in the Buyer (or a new mortgagee policy providing substantially similar coverage
as the Lender’s title insurance policy endorsed pursuant to the foregoing
provisions of this paragraph);
     (7) Borrower executes and delivers to Lender, without any cost or expense
to Lender, a release of Lender, its officers, directors, employees and agents,
from all claims and liability relating to the transactions evidenced by the Loan
Documents through and including the date of the closing of the Sale, which
agreement shall be in form and substance satisfactory to Lender and shall be
binding upon the Buyer;
     (8) Subject to the provisions of Section 5.25 hereof, such Sale is not
construed so as to relieve Borrower of any personal liability under the Note or
any of the other Loan Documents for any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale and Borrower
executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate the ratification
of said personal liability. Borrower shall be released from and relieved of any
personal liability under the Note or any of the other Loan Documents for any
acts or events occurring or obligations arising after the closing of such Sale;
and
     (9) Such Sale is not construed so as to relieve any Indemnitor of its
obligations under any Loan Document, and a Constituent Entity of the Buyer
approved by Lender in its sole discretion (a “Successor Indemnitor”) assumes the
obligations of such Indemnitor and executes such documents as may be required by
Lender to evidence such assumption. Each Indemnitor shall be released from and
relieved of any of its obligations under any indemnity or guaranty executed in
connection with the Loan for any acts or events occurring or obligations arising
after the closing of such Sale;
     (10) Buyer has furnished to Lender all appropriate papers evidencing the
Buyer’s capacity and good standing, and the authority of the signers to execute
the assumption of the Loan Documents and the Obligations, which papers shall
include certified copies of all documents relating to the organization and
formation of the Buyer and of the entities, if any, which are Constituent
Entities of the Buyer, all of which shall be satisfactory to Lender;
     (11) Buyer shall assume the obligations of Borrower under any management
agreements pertaining to the Property, or shall cause the new manager and
management agreement to satisfy the requirements of Section 1.24 hereof; and
     (12) Buyer shall furnish an opinion of counsel satisfactory to Lender that
the acquisition of the Property and the assumption of the Loan Documents and
Obligations by Buyer and, to the extent applicable, Successor Indemnitor, was
validly authorized, and duly executed and delivered, and constitutes the legal,
valid and binding obligations of Buyer and Successor Indemnitor, enforceable
against each of them in accordance with their respective terms, and with respect
to such other matters as Lender may reasonably require.

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     (c) Subject to Section 1.11(c)(1)(b), provided no Default shall then be
continuing, the following direct or indirect transfers of interests in Borrower,
or any Constituent Entity of Borrower, shall be permitted without the prior
written consent of Lender:
          (1) If (a) Borrower (or any Constituent Entity of Borrower) is a
corporation, any direct or indirect transfer of stock in such corporation, or
the issuance of new stock in such corporation, which does not result in a change
of control (as defined under Rule 405 under the Securities Act of 1933, as
amended) of such corporation; or (b) Borrower (or any Constituent Entity of
Borrower, or any general partner or managing member of Borrower) is a
Publicly-Held Corporation (as defined below), any direct or indirect transfer of
stock in such corporation, or the issuance of new stock in such corporation,
regardless of whether a Default shall then be continuing. As used herein, the
term “Publicly-Held Corporation” means a corporation the outstanding voting
stock of which is registered under Section 12(b) or 12(g) of the Securities and
Exchange Act of 1934, as amended;
          (2) If Borrower (or any Constituent Entity of Borrower) is a limited
partnership, any direct or indirect transfer of limited partnership interests in
such limited partnership, or the issuance of new limited partnership interests
which results in the dilution of the existing limited partners, so that after
giving effect to such transfer or issuance, (x) not more than 49% of the equity
interests in such partnership have been transferred or issued from and after the
date hereof and (y) the persons responsible for the management of the Borrower
and the Property remain unchanged;
          (3) If Borrower (or any Constituent Entity of Borrower) is a limited
liability company, any direct or indirect transfer of membership interests in
Borrower, or the issuance of new membership interests which results in the
dilution of the existing members, so that after giving effect to such transfer
or issuance, (x) not more than 49% of the equity interests in such limited
liability company have been transferred or issued from and after the date hereof
and (y) the persons responsible for the management of the Borrower and the
Property remain unchanged; and
          (4) Either (a) any transfer for estate planning purposes by the
Indemnitor, or (b) any involuntary transfer caused by the death of a holder of
ownership interests in Borrower, or in any general partner or managing member of
Borrower, in each case so long as (y) Borrower is reconstituted, if required,
following any such death and (z) either (i) those persons responsible for the
management of the Borrower and the Property remain unchanged as a result of such
death or estate planning or (ii) the person(s) to become responsible for
management of the Borrower and the Property are approved by Lender.
Borrower shall give Lender (i) prior written notice of any event set forth in
Subparagraphs (1)(a), (2) or (3) above, and (ii) prompt written notice after any
event giving rise to a transfer set forth in Subparagraph (4) above, in each
case together with copies of all documents, instruments and agreements effecting
such transfer, all of which shall be certified by Borrower to be true, correct
and complete.
     1.12 Payment of Utilities, Assessments, Charges, Etc. Borrower shall pay,
or cause to be paid, when due all utility charges (e.g., for gas, electricity,
water and sewer services and similar charges) which are incurred by Borrower or
its agents, and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Real Estate and/or the Improvements or any portion
thereof, whether or not such assessments or charges are or may become liens
thereon.
     1.13 Access Privileges and Inspections. Lender and the agents,
representatives and employees of Lender shall, subject to the rights of tenants,
have full and free access to the Real Estate and the Improvements and any other
location where books and records concerning the Property are kept at all

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reasonable times and on reasonable prior notice for the purposes of inspecting
the Property and of examining, copying and making extracts from the books and
records of Borrower relating to the Property. Borrower shall lend assistance to
all such agents, representatives and employees of Lender.
     1.14 Waste; Alteration of Improvements. Borrower shall not commit, suffer
or permit any physical waste on the Property nor take any actions that might
invalidate any insurance carried on the Property. Borrower shall maintain or
cause to be maintained the Property in good condition and repair. No part of the
Improvements may be removed, demolished or materially altered, in each case,
without the prior written consent of Lender, except as required pursuant to
Applicable Laws or the Leases. Without the prior written consent of Lender in
each case (or as expressly required under the Leases), Borrower shall not
commence construction of any improvements on the Real Estate other than
improvements required for the maintenance or repair of the Property.
     1.15 Zoning. Without the prior written consent of Lender in each case,
Borrower shall not seek, make, suffer, consent to or acquiesce in any change in
the zoning or conditions of use of the Real Estate or the Improvements. If,
under applicable zoning provisions, the use of all or any part of the Real
Estate or the Improvements is or becomes a nonconforming use, Borrower shall not
cause or permit such use to be discontinued or abandoned without the prior
written consent of Lender. Without Lender’s prior written consent, Borrower
shall not file or subject any part of the Real Estate or the Improvements to any
declaration of condominium or co-operative or convert any part of the Real
Estate or the Improvements to a condominium, co-operative or other form of
multiple ownership and governance.
     1.16 Financial Statements, Books and Records, and Informational Reporting.
Borrower shall keep accurate books and records of account of the Property and
its own financial affairs sufficient to permit the preparation of financial
statements therefrom in accordance with generally accepted accounting
principles. Lender and its duly authorized representatives shall have the right
to examine, copy and audit Borrower’s records and books of account at all
reasonable times upon reasonable prior written notice. So long as this Mortgage
continues in effect, Borrower shall provide to Lender, in addition to any other
financial statements required hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified to Lender as being true and correct by Borrower or the person or
entity to which they pertain, as applicable, be prepared in accordance with
generally accepted accounting principles consistently applied and be in form and
substance reasonably acceptable to Lender:
     (a) upon request by Lender, copies of all tax returns filed by Indemnitor
(which tax return shall include Borrower), within thirty (30) days after the
date of filing;
     (b) monthly operating statements for the Property (including a current Rent
Roll containing the information set forth in Paragraph 1.1(ee) above), within
fifteen (15) days after the end of each month during the first twelve
(12) months of the term of the Loan or until the occurrence of a Secondary
Market Transaction, whichever first occurs, and (ii) during any period when
Borrower is required to make payments of net cash flow to any Reserve;
     (c) quarterly operating statements for the Property, within thirty
(30) days after the end of each calendar quarter;
     (d) annual financial statements for Borrower (setting forth Borrower’s
balance sheet and operating statements for the Property) and each Indemnitor,
within ninety (90) days after the end of each calendar year;

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     (e) a current Rent Roll, containing the information set forth in
Paragraph 1.1(ee) above, dated as of January 1 of each calendar year and
certified by Borrower as being true, correct and complete, which shall be
delivered to Lender on or before January 15 of each year; and
     (f) such other information with respect to the Property, Borrower, the
principals in Borrower, and each Indemnitor which may reasonably be requested
from time to time by Lender, within a reasonable time after the applicable
request.
     If any of the aforementioned materials are not furnished to Lender within
the applicable time periods, in addition to any other rights and remedies of
Lender contained herein, Lender shall have the right, but not the obligation, to
obtain the same by means of an audit by an independent certified public
accountant selected by Lender, in which event Borrower agrees to pay, or to
reimburse Lender for, any expense of such audit and further agrees to provide
all necessary information to said accountant and to otherwise cooperate in the
making of such audit.
     1.17 Further Documentation. Borrower shall, on the request of Lender and at
the expense of Borrower, promptly: (a) correct any defect, error or omission
which may be discovered in the contents of this Mortgage or in the contents of
any of the other Loan Documents; (b) execute, acknowledge, deliver and record or
file such further instruments (including, without limitation, further mortgages,
deeds of trust, security deeds, security agreements, financing statements,
continuation statements and assignments of rents or leases) and promptly do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and the other Loan Documents and to
subject to the liens and security interests hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements or appurtenances to the Property; (c) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by Lender to
protect, continue or perfect the liens or the security interests hereunder
against the rights or interests of third persons; and (d) furnish to Lender,
upon Lender’s request (not more than twice in a calendar year, provided no Event
of Default has occurred), a duly acknowledged written statement and estoppel
certificate addressed to such party or parties as directed by Lender and in form
and substance supplied by Lender, setting forth all amounts due under the Note,
stating whether any Default or Event of Default exists, stating whether any
offsets or defenses exist against the Obligations, affirming that the Loan
Documents are the legal, valid and binding obligations of Borrower, and
containing such other matters as Lender may reasonably require.
     1.18 Payment of Costs; Reimbursement to Lender. Borrower shall pay all
costs and expenses of every character incurred in connection with the closing of
the Loan or otherwise attributable or chargeable to Borrower as the owner of the
Property, including, without limitation, appraisal fees, recording fees,
documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, public records search
fees, escrow fees and attorneys’ fees. Borrower shall pay to Lender any and all
reasonable costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) in connection with any matter for which the
consent or approval of Lender is required (or which is required to be delivered
to Lender for review and/or approval) pursuant to the Loan Documents. If
Borrower defaults in any such payment, which default is not cured within any
applicable grace or cure period, Lender may pay the same and Borrower shall
reimburse Lender on demand for all such costs and expenses incurred or paid by
Lender, together with such interest thereon at the Default Interest Rate from
and after the date Lender makes demand for such payment until reimbursement
thereof by Borrower. Further, Borrower shall promptly notify Lender in writing
of any litigation or litigation threatened in writing affecting the Property, or
any other demand or claim which, if enforced, could impair or threaten to impair
Lender’s security hereunder. Without limiting or waiving any other rights and
remedies of Lender hereunder, if any action or proceeding of any kind
(including, but

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not limited to, any bankruptcy, insolvency, arrangement, reorganization or other
debtor relief proceeding) is commenced which might affect Lender’s interest in
the Property or Lender’s right to enforce its security, or upon the occurrence
of any other Event of Default, then Lender may, at its option, with or without
notice to Borrower, make any appearances, disburse any sums and take any actions
as may be necessary or desirable to protect or enforce the security of this
Mortgage or to remedy such Event of Default (without, however, waiving any
Default). Borrower agrees to pay on demand all expenses of Lender incurred with
respect to the foregoing (including, but not limited to, reasonable fees and
disbursements of counsel), together with interest thereon at the Default
Interest Rate from and after the date on which Lender incurs such expenses until
reimbursement thereof by Borrower. The necessity for any such actions and of the
amounts to be paid shall be determined by Lender in its discretion. Lender is
hereby empowered to enter and to authorize others to enter upon the Property or
any part thereof for the purpose of performing or observing any such defaulted
term, covenant or condition without thereby becoming liable to Borrower or any
person in possession holding under Borrower. Borrower hereby acknowledges and
agrees that the remedies set forth in this Section 1.18 shall be exercisable by
Lender, and any and all payments made or costs or expenses incurred by Lender in
connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by Borrower with interest thereon at the Default Interest
Rate, notwithstanding the fact that such remedies were exercised and such
payments made and costs incurred by Lender after the filing by Borrower of a
voluntary case or the filing against Borrower of an involuntary case pursuant to
or within the meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11
U.S.C., or after any similar action pursuant to any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter, in effect, which may be or become applicable to
Borrower, Lender, any Indemnitor, the Obligations or any of the Loan Documents.
Borrower hereby indemnifies and holds Lender harmless from and against all loss,
cost and expenses with respect to any Event of Default hereof, any liens (i.e.,
judgments, mechanics’ and materialmen’s liens, or otherwise), charges and
encumbrances filed against the Property, and from any claims and demands for
damages or injury, including claims for property damage, personal injury or
wrongful death, arising out of or in connection with any accident or fire or
other casualty on the Real Estate or the Improvements or any nuisance made or
suffered thereon, including, in any case, reasonable attorneys’ fees, costs and
expenses as aforesaid, excluding matters arising solely and directly out of the
Lender’s gross negligence or willful misconduct, whether at pretrial, trial or
appellate level, and such indemnity shall survive payment in full of the
Obligations. This Section shall not be construed to require Lender to incur any
expenses, make any appearances or take any actions.
     1.19 Security Interest and Security Agreement. This Mortgage is also a
security agreement under the Uniform Commercial Code for any of the Property
which, under applicable law, may be subject to a security interest under the
Uniform Commercial Code, whether acquired now or in the future, including,
without limitation, the Reserves, all products, and cash and non-cash proceeds
thereof (collectively, “UCC Collateral”). Borrower hereby grants to Lender a
security interest in the UCC Collateral. Borrower hereby authorizes Lender to
file such financing statements, continuation statements and amendments, in such
form as Lender may require, to perfect or continue the perfection of this
security interest. Borrower shall pay all third party out of pocket costs of
preparing and filing such statements, and all costs and expenses of any record
searches for financing statements that Lender may require. Without the prior
written consent of Lender, Borrower shall not create or permit to exist any
other lien or security interest in any of the UCC Collateral. The name and
address of Borrower (as Debtor under any applicable Uniform Commercial Code) and
Lender (as Secured Party under any applicable Uniform Commercial Code) are as
set forth on Page 1 of this Mortgage.
     1.20 Easements and Rights-of-Way. Borrower shall not grant any easement or
right-of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Lender, which consent shall
not be unreasonably withheld. The purchaser at any foreclosure sale hereunder
may, at its discretion, disaffirm any easement or right-of-way granted in
violation of any of

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the provisions of this Mortgage and may take immediate possession of the
Property free from, and despite the terms of, such grant of easement or
right-of-way. If Lender consents to the grant of an easement or right-of-way,
Lender agrees to grant such consent provided that Lender is paid a reasonable
review fee together with all other expenses, including, without limitation,
reasonable attorneys’ fees, incurred by Lender in the review of Borrower’s
request and in the preparation of documents effecting the subordination.
Borrower shall at all times comply with all easement agreements, reciprocal
easement agreements, declarations, restrictive covenants and any other similar
types of agreements now or hereafter affecting the Property (to the extent that
any failure to comply with such documents, agreements or instruments shall
endanger, cloud or adversely affect title to the Property in any manner, or
adversely affect the Property in any manner, as determined by Lender in its
discretion), and Borrower shall not amend, modify or terminate any such easement
agreements, reciprocal easement agreements, declarations, restrictive covenants
or any other similar types of agreements without Lender’s prior written consent.
     1.21 Compliance with Laws. Borrower shall at all times comply with all
Applicable Laws. Borrower may, upon providing Lender with security satisfactory
to Lender, proceed diligently and in good faith to contest the validity or
applicability of any Applicable Law so long as the Property shall not be subject
to any lien, charge, fine or other liability, and shall not be in danger of
being forfeited, lost or closed, during or as a result of such contest. Borrower
shall not alter the Property in any manner that would materially increase
Borrower’s responsibilities for compliance with Applicable Laws without the
prior approval of Lender. Borrower shall not use or occupy, or allow the use or
occupancy of, the Property in any manner which violates any Lease or any
Applicable Law or which constitutes a public or private nuisance or which makes
void, voidable or cancelable, or increases the premium of, any insurance then in
force with respect thereto. Borrower shall, from time to time, upon Lender’s
request, provide Lender with evidence reasonably satisfactory to Lender that the
Property complies with all Applicable Laws. Notwithstanding the foregoing, if as
a result of a change in Applicable Law material structural changes are required
to be made to the Property, then Borrower shall have the right at any time
during the Defeasance Period to partially defease the Loan and obtain a release
of the Property from the lien of this Mortgage pursuant to Section 1.03(d)-(f)
of the Note.
     1.22 Additional Taxes. In the event of the enactment after this date of any
law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Lender the payment of the
whole or any part of the Taxes or Other Charges herein required to be paid by
Borrower, or changing in any way the laws relating to the taxation of mortgages
or security agreements or debts secured by mortgages or security agreements or
the interest of the Lender or secured party in the property covered thereby, or
the manner of collection of such Taxes or Other Charges, so as to adversely
affect this Mortgage or the Obligations or Lender, then, and in any such event,
Borrower, upon demand by Lender, shall pay such Taxes or Other Charges, or
reimburse Lender therefor; provided, however, that if in the opinion of counsel
for Lender (a) it might be unlawful to require Borrower to make such payment, or
(b) the making of such payment might result in the imposition of interest beyond
the maximum amount permitted by law, then and in either such event, Lender may
elect, by notice in writing given to Borrower, to declare all of the Obligations
to be and become due and payable in full sixty (60) days from the giving of such
notice.
     1.23 Borrower’s Waivers. To the full extent permitted by law, Borrower
shall not at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement, valuation,
stay, moratorium or extension, or any law now or hereafter in force providing
for the reinstatement of the Obligations prior to any sale of the Property to be
made pursuant to any provisions contained herein or prior to the entering of any
decree, judgment or order of any court of competent jurisdiction, or any right
under any statute to redeem all or any part of the

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Property so sold. Borrower, for Borrower and Borrower’s successors and assigns,
and for any and all persons ever claiming any interest in the Property, to the
full extent permitted by law, hereby knowingly, intentionally and voluntarily
with and upon the advice of competent counsel: (a) waives, releases,
relinquishes and forever forgoes all rights of valuation, appraisement, stay of
execution, reinstatement and notice of election or intention to mature or
declare due the Obligations (except such notices as are specifically provided
for herein); (b) waives, releases, relinquishes and forever forgoes all right to
a marshalling of the assets of Borrower, including the Property, to a sale in
the inverse order of alienation, or to direct the order in which any of the
Property shall be sold in the event of foreclosure of the liens and security
interests hereby created and agrees that any court having jurisdiction to
foreclose such liens and security interests may order the Property sold as an
entirety; and (c) waives, releases, relinquishes and forever forgoes all rights
and periods of redemption provided under applicable law. To the full extent
permitted by law, Borrower shall not have or assert any right under any statute
or rule of law pertaining to the exemption of homestead or other exemption under
any federal, state or local law now or hereafter in effect, the administration
of estates of decedents or other matters whatever to defeat, reduce or affect
the right of Lender under the terms of this Mortgage to a sale of the Property,
for the collection of the Obligations without any prior or different resort for
collection, or the right of Lender under the terms of this Mortgage to the
payment of the Obligations out of the proceeds of sale of the Property in
preference to every other claimant whatever. Further, Borrower hereby knowingly,
intentionally and voluntarily, with and upon the advice of competent counsel,
waives, releases, relinquishes and forever forgoes all present and future
statutes of limitations as a defense to any action to enforce the provisions of
this Mortgage or to collect any of the Obligations the fullest extent permitted
by law. Borrower covenants and agrees that upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against Borrower, Borrower shall not
seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S.C. §105
or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any
other debtor relief law (whether statutory, common law, case law, or otherwise)
of any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, to stay, interdict, condition, reduce or inhibit the ability
of Lender to enforce any rights of Lender against any Indemnitor of the secured
obligations or any other party liable with respect thereto by virtue of any
indemnity, guaranty or otherwise.
     1.24 Management.
     (a) The management of the Property shall be by either (1) Borrower or an
entity affiliated with Borrower approved by Lender for so long as Borrower or
said affiliated entity is managing the Property in a first class, commercially
reasonable manner to upkeep the building in accordance with its condition as of
the date hereof; or (2) a professional property management company approved by
Lender, and in either case pursuant to a written agreement approved by Lender.
Borrower represents that, as of the date hereof, other than the agreement for
property consulting services with Frauenshuh Inc. Borrower has not retained
either a property manager or a leasing agent for the Property. In no event shall
any manager be removed, replaced or retained, or any management agreement
entered into, modified or amended, in each case without the prior written
consent of Lender, which shall not unreasonably be withheld. After an Event of
Default hereunder or a default under any management contract then in effect,
which default is not cured within any applicable grace or cure period, Lender
shall have the right to terminate, or to direct Borrower to terminate, such
management contract upon thirty (30) days’ notice and to retain, or to direct
Borrower to retain, a new management agent approved by Lender. It shall be a
condition of Lender’s consent to any management agreement, whether with an
affiliate of Borrower or a professional property management company, that such
manager enter into an agreement with Lender whereby the manager acknowledges and
agrees to the aforesaid rights of Lender, and as to such other matters as Lender
may require.
     (b) Without limiting the restrictions set forth in Section 1.24(a)
pertaining to the management agreement for the Property, Borrower may not
terminate any other Contract that is material

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to the operation of the Property, or enter into any amendment thereto that makes
the terms thereof less favorable to Borrower, in each case without the prior
written consent of Lender, which shall not unreasonably be withheld, provided,
however, that if the other party to such Contract is in default thereunder, and
Borrower can replace the goods or services provided on terms not materially
disadvantageous to Borrower, then the prior written consent of Lender shall not
be required to terminate such Contract. Borrower shall perform its obligations
under each Contract and each of the General Intangibles (to the extent Borrower
is obligated to perform), except where Borrower’s failure to do so would not
have a material adverse effect on Borrower or the Property. Borrower represents
that its interest under each Contract, and each General Intangible, is not
subject to any claim, setoff, lien, deduction or encumbrance of any nature,
other than that created by this Mortgage. At any time during the continuance of
an Event of Default, Lender may (but shall not be obligated to) take such action
as Lender may determine to be reasonably necessary to protect the rights of
Borrower under any or all of the Contracts and/or the General Intangibles.
Should Lender, or Lender’s designee, acquire the Property (whether pursuant to
exercise of Lender’s remedies hereunder or by transfer in lieu thereof), Lender
may elect to assume Borrower’s interests under any or all of the Contracts or
General Intangibles as Lender shall determine, and Borrower shall cause to be
terminated, without obligation to Lender or the successor owner of the Property,
such other Contracts and/or General Intangibles as Lender may direct.
     1.25 Hazardous Waste and Other Substances.
     (a) Borrower hereby represents and warrants to Lender that, as of the date
hereof, except as disclosed in writing to Lender: (i) to Borrower’s knowledge,
obtained in Borrower’s ownership, possession and, to the extent applicable,
occupancy of the Property, except as expressly set forth in the environmental
reports prepared for Lender in connection with the Loan (collectively, the
“Environmental Report”), the Property is not in direct or indirect violation of
any local, state or federal law, rule or regulation pertaining to environmental
regulation, contamination or clean-up (collectively, “Environmental Laws”),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq. and 40 CFR
§302.1 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
§6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.
and 40 CFR § 116.1 et seq.), those relating to lead based paint, and the
Hazardous Materials Transportation Act (49 U.S.C. §1801 et seq.), and the
regulations promulgated pursuant to said laws, all as amended; (ii) to
Borrower’s knowledge, obtained in Borrower’s ownership, possession and, to the
extent applicable, occupancy of the Property, except as expressly set forth in
the Environmental Report, no hazardous, toxic or harmful substances, wastes,
materials, pollutants or contaminants (including, without limitation, asbestos,
lead based paint, polychlorinated biphenyls, petroleum products, flammable
explosives, radioactive materials, infectious substances or raw materials which
include hazardous constituents) or any other substances or materials which are
included under or regulated by Environmental Laws, or any molds, spores or
fungus or other harmful microbial matter (collectively, “Hazardous Substances”)
are located on or have been handled, generated, stored, processed or disposed of
on or released or discharged from the Property (including underground
contamination) except for those substances used, stored or handled by Borrower
or Tenants in the ordinary course of their respective business and in compliance
with all Environmental Laws; (iii) to the best of Borrower’s knowledge, after
due and diligent inquiry, the Property is not subject to any private or
governmental lien or judicial or administrative notice or action relating to
Hazardous Substances; (iv) to Borrower’s knowledge, obtained in Borrower’s
ownership, possession and, to the extent applicable, occupancy of the Property,
except as expressly set forth in the Environmental Report, there are no existing
or closed underground storage tanks or other underground storage receptacles for
Hazardous Substances on the Property; (v) Borrower has received no written
notice of, and to the best of Borrower’s knowledge and belief, there exists no
investigation, action, proceeding or claim by any agency, authority or unit of
government or by any third party which could result in any liability, penalty,
sanction or judgment under any Environmental Laws with respect to any condition,
use or operation of the Property nor does

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Borrower know of any basis for such a claim; and (vi) Borrower has received no
written notice of and, to the best of Borrower’s knowledge and belief, there has
been no claim by any party that any use, operation or condition of the Property
has caused any nuisance or any other liability or adverse condition on any other
property nor does Borrower know of any basis for such a claim.
     (b) Borrower shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances disclosed in the Environmental
Report and used, stored or handled by Borrower and Tenants in the ordinary
course of their respective business and, in each case, in compliance with all
Environmental Laws) and in compliance with all Environmental Laws, shall not
install or use any underground storage tanks, shall expressly prohibit the use,
generation, handling, storage, production, processing and disposal of Hazardous
Substances by all Tenants (except in the ordinary course of a business that is
not a Prohibited Use and in each case in compliance with all Environmental Laws)
and, without limiting the generality of the foregoing, during the term of this
Mortgage, shall not install in the Improvements or permit to be installed in the
Improvements asbestos-containing materials (“ACMs”) or any substance containing
ACMs. Borrower shall, if required under applicable Environmental Laws, maintain
all applicable Material Safety Data Sheets with respect to the Property, and
make same available to Lender or Lender’s consultants upon reasonable notice.
     (c) Borrower shall promptly notify Lender if Borrower shall become aware of
the possible existence of any Hazardous Substances on the Property (except as
disclosed in the Environmental Report, in the ordinary course of a business that
is not a Prohibited Use and in each case in compliance with all Environmental
Laws) or if Borrower shall become aware that the Property is or may be in
violation of any Environmental Laws. Further, immediately upon receipt of the
same, Borrower shall deliver to Lender copies of any and all orders, notices,
permits, applications, reports, and other communications, documents and
instruments received, communicated to or obtained by Borrower pertaining to the
actual, alleged or potential presence or existence of any Hazardous Substances
at, on, about, under, within, near or in connection with the Property. Borrower
shall, promptly and when and as required by Lender, at Borrower’s sole cost and
expense, take all actions as shall be necessary or advisable for the clean-up of
any and all portions of the Property or other affected property which Lender
reasonably determines to be migrating from the Property to such affected
property, in accordance with, and to the extent required by, all applicable
Environmental Laws, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and to
the extent required by all applicable Environmental Laws, and shall further pay
or cause to be paid, at no expense to Lender, all clean-up, administrative and
enforcement costs of applicable governmental agencies which may be asserted
against the Property; in the event Borrower fails to take such actions,
(1) Lender may, but shall not be obligated to, cause the Property or other
affected property to be freed from any Hazardous Substances (except for those
Hazardous Substances disclosed in the Environmental Report, used in the ordinary
course of a business that are not a Prohibited Use and in each case are in
compliance with all Environmental Laws) or otherwise brought into compliance
with Environmental Laws and any and all costs and expenses incurred by Lender in
connection therewith, together with interest thereon at the Default Interest
Rate from the date demand for payment is made by Lender until actually paid by
Borrower, shall be immediately paid by Borrower on demand, and (2) Borrower
hereby grants to Lender and its agents and employees access to the Property and
a license to remove any Hazardous Substances (except for those Hazardous
Substances disclosed in the Environmental Report, used in the ordinary course of
business that are not a Prohibited Use and in each case are in compliance with
all Environmental Laws) and to do all things Lender shall deem necessary to
bring the Property in conformance with Environmental Laws. Borrower covenants
and agrees, at Borrower’s sole cost and expense, to indemnify, defend (at trial
and appellate levels, and with attorneys, consultants and experts acceptable to
Lender), and hold Lender harmless from and against any and all liens, damages,
losses, liabilities, obligations, settlement payments, penalties, assessments,
citations, directives, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or of any

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nature whatsoever (including, without limitation, reasonable attorneys’,
consultants’ and experts’ fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim, litigation or
proceeding) which may at any time be imposed upon, incurred by or asserted or
awarded against Lender or the Property, and arising directly or indirectly from
or out of: (i) the presence, release or threat of release of any Hazardous
Substances on, in, under or affecting all or any portion of the Property
regardless of whether or not caused by or within the control of Borrower;
(ii) the violation of any Environmental Laws relating to or affecting the
Property, whether or not caused by or within the control of Borrower; (iii) the
failure by Borrower to comply fully with the terms and conditions of this
Section 1.25; (iv) the breach of any representation or warranty contained in
this Section 1.25; or (v) the enforcement of this Section 1.25, including,
without limitation, the cost of assessment, containment and/or removal of any
and all Hazardous Substances from all or any portion of the Property the cost of
any actions taken in response to the presence, release or threat of release of
any Hazardous Substances on, in, under or affecting any portion of the Property
or (to the extent such Hazardous Substances were released from, or migrated
from, the Property) any surrounding areas to prevent or minimize such release or
threat of release so that it does not migrate or otherwise cause or threaten
danger to present or future public health, safety, welfare or the environment,
and costs incurred to comply with the Environmental Laws in connection with all
or any portion of the Property or any such surrounding areas. The indemnity set
forth in this Section 1.25(c) shall also include, when realized, any diminution
in the value of the security afforded by the Property or any future reduction in
the sales price of the Property by reason of any matter set forth in this
Section 1.25(c). Lender’s rights under this Section shall survive payment in
full of the Obligations and shall be in addition to all other rights of Lender
under this Mortgage, the Note and the other Loan Documents.
     (d) Upon Lender’s request, at any time after the occurrence of an Event of
Default hereunder and in connection with a potential sale of the Property
pursuant to Lender’s exercise of its rights and remedies under this Mortgage, or
at such other time as Lender has reasonable grounds to believe that Hazardous
Substances (except for those Hazardous Substances disclosed in the Environmental
Report, used in the ordinary course of a business that are not a Prohibited Use
and in each case are in compliance with all Environmental Laws) are or have been
released, stored or disposed of on or around the Property or that the Property
may be in violation of the Environmental Laws (except for items disclosed in the
environmental report delivered to Lender in connection herewith), Borrower shall
provide, at Borrower’s sole cost and expense, an inspection or audit of the
Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Lender to determine the presence or absence
of Hazardous Substances on the Property or an inspection or audit of the
Improvements prepared by an engineering or consulting firm approved by Lender to
determine the presence or absence of friable asbestos or substances containing
asbestos on the Property. If Borrower fails to provide such inspection or audit
within thirty (30) days after such request, Lender may order the same, and
Borrower hereby grants to Lender and its employees and agents access to the
Property and a license to undertake such inspection or audit. The cost of such
inspection or audit shall be immediately due and payable to Lender by Borrower
on demand, together with interest thereon at the Default Interest Rate from the
date demand for payment is made by Lender until actually paid by Borrower.
     (e) The obligations of Borrower under this Mortgage (including, without
limitation, this Section 1.25) with respect to Hazardous Substances shall not in
any way limit the obligations of any party under the Hazardous Substances
Indemnity.
     (f) Borrower covenants and agrees to institute, within thirty (30) days
after the date hereof, an operations and maintenance program (the “ACM O&M
Plan”) designed by an environmental consultant, satisfactory to the Lender, with
respect to “ACM’s”, consistent with “Guidelines for Controlling
Asbestos-Containing Materials in Buildings” (USEPA, 1985) and other relevant
guidelines, and such ACM O&M Plan will hereafter continuously remain in effect
until the Obligations is repaid in

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full. In furtherance of the foregoing, Borrower shall inspect and maintain all
ACM’s on a regular basis and ensure that all ACM’s shall be maintained in a
condition that prevents exposure of tenants or invitees to ACM’s at all times.
Without limiting the generality of the preceding sentence, Lender may reasonably
require (i) periodic notices or reports to Lender in form, substance and at such
intervals as Lender may specify, (ii) an amendment to the ACM O&M Plan to
address changing circumstances, laws or other matters, (iii) at Borrower’s sole
expense, supplemental examination of the Property by consultants specified by
Lender, and (iv) variation of the ACM O&M Plan in response to the reports
provided by any such consultants.
     1.26 Brokerage Fees; Indemnification; Subrogation.
     (a) Borrower shall indemnify, defend and hold Lender harmless against:
(i) any and all claims for brokerage, leasing, finders or similar fees which may
be made relating to the Property or the Obligations, and (ii) any and all
liability, obligations, losses, damages, penalties, claims, actions, suits,
costs and expenses (including Lender’s reasonable attorneys’ fees, together with
reasonable appellate counsel fees, if any) of whatever kind or nature which may
be asserted against, imposed on or incurred by Lender in connection with the
Obligations, this Mortgage, the Property, or any part thereof, or the exercise
by Lender of any rights or remedies granted to it under this Mortgage; provided,
however, that nothing herein shall be construed to obligate Borrower to
indemnify, defend and hold harmless Lender from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs and expenses enacted against, imposed on or incurred by Lender by reason
of Lender’s willful misconduct or gross negligence.
     (b) If Lender is made a party defendant to any litigation or any claim is
threatened or brought against Lender concerning the Obligations, this Mortgage,
the Property, or any part thereof, or any interest therein, or the construction,
maintenance, operation or occupancy or use thereof, then Borrower shall
indemnify, defend and hold Lender harmless from and against all liability by
reason of said litigation or claims, including reasonable attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses incurred
by Lender in any such litigation or claim, whether or not any such litigation or
claim is prosecuted to judgment. If Lender commences an action against Borrower
to enforce any of the terms hereof or to prosecute any breach by Borrower of any
of the terms hereof or of any of the other Loan Documents, or to recover any sum
secured hereby, Borrower shall pay to Lender its reasonable attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses. The
right to such attorneys’ fees (together with reasonable appellate counsel fees,
if any) and expenses shall be deemed to have accrued on the commencement of such
action, and shall be enforceable whether or not such action is prosecuted to
judgment. If Borrower breaches any term of this Mortgage, Lender may engage the
services of an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement following any breach by Borrower, Borrower shall pay
Lender reasonable attorneys’ fees (together with reasonable appellate counsel
fees, if any) and expenses incurred by Lender, whether or not an action is
actually commenced against Borrower by reason of such breach. All references to
“attorneys” in this Subsection and elsewhere in this Mortgage shall include
without limitation any attorney or law firm engaged by Lender and Lender’s
in-house counsel, and all references to “fees and expenses” in this Subsection
and elsewhere in this Mortgage shall include without limitation any reasonable
fees of such attorney or law firm and any reasonable allocation charges and
reasonable allocation costs of Lender’s in-house counsel.
     (c) A waiver of subrogation shall be obtained by Borrower from its
insurance carrier and, consequently, Borrower waives any and all right to claim
or recover against Lender, its officers, employees, agents and representatives,
for loss of or damage to Borrower, the Property, Borrower’s property or the
property of others under Borrower’s control from any cause insured against or
required to be insured against by the provisions of this Mortgage.

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     1.27 Single-Purpose Entity Covenants. Borrower hereby represents, warrants
and covenants, as of the date hereof and until such time as the Obligations are
paid in full, that without, in each case, the prior written consent of Lender
(which may be withheld or conditioned by Lender in its sole and absolute
discretion for any reason or for no reason):
     (a) The sole purpose of Borrower has been, is and will be, to acquire, own,
hold, maintain, and operate the Property, together with such other activities as
may be necessary or advisable in connection with the ownership of the Property.
Borrower has not engaged, and does not and shall not engage, in any business,
and it has and shall have no purpose, unrelated to ownership of the Property.
Borrower has not owned, does not own and shall not acquire, any real property or
own assets other than those related to the Property and/or otherwise in
furtherance of the limited purposes of Borrower.
     (b) Neither Borrower, nor any general partner, manager or managing member
(a “Controlling Entity”) of Borrower, as applicable, shall have the authority to
perform any act in respect of Borrower in violation of any (a) applicable laws
or regulations or (b) any agreement between Borrower and Lender (including,
without limitation, the Loan Documents).
     (c) Borrower shall not:
          (1) make any loans to the holder (directly or indirectly) of any
equity interests in Borrower (collectively, the “Equity Holders”), any Affiliate
(as defined below) of Borrower or of any Equity Holders;
          (2) except as expressly permitted by the Lender in writing, sell,
encumber (except with respect to the Lender) or otherwise transfer or dispose of
all or substantially all of the properties of Borrower (a sale or disposition
will be deemed to be “all or substantially all of the properties of Borrower” if
the sale or disposition includes the Property or if the total value of the
properties sold or disposed of in such transaction and during the twelve months
preceding such transaction is sixty six and two thirds percent (66-2/3%) or more
in value of Borrower’s total assets as of the end of the most recently completed
fiscal year of Borrower);
          (3) to the fullest extent permitted by law, dissolve, wind-up, or
liquidate Borrower;
          (4) merge, consolidate or acquire all or substantially all of the
assets of an Affiliate of same or other person or entity;
          (5) change the nature of the business conducted by Borrower; or
          (6) except as permitted by the Lender in writing, amend, modify or
otherwise change the Organizational Documents (as defined below) of Borrower
(which approval, after a Secondary Market Transaction with respect to the Loan,
may be conditioned upon Lender’s receipt of confirmation from each of the
applicable Rating Agencies that such amendment, modification or change would not
result in the qualification, withdrawal or downgrade of any securities rating).
     (d) Borrower shall not, and no Equity Holder or other person or entity on
behalf of Borrower shall, without the prior written affirmative vote of one
hundred percent (100%) of the members, partners or stockholders of Borrower:
(1) institute proceedings to be adjudicated bankrupt or insolvent; (2) consent
to the institution of bankruptcy or insolvency proceedings against it; (3) file
a petition seeking, or consenting to, reorganization or relief under any
applicable federal or state law relating to bankruptcy (but the foregoing clause
(2) shall not apply to Persons that own shares in a Publicly Traded

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Corporation); (4) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of Borrower or a
substantial part of its property; (5) make any assignment for the benefit of
creditors; (6) admit in writing its inability to pay its debts generally as they
become due or declare or effect a moratorium on its debts; or (7) take any
action in furtherance of any such action ((1) through (7) above, with respect to
any individual or entity, collectively, a “Bankruptcy Action”).
     (e) Borrower shall have no indebtedness or incur any liability other than
(1) unsecured debts and liabilities for trade payables and accrued expenses
incurred in the ordinary course of its business of operating the Property,
provided, however, that such unsecured indebtedness or liabilities (y) are in
amounts that are normal and reasonable under the circumstances, but in no event
to exceed three percent (3%) of the original principal amount of the Loan and
(z) are not evidenced by a note and are paid when due, but in no event for more
than sixty (60) days from the date that such indebtedness or liabilities are
incurred and (2) the Obligations. No indebtedness other than the Loan shall be
secured (senior, subordinated or pari passu) by the Property.
     (f) The following provisions shall apply only when Borrower is a limited
liability company or a partnership. A Bankruptcy Action by or against any
partner or member of Borrower, as applicable, shall not cause such partner or
member of Borrower, as applicable, to cease to be a partner or member of
Borrower and upon the occurrence of a Bankruptcy Action, Borrower shall continue
without dissolution. Additionally, to the fullest extent permitted by law, if
any partner or member of Borrower, as applicable, ceases to be a partner or
member of Borrower, as applicable, such event shall not terminate Borrower and
Borrower shall continue without dissolution.
     (g) Borrower shall at all times observe the applicable legal requirements
for the recognition of Borrower as a legal entity separate from any Equity
Holders or Affiliates of Borrower or of any Equity Holder, including, without
limitation, as follows:
          (1) Borrower shall either (a) maintain its principal executive office
and telephone and facsimile numbers separate from that of any Affiliate of
Borrower or of any Equity Holder and shall conspicuously identify such office
and numbers as its own, or (b) shall allocate by written agreement fairly and
reasonably any rent, overhead and expenses for shared office space.
Additionally, Borrower shall use its own separate stationery, invoices and
checks which reflects its name, address, telephone number and facsimile number.
          (2) Borrower shall maintain correct and complete financial statements,
accounts, books and records and other entity documents separate from those of
any Affiliate of Borrower or of any Equity Holder or any other person or entity
(except that Borrower Parties may have one bank account). Borrower shall prepare
unaudited quarterly and annual financial statements, and Borrower’s financial
statements shall substantially comply with generally accepted accounting
principles.
          (3) Borrower shall maintain its own separate bank accounts (except
that Borrower Parties may have one bank account), payroll and correct, complete
and separate books of account.
          (4) Borrower shall file or cause to be filed its own separate tax
returns, or may be consolidated with the tax returns of the Indemnitor, as the
case may be.
          (5) Borrower shall hold itself out to the public (including any of its
Affiliates’ creditors) under Borrower’s own name and as a separate and distinct
entity and not as a department, division or otherwise of any Affiliate of
Borrower or of any Equity Holder.

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          (6) Borrower shall observe all customary formalities regarding the
existence of Borrower, including holding meetings and maintaining current and
accurate minute books separate from those of any Affiliate of Borrower or of any
Equity Holder.
          (7) Borrower shall hold title to its assets in its own name and act
solely in its own name and through its own duly authorized officers and agents.
No Affiliate of Borrower or of any Equity Holder other than Gladstone Limited
Partnership shall be appointed or act as agent of Borrower, other than as a
property manager or leasing agent with respect to the Property.
          (8) Investments shall be made in the name of Borrower directly by
Borrower or on its behalf by brokers engaged and paid by Borrower.
          (9) Except as required by Lender, Borrower shall not guarantee, pledge
or assume or hold itself out or permit itself to be held out as having
guaranteed, pledged or assumed any liabilities or obligations of any Equity
Holder or any Affiliate of Borrower, nor shall it make any loan, except as
permitted in the Loan Documents.
          (10) Reserved.
          (11) Assets of Borrower shall be separately identified, maintained and
segregated. Borrower’s assets shall at all times be held by or on behalf of
Borrower and if held on behalf of Borrower by another entity, shall at all times
be kept identifiable (in accordance with customary usages) as assets owned by
Borrower. This restriction requires, among other things, that (i) funds of
Borrower shall be deposited or invested in Borrower’s name (except that Borrower
Parties may have one bank account), (ii) funds of Borrower shall not be
commingled with the funds of any Affiliate of Borrower or of any Equity Holder,
(iii) the Borrower Parties shall maintain all accounts in their collective name
and with the same tax identification number, separate from those of any
Affiliate of Borrower or of any Equity Holder, and (iv) funds of Borrower shall
be used only for the business of Borrower.
          (12) Borrower shall maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify its individual
assets from those of any Affiliate of Borrower or of any Equity Holder.
          (13) Borrower shall pay or cause to be paid its own liabilities and
expenses of any kind, including but not limited to salaries of its employees,
only out of its own separate funds and assets, except as required by the Loan
Documents.
          (14) Borrower is adequately capitalized as of the date hereof to
engage in the transactions contemplated at the closing of the Loan.
          (15) Borrower shall not do any act which would make it impossible to
carry on the ordinary business of Borrower.
          (16) All data and records (including computer records) used by
Borrower or any Affiliate of Borrower in the collection and administration of
any loan shall reflect Borrower’s ownership interest therein.
          (17) No funds of Borrower shall be invested in securities issued by,
nor shall Borrower acquire the indebtedness or obligation of, an Affiliate of
Borrower or of an Equity Holder.

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          (18) Borrower shall maintain an arm’s length relationship with each of
its Affiliates and may enter into contracts or transact business with its
Affiliates only on commercially reasonable terms that are no less favorable to
Borrower than is obtainable in the market from a person or entity that is not an
Affiliate of Borrower or of any Equity Holder.
          (19) Borrower shall correct any misunderstanding that is known by
Borrower regarding its name or separate identity.
     (h) Any indemnification obligation of Borrower to the holder of any equity
interest in Borrower shall (1) be fully subordinated to the Loan and (2) not
constitute a claim against Borrower or its assets until such time as the Loan
has been indefeasibly paid in accordance with its terms and otherwise has been
fully discharged (or has been defeased in accordance with the Note).
     (i) The following shall only apply if and when Borrower is a limited
partnership. Each general partner of Borrower may not be an individual. Each
general partner of Borrower shall at all times have as its sole purpose to act
as the general partner of Borrower, and shall be engaged in no other business or
have any other purpose. Additionally, any additional or substitute general
partner of Borrower shall have organizational documents that (1) include
covenants substantially similar to the foregoing provisions of this
Section 1.27, inclusive of all single purpose/bankruptcy remote provisions, and
(2) are acceptable to the Lender.
     (j) Borrower shall cause the Organizational Documents of Borrower to
include, at all times, requirements substantially similar to the foregoing, in a
manner reasonably satisfactory to Lender. At any time when Borrower is a limited
partnership, the Organizational Documents of the general partner shall include
provisions substantially similar to those set forth in Section 1.27(i) above.
     (k) As used in this Mortgage:
          (i) “Affiliate” means any person or entity which directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with a specified person or entity. For purposes of the
definition of “Affiliate”, the terms “control”, “controlled”, or “controlling”
with respect to a specified person or entity shall include, without limitation,
(i) the ownership, control or power to vote ten percent (10%) or more of (x) the
outstanding shares of any class of voting securities or (y) beneficial
interests, of any such person or entity, as the case may be, directly or
indirectly, or acting through one or more persons or entities, (ii) the control
in any manner over the general partner(s) or the election of more than one
director or trustee (or persons exercising similar functions) of such person or
entity, or (iii) the power to exercise, directly or indirectly, control over the
management or policies of such person or entity.
          (ii) “Constituent Entity” shall mean, with respect to any entity,
(i) with respect to any limited partnership, (x) any general partner of such
limited partnership and (y) any limited partner of such partnership which owns
(or is owned by any person or entity owning, holding or controlling, directly or
indirectly) the right to receive 50% or more of the income, distributable funds
or losses of such partnership; (ii) with respect to any general partnership or
joint venture, any partner or venturer in such general partnership or joint
venturer; (iii) with respect to any corporation, any person or entity which owns
or controls 50% or more of any class of stock of such corporation; (iv) with
respect to any limited liability company, (x) any manager of such limited
liability company, (y) any managing member of such limited liability company, or
the sole member of any limited liability company having only one (1) member, and
(z) any non-managing member of such limited liability company which owns (or is
owned by any person or entity owning, holding or controlling, directly or
indirectly) the right to receive 50% or more of the income, distributable funds
or losses of such limited liability company; (v)

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any person or entity which controls any entity described in any of clauses
(i) through (iv) of this definition (except any officers or directors of
Gladstone Commercial Corporation so long as no such officers or directors own or
control 50% or more of any class of stock of such corporation); and (vi) any
entity which is a “Constituent Entity” with respect to an entity which is a
“Constituent Entity” of the subject entity. For all purposes of this Mortgage
unless expressly noted, “control” and “controlled by” shall have the meanings
assigned to them in Rule 405 under the Securities Act of 1933, as amended. For
the purposes of clause (vi) of the definition of Constituent Entity, if entity
“B” is a Constituent Entity of entity “A”, then any Constituent Entity of “B”
shall be deemed to be a Constituent Entity of any entity of which “A” is a
Constituent Entity.
          (iii) “Organizational Documents” shall mean, with respect to any
entity, the documents customarily used to form an entity and provide for its
governance, as the same may be amended from time to time, including, without
limitation, (a) with respect to a corporation, the articles of incorporation or
certificate of incorporation or charter, and the by-laws; (b) with respect to a
limited liability company, the articles of organization and the operating
agreement; (c) with respect to a limited partnership, the certificate of limited
partnership and the limited partnership agreement; and (d) with respect to a
general partnership, the agreement of partnership.
     (l) In the event Borrower is a single-member Delaware limited liability
company, the limited liability company agreement of Borrower (the “LLC
Agreement”) shall provide that (i) upon the occurrence of any event that causes
the sole member of Borrower (“Member”) to cease to be the member of Borrower
(other than (A) upon an assignment by Member of all of its limited liability
company interest in Borrower and the admission of the transferee, or (B) the
resignation of Member and the admission of an additional member, in either case
in accordance with the terms of the Loan Documents and the LLC Agreement), the
person executing the LLC Agreement as a “Special Member Designee” (as such term
is defined in the LLC Agreement) (“Special Member”) shall, without any action of
any other Person and simultaneously with the Member ceasing to be the member of
Borrower, automatically be admitted to Borrower as a special member and shall
continue Borrower without dissolution and (ii) such Special Member may not
resign from Borrower or transfer its rights as Special Member unless a successor
Special Member has been admitted to Borrower as Special Member in accordance
with requirements of Delaware law. The LLC Agreement shall further provide that
(i) Special Member shall automatically cease to be a member of Borrower upon the
admission to Borrower of a substitute Member, (ii) Special Member shall be a
member of Borrower that has no interest in the profits, losses and capital of
Borrower and has no right to receive any distributions of Borrower assets,
(iii) pursuant to Section 18-301 of the Delaware Limited Liability Company Act
(the “Act”), Special Member shall not be required to make any capital
contributions to Borrower and shall not receive a limited liability company
interest in Borrower, (iv) Special Member, in its capacity as Special Member,
may not bind Borrower, and (v) except as required by any mandatory provision of
the Act, Special Member, in its capacity as Special Member, shall have no right
to vote on, approve or otherwise consent to any action by, or matter relating
to, Borrower, including, without limitation, the merger, consolidation or
conversion of Borrower.
     1.28 Reserve Accounts and Disbursement Requests. At Lender’s option, as
additional security for the indebtedness secured hereby, Borrower shall
establish and maintain the reserve accounts required by this Section 1.28,
subject to the security interest therein as more fully set forth in Section 1.19
hereof.
     (a) Replacement Reserve. Borrower agrees that it will perform, or cause to
be performed, all repairs and replacements necessary to maintain the Property in
good working order, in accordance with its condition as of the date hereof.
Simultaneously herewith, and on each Payment Date until the Note is paid in
full, Borrower shall pay to Lender the sum of $950.84 to be held in a reserve
fund

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(the “Replacement Reserve”) subject to this Mortgage and the Other Mortgages,
for payment of certain repairs and replacements at the Property which, under
generally accepted accounting principles, are categorized as capital expenses
and not as operating expenses (the “Repairs”). Notwithstanding the foregoing,
Borrower shall not be required to make a deposit into the Replacement Reserve to
the extent that any such deposit would increase the amount in the Replacement
Reserve (after deducting any pending disbursement requests therefrom) above
$62,100.00. Borrower shall perform, or cause Principal Tenant to perform, all
Repairs in a good and workmanlike manner, in accordance with all applicable
codes and regulations, and each case in a manner satisfactory to Lender and as
necessary to maintain the Property in good condition and in compliance with all
applicable laws, ordinances, rules and regulations. So long as no Default shall
exist and be continuing, Lender shall, to the extent funds are available for
such purpose in the Replacement Reserve, disburse to Borrower the amount paid or
incurred by Borrower in performing the Repairs as required above upon
satisfaction of the requirements set forth in Section 1.29 of this Mortgage.
Lender may, at Borrower’s expense, make or cause to be made an inspection of the
Property to determine the need, as determined by Lender in its reasonable
judgment, for further Repairs of the Property. In the event that such inspection
reveals that further Repairs are required, Lender shall provide Borrower with a
written description of the required Repairs, and Borrower shall complete, or
cause Principal Tenant to complete, such Repairs to Lender’s reasonable
satisfaction within ninety (90) days after Lender’s notice, or such later date
as may be approved by Lender in its discretion.
     (b) Telex Excess Cash Flow Reserve. In the event Borrower has not delivered
a Satisfactory Letter of Credit (as that term is defined in Section 5.31 hereof)
to Lender on or before November 30, 2013, then commencing on December 1, 2013
(the “Telex Sweep Period”), all Excess Cash Flow (as defined below) shall be
deposited (the “Excess Cash Flow Sweep”) into a reserve account (the “Telex
Excess Cash Flow Reserve”) to be held by Lender as additional collateral for the
Loan, and for payment of Leasing Costs. Borrower shall be required to continue
to make such deposits of Excess Cash Flow into the Telex Excess Cash Flow
Reserve each month until the satisfaction of the Telex Tenant Conditions (as
defined in that certain Cash Management Agreement of even date herewith between
the Borrower Parties and Lender (the “CMA”)) or until the date that the sum in
the Telex Excess Cash Flow Reserve is equal to $980,000.00. Upon the
satisfaction of the Telex Tenant Conditions, provided no Default exists, Lender
shall disburse funds in the Telex Excess Cash Flow Reserve for payment of
Leasing Costs incurred by Borrower in connection with Borrower’s leasing of
space at the Property, subject to and in accordance with Section 1.29 below.
Lender may use funds in the Telex Excess Cash Flow Reserve to pay for Leasing
Costs in connection with re-leasing the Property to a Telex Replacement Tenant
pursuant to a lease approved by Lender in accordance with this Mortgage
(“Approved Leasing Costs”). In the event Borrower has delivered a Satisfactory
Letter of Credit to Lender, and Borrower has failed to pay the Leasing Costs for
any Lease of space at the Property, then Lender may and is hereby authorized to
draw upon the Letter of Credit, by sight draft on the Issuing Bank (as those
terms are defined in Section 5.31 hereof), and deposit the cash proceeds thereof
into the Telex Excess Cash Flow Reserve and to disburse funds in the Telex
Excess Cash Flow Reserve for payment of Leasing Costs incurred by Borrower in
connection with Borrower’s leasing of space at the Property, subject to and in
accordance with Section 1.29 below. As used herein, the term “Excess Cash Flow”
shall mean all cash flow generated by the Property and Properties after
deducting the payments identified in Section 2(d)(ii)(a-e) of the CMA. Defined
terms used herein and not defined shall have the meanings ascribed to them in
the CMA.
     (c) [RESERVED]
     (d) Early Termination of Leases. If any Tenant (a “Terminating Tenant”)
gives notice to Borrower that it is exercising an early termination option set
forth in its Lease with Borrower, Borrower shall direct such Tenant to deliver
the payment required pursuant to its Lease in connection with the exercise of
the early termination option (the “Early Termination Payment”) to be remitted to

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Lender. Borrower agrees, furthermore, that if such Tenant remits the Early
Termination Payment directly to Borrower, Borrower shall remit the Early
Termination Payment to Lender. Any Early Termination Payment shall be deposited
in a segregated sub-account of the Leasing Reserve (the “Early Termination
Reserve”) to be held as additional security for the Obligations; a separate
Early Termination Reserve shall be maintained with respect to each Lease so
terminated. So long as no Default shall exist and be continuing, Lender shall,
to the extent that funds are available for such purpose in the Early Termination
Reserve, disburse to Borrower funds then on deposit in the Early Termination
Reserve as follows:
          (i) If Borrower enters into a Lease for the entire premises previously
demised under the Lease so terminated (the “Vacated Space”) with a Tenant
reasonably acceptable to Lender and such Lease satisfies all applicable
requirements of Section 1.10 hereof, and the Tenant under such Lease accepts
such demised premises, takes occupancy thereof and commences the payment of base
rent under its Lease (any such Lease, a “Qualified Replacement Lease”), then all
funds in the Early Termination Reserve shall be used first to pay Leasing Costs
with respect to such Qualified Replacement Lease upon satisfaction of the
conditions set forth in Section 1.29 hereof; any funds remaining in the Early
Termination Reserve after payment of all Leasing Costs with respect thereto
shall be disbursed to Borrower as follows: (x) if the monthly net rent payable
under the Qualified Replacement Lease is greater than or equal to the monthly
rent payable by the Terminating Tenant under its Lease as of the date of such
termination, then provided no Default is then continuing, such funds remaining
in the Early Termination Reserve shall be disbursed to Borrower; and (y) if the
monthly net rent payable under the Qualified Replacement Lease is less than the
monthly rent payable by the Terminating Tenant under its Lease as of the date of
such termination, then provided no Default is then continuing all funds
remaining in the Early Termination Reserve shall be disbursed to Borrower in
equal monthly installments over the remaining term of the Qualified Replacement
Lease, until such time as all funds have been disbursed from the Early
Termination Reserve.
          (ii) If Borrower enters into one or more Leases each for less than the
entire Vacated Space, no disbursements shall be permitted from the Early
Termination Reserve except as follows:
          (i) until such time as the entire Vacated Space has been re-leased
pursuant to one or more Qualified Replacement Leases, and the Tenant under each
such Qualified Replacement Lease accepts such demised premises, takes occupancy
thereof and commences the payment of base rent under its Lease, Lender shall
from time to time make disbursements on account of Leasing Costs with respect to
the Vacated Space, provided, however, that the disbursements with respect to any
portion of the Vacated Space on a per-square foot basis shall not exceed the
amount of the Early Termination Payment on a per-square-foot basis; and
          (ii) at such time as the entire Vacated Space has been re-leased
pursuant to one or more Qualified Replacement Leases and the Tenant under each
such Qualified Replacement Lease accepts such demised premises, takes occupancy
thereof and commences the payment of base rent under its Lease, then after
payment of all Leasing Costs with respect to the re-leasing of such Vacated
Space, the funds remaining in the Early Termination Reserve shall be disbursed
as follows: (i) first, to the extent that any disbursements were made from the
Leasing Reserve with respect to such Vacated Space, an amount equal to the sum
of all such disbursements will be transferred to the Leasing Reserve
(notwithstanding any limit to the required deposits thereto); (ii) next, any
funds remaining in the Early Termination Reserve shall be disbursed to Borrower
as follows: (x) if the monthly aggregate net rents payable under all such
Qualified Replacement Leases is greater than or equal to the monthly rent
payable by the

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Terminating Tenant, and the term of all such Qualified Replacement Leases
extends to or beyond the scheduled expiration date of the Lease with the
Terminating Tenant, then provided no Default is then continuing such funds
remaining in the Early Termination Reserve shall be disbursed to Borrower; and
(y) if the conditions of clause (x) are not satisfied, then provided no Default
is then continuing such funds remaining in the Early Termination Reserve shall
be disbursed to Borrower in equal monthly installments over the period that
would have been remaining in the term of the Lease with the Terminating Tenant.
Leasing Costs with respect to any Qualified Replacement Lease shall be disbursed
first out of the related Early Termination Reserve, if applicable, prior to
using any funds in the Leasing Reserve with respect thereto.
     (e) Payment Reserve. Contemporaneously with the execution hereof, Borrower
has established with Lender a temporary reserve in the amount equal to one
(1) regular monthly installment of principal, interest and all required
reserves, deposits or impounds under the Loan Documents (the “Payment Reserve”).
Borrower understands and agrees that, notwithstanding the establishment of the
Payment Reserve as herein required, all of the proceeds of the Note have been,
and shall be considered, fully disbursed and shall bear interest and be payable
on the terms provided therein. So long as no Default has occurred hereunder,
Lender shall on the first Payment Date under the Note, advance from the Payment
Reserve to itself the amount due and payable by Borrower under the Note on such
Payment Date and shall also advance from the Payment Reserve into the Impound
Account the amount of any deposit for Taxes and Other Charges and Insurance
Premiums and into each other Reserve the amount of any deposit required to be
paid for such purpose by Borrower on such Payment Date pursuant to the terms
hereof. Borrower shall not be obligated to make any further deposits into the
Payment Reserve after the disbursement of the funds held therein as aforesaid,
and the Payment Reserve shall terminate upon such disbursement. No interest on
funds contained in the Payment Reserve shall be paid by Lender to Borrower.
Nothing contained herein, including, without limitation, the existence of the
Payment Reserve, shall release Borrower of any obligation to make payments under
the Note, this Mortgage or the other Loan Documents strictly in accordance with
the terms hereof or thereof and, in this regard, without limiting the generality
of the foregoing, should the amounts contained in the Payment Reserve not be
sufficient to pay in full the amount due under the Note and the Impound Account
and other Reserve deposits referenced above in this subparagraph on such Payment
Date, Borrower shall be responsible for paying such deficiency on the due date
of any such payments.
     1.29 Disbursements from the Property Reserve Accounts. So long as no Event
of Default shall have occurred and be continuing under this Mortgage, all sums
in each of the Telex Excess Cash Flow Reserve and the Replacement Reserve (the
foregoing, collectively, the “Property Reserve Accounts”) shall be held by
Lender in the respective Property Reserve Account as set forth above for the
purposes set forth in Section 1.28. So long as no Default has occurred and is
continuing, Lender shall disburse to Borrower, from the appropriate Property
Reserve Account for the purposes set forth in Section 1.28, an amount equal to
the actual expenses incurred to date by Borrower, less any prior disbursements
to Borrower from any of the Property Reserve Account for such expenditure, but
only to the extent that such expense is one for which, pursuant to Section 1.28,
the proceeds of a Property Reserve Account may be disbursed. Disbursements shall
be made to Borrower within ten (10) days following Lender’s receipt of each of
the following:
     (a) a written request from Borrower for such disbursement, accompanied by a
certification by Borrower, in the form therefor then utilized by Lender or
Lender’s servicing agent;

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     (b) copies of invoices, receipts or other evidence satisfactory to Lender
verifying the cost and expenses actually incurred by Borrower or the payment of
the costs and expenses for which Borrower is requesting such disbursement;
     (c) for disbursement requests in connection with a single project, or group
of related projects, for which Borrower is seeking reimbursement of $20,000 or
more, affidavits, lien waivers or other evidence reasonably satisfactory to
Lender showing that all materialmen, laborers, contractors, suppliers and other
parties who have or might claim statutory or common law liens, or who have
furnished labor, materials or supplies to or in connection with the Property,
have been paid all amounts due;
     (d) for disbursement requests in connection with a single project, or group
of related projects, for which Borrower is seeking reimbursement of $40,000 or
more, excluding, however, Leasing Commissions, a certification from an
inspecting architect or other third party reasonably acceptable to Lender,
verifying that the any work for which Borrower is requesting a disbursement has
been properly completed and that the cost of such work bears a reasonable
relationship to the costs incurred therefor;
     (e) a copy of the certificate of occupancy for the Improvements if, as a
result of any work undertaken by Borrower, it was necessary to receive an
amendment to the existing certificate of occupancy (or similar instrument)
issued with respect to the Improvements, or to obtain a new certificate of
occupancy for the Improvements, or a certification of Borrower that no such
amended or new certificate of occupancy is required; and
     (f) payment of an administrative fee of $150.00 per request.
Lender shall not be required to make an advance from each Property Reserve
Account more frequently than once in any thirty (30) day period. In making any
disbursement from a Property Reserve Account, Lender shall be entitled to rely
on the disbursement request from Borrower without any inquiry into the accuracy,
validity or contestability of any amount set forth therein. All costs and
expenses required to be incurred in connection with the review and approval of
each request for a disbursement from a Property Reserve Account shall be paid by
Borrower not later than concurrently with such disbursement. The Reserves shall
not, unless otherwise explicitly required by applicable law, be or be deemed to
be escrow or trust funds. Lender may, at its discretion, hold the Reserves
either in a separate account or commingled by Lender with any other funds in the
possession or control of Lender. The Reserves are solely for the protection of
Lender, and entail no responsibility on Lender’s part beyond making
disbursements upon strict satisfaction of the requirements of Section 1.28 and
this Section 1.29 and beyond the allowing of due credit for the sums actually
received. In the event that the amounts on deposit in any of the Property
Reserve Account are insufficient to reimburse Borrower for amounts otherwise
properly requested, Lender shall not be obligated or authorized to transfer
funds from other Reserves, and Borrower shall pay the amount of such deficiency.
Upon assignment of this Mortgage by Lender, any funds in the Reserves shall be
turned over to the assignee, and any responsibility of the assignor with respect
thereto shall terminate.
     1.30 Interest-Bearing Reserves. Lender shall cause funds in the Leasing
Reserve and the Replacement Reserve (referred to in this Section 1.30 as the
“Interest-Bearing Reserve”) to be deposited into an interest bearing account of
the type customarily maintained by Lender or its servicing agent for the
investment of similar reserves, which account may not yield the highest interest
rate then available. To the extent that any funds in any of the Reserves are
invested in any investment suitable for the investment of escrows and reserves
established under mortgage loans included in a Secondary Market Transaction in
which some or all of the securities issued thereby are rated “AAA” (or the
equivalent rating) by one or more Rating Agencies, as the standards therefor are
established from time to time (or if Lender reasonably determines that no such
standards exist, such investments as are otherwise acceptable

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to Lender, in the exercise of prudent lending standards), Borrower shall bear
the risk of loss of such investments. Interest payable on such amounts shall be
computed based on the daily outstanding balance in the Interest-Bearing Reserve.
Such interest shall be calculated on a simple, non-compounded interest basis
based solely on contributions made to the Interest-Bearing Reserve by Borrower.
All interest earned on amounts contributed to the Interest-Bearing Reserve shall
be retained by Lender and added to the balance in such Interest-Bearing Reserve
and shall be disbursed for payment of the items for which other funds in such
Interest-Bearing Reserve are to be disbursed. Borrower acknowledges that all
Reserves other than the Interest-Bearing Reserves shall not accrue or bear
interest for the benefit of Borrower, and no interest shall be payable thereon
by Lender.
     1.31 Principal Lease.
     (a) Borrower will comply in all material respects with the terms and
conditions of the Principal Lease, Borrower will not, without the prior consent
of Lender, do or permit anything to be done, the doing of which, or refrain from
doing anything, the omission of which, will impair or tend to impair the
security of the Real Estate under the Principal Lease or will be grounds for
declaring a forfeiture of the Principal Lease.
     (b) Borrower shall enforce in all material respects the Principal Lease and
will not, without the prior written consent of Lender, which consent shall not
be unreasonably withheld, conditioned or delayed as to any matter other than a
surrender or termination of the Principal Lease or the exercise of any option
thereunder, terminate, modify, cancel, change, supplement, alter or amend any of
the Principal Lease, or waive, excuse, condone or in any way release or
discharge its interest under the Principal Lease, or from any of the material
covenants and conditions to be performed or observed by Principal Tenant under
the Principal Lease (Principal Tenant is hereinafter referred to in this
Section 1.31 as the “Tenant”). Any such termination, cancellation, modification,
change, supplement, alteration or amendment of the Principal Lease without the
prior consent of Lender shall be void and of no force and effect.
     (c) Borrower will give Lender prompt (and in all events within five
(5) days) notice of the receipt by Borrower of any notice of default from the
Tenant. Borrower will promptly (and in all events within five (5) days) furnish
to Lender copies of all material information furnished to the Tenant by the
terms of the Principal Lease. Borrower will deliver to Lender an exact copy of
any material notice, communication, plan, specification or other instrument or
document received or given by Borrower in any way relating to or affecting the
Principal Lease which may concern or affect the estate of the Tenant or Borrower
thereunder in or under the Principal Lease or in the real estate respectively
thereby demised.
     (d) Lender shall have the right, but not the obligation, to perform any
obligations of Borrower under the terms of the Principal Lease during the
continuance of a default thereunder, after notice, if applicable, and the
expiration of any applicable grace or cure period, if any. All costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, after such a default shall be treated as an advance
secured by this Mortgage, shall bear interest thereon at the Default Interest
Rate from the date of payment by Lender until paid in full and shall be paid by
Borrower to Lender during the continuance of an Event of Default within five
(5) days after demand. No performance by Lender of any obligations of Borrower
shall constitute a waiver of any default arising by reason of Borrower’s failure
to perform the same. If Lender shall make any payment or perform any act or take
action in accordance with this Section 1.31(d), Lender will notify Borrower of
the making of any such payment, the performance of any such act, or the taking
of any such action. In any such event, subject to the rights of lessees,
sublessees and other occupants under the Principal Lease, Lender and any person
designated by Lender shall have, and are hereby granted, the right to enter upon
the Property at any time and from time to time for the purpose of taking any
such action.

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     (e) To the extent permitted by law, the price payable by Borrower or any
other person or entity in the exercise of any right of redemption following
foreclosure of the Property shall include all rents paid and other sums advanced
by Lender, together with interest thereon at the Default Interest Rate as fee
owner and as lessee under the Principal Lease, respectively, on behalf of
Borrower on account of the Property.
     (f) If either Borrower or the Tenant shall deliver to Lender a copy of any
notice of default sent by such person to another party under the Principal
Lease, such notice shall constitute full protection to Lender for any action
taken or omitted to be taken by Lender in reliance thereon after notice, if
applicable, and the expiration of any applicable cure period if any.
     (g) Borrower hereby assigns, transfers and sets over to Lender all of
Borrower’s claims and rights to the payment of damages arising from any
rejection by Tenant of the Principal Lease under the Bankruptcy Code. Borrower
shall notify Lender promptly (and in any event within ten (10) days) of any
claim, suit action or proceeding relating to the rejection of any of the
Principal Lease. Lender is hereby irrevocably appointed as Borrower’s
attorney-in-fact, coupled with an interest, with exclusive power to file and
prosecute, to the exclusion of Borrower, any proofs of claim, complaints,
motions, applications, notices and other documents, in any case in respect of
Tenant under the Bankruptcy Code during the continuance of any Event of Default.
Borrower may make any compromise or settlement in connection with such
proceedings (subject to Lender’s reasonable approval); provided, however, that
Lender shall be authorized and entitled to compromise or settle any such
proceeding if such compromise or settlement is made after the occurrence and
during the continuance of any Event of Default. Borrower shall promptly execute
and deliver to Lender any and all instruments reasonably required in connection
with any such proceeding after request therefor by Lender. Except as set forth
above, Borrower shall not adjust, compromise, settle or enter into any agreement
with respect to such proceedings without the prior written consent of Lender.
     (h) Borrower shall not, without Lender’s prior written consent, elect to
treat any of the Principal Lease as terminated under Section 365(h)(l) of the
Bankruptcy Code. Any such election made without Lender’s prior written consent
shall be void.
     (i) If pursuant to Section 365(h)(2) of the Bankruptcy Code, Borrower seeks
to offset against the rent reserved in the Principal Lease the amount of any
damages caused by the non-performance by the Tenant of any of the Tenant’s
obligations under the Principal Lease after the rejection by the Tenant of the
Principal Lease under the Bankruptcy Code, Borrower shall, prior to effecting
such offset, notify Lender of its intention to do so, setting forth the amounts
proposed to be so offset and the basis therefor. If Lender has failed to object
as aforesaid within ten (10) days after notice from Borrower in accordance with
the first sentence of this subsection (l), Borrower may proceed to effect such
offset in the amounts set forth in Borrower’s notice. Neither Lender’s failure
to object as aforesaid nor any objection or other communication between Lender
and Borrower relating to such offset shall constitute an approval of any such
offset by Lender. Borrower shall indemnify and save Lender harmless from and
against any and all claims, demands, actions, suits, proceedings, damages,
losses, costs and expenses of every nature whatsoever (including, without
limitation, reasonable attorneys’ fees and disbursements) arising from or
relating to any such offset by Borrower against the rent reserved in the
respective Lease.
     (j) If any action, proceeding, motion or notice shall be commenced or filed
in respect of Borrower or, after the occurrence and during the continuance of
any Event of Default, the Property in connection with any case under the
Bankruptcy Code, Lender shall have the option, to the exclusion of Borrower,
exercisable upon notice from Lender to Borrower, to conduct and control any such
litigation with counsel of Lender’s choice. Lender may proceed in its own name
or in the name of Borrower in connection with any such litigation, and Borrower
agrees to execute any and all powers,

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authorizations, consents and other documents required by Lender in connection
therewith. Borrower shall pay to Lender all costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements) paid or
incurred by Lender in connection with the prosecution or conduct of any such
proceedings within five (5) days after notice from Lender setting forth such
costs and expenses in reasonable detail. Any such costs or expenses not paid by
Borrower as aforesaid shall be secured by the lien of this Mortgage, shall be
added to the principal amount of the Debt and shall bear interest at the Default
Interest Rate. Borrower shall not commence any action, suit, proceeding or case,
or file any application or make any motion, in respect of the Principal Lease in
any such case under the Bankruptcy Code without the prior written consent of
Lender.
     (k) Borrower shall immediately, after obtaining knowledge thereof, notify
Lender of any filing by or against the Tenant of a petition under the Bankruptcy
Code. Borrower shall thereafter forthwith give written notice of such filing to
Lender, setting forth any information available to Borrower as to the date of
such filing, the court in which such petition was filed, and the relief sought
therein. Borrower shall promptly deliver to Lender following receipt any and all
notices, summonses, pleadings, applications and other documents received by
Borrower in connection with any such petition and any proceedings relating
thereto.
     (l) Borrower hereby covenants and agrees to send to Lender copies of all
material notices under the Principal Lease hereafter given or received by such
person in connection therewith to Lender in accordance with Section 5.5 hereof.
     (m) Effective upon the entry of an order for relief in respect of Borrower
under the Bankruptcy Code, Borrower hereby assigns and transfers to Lender a
non-exclusive right to apply to the Bankruptcy Court under Section 365(d)(4) of
the Bankruptcy Code for an order extending the period during which the Principal
Lease may be rejected or assumed.
ARTICLE II
EVENTS OF DEFAULT
     2.1 Events of Default. The occurrence of any of the following shall be an
“Event of Default” hereunder:
     (a) Borrower or Borrower Parties fail to punctually perform any covenant,
agreement, obligation, term or condition of the Note, this Mortgage or any other
Loan Document which requires payment of any money to Lender, and (1) in the case
of any Monthly Payment Amount due under the Note or any payment to any Reserve
required under this Mortgage, such failure continues beyond the applicable grace
period set forth in the Note with respect to the Monthly Payment Amount, (2) in
the case of any other amount due from Borrower to Lender, such failure continues
for the applicable period set forth therein or, if no period is set forth, for
seven (7) days after such payment becomes due or, if due on demand, is demanded.
     (b) Borrower (i) fails to provide insurance as required by Section 1.4
hereof or (ii) fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 1.5 hereof (except to the extent that such lapse
is due solely to a failure by Lender to pay the insurance premiums after so
requested by Borrower and sufficient funds are available therefore at such time
in the Impound Account) or (iii) fails to comply with Section 1.31 hereof.
     (c) Borrower fails to perform any other covenant, agreement, obligation,
term or condition set forth herein other than those otherwise described in this
Section 2.1 and, to the extent such

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failure or default is susceptible of being cured, the continuance of such
failure or default for thirty (30) days after written notice thereof from Lender
to Borrower; provided, however, that if such default is susceptible of cure but
such cure cannot be accomplished with reasonable diligence within said period of
time, and if Borrower commences to cure such default promptly after receipt of
notice thereof from Lender, and thereafter prosecutes the curing of such default
with reasonable diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable diligence, but
not to exceed an additional sixty (60) days.
     (d) Any representation or warranty made herein, in or in connection with
the Loan Application or any commitment relating to the Loan (not correctly
stated in the Loan Documents), or in any of the other Loan Documents to Lender,
by Borrower, by any Indemnitor or by any Constituent Entity of Borrower or any
Indemnitor, is determined by Lender to have been false or misleading in any
material respect at the time made.
     (e) A Transfer, except as expressly permitted by Section 1.11 hereof.
     (f) A default occurs under any of the other Loan Documents which has not
been cured within any applicable grace or cure period therein provided.
     (g) Borrower, any Indemnitor, the sole member of Borrower or the Tenant, or
any guarantor of the Principal Lease becomes insolvent, or shall make a transfer
in fraud of creditors, or shall make an assignment for the benefit of creditors,
shall file a petition in bankruptcy, shall voluntarily be adjudicated insolvent
or bankrupt or shall admit in writing the inability to pay debts as they mature,
shall petition or apply to any tribunal for or shall consent to or shall not
contest the appointment of a receiver, trustee, custodian or similar officer for
Borrower, any Indemnitor or the sole member of Borrower, Principal Tenant and
any guarantor of the Principal Lease, or for a substantial part of the assets of
Borrower, the sole member of Borrower, or the Principal Tenant and any guarantor
thereunder, Principal Lease or Borrower, any such Indemnitor the sole member of
Borrower, or the Tenant under the Principal Lease or any guarantor thereunder,
or shall commence any case, proceeding or other action under any bankruptcy,
reorganization, arrangement, readjustment or debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect.
Notwithstanding the foregoing to the contrary, Lender shall not deem the filing
of a petition in bankruptcy by the Principal Tenant or any guarantor under the
Principal Lease to be an Event of Default provided (i) all excess cash flow is
deposited into the Excess Cash Flow Reserve (as that term is defined in
Section 1.28 herein) until the petition for bankruptcy against the Principal
Tenant or any guarantor under the Principal Lease is dismissed, or the
reorganization plan proposed by the Principal Tenant or any guarantor under the
Principal Lease is confirmed by the bankruptcy court and (ii) the Principal
Tenant or any guarantor under the Principal Lease assumes the Principal Lease
under the Bankruptcy Code and resumes making monthly payments of rent under the
Principal Lease.
     (h) A petition is filed or any case, proceeding or other action is
commenced against Borrower, against any Indemnitor or against the sole member of
Borrower, or the Principal Tenant or any guarantor under the Principal Lease
seeking to have an order for relief entered against it as debtor or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts or other relief under any law relating to bankruptcy,
insolvency, arrangement, reorganization, receivership or other debtor relief
under any law or statute of any jurisdiction whether now or hereafter in effect
or a court of competent jurisdiction enters an order for relief against
Borrower, against any Indemnitor, against the sole member of Borrower, or
against the Principal Tenant or any guarantor under the Principal Lease, as
debtor, or an order, judgment or decree is entered appointing, with or without
the consent of Borrower, of any Indemnitor, of the sole member of Borrower, a
receiver, trustee, custodian or similar officer for Borrower, for any such
Indemnitor or the sole member of Borrower, for the Principal Tenant or any

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guarantor under the Principal Lease, or for any substantial part of any of the
properties of Borrower, any such Indemnitor, the sole member of Borrower, or the
Principal Tenant or any guarantor thereunder, and if any such event shall occur,
such petition, case, proceeding, action, order, judgment or decree shall not be
dismissed within sixty (60) days after being commenced. Notwithstanding the
foregoing to the contrary, Lender shall not deem the filing of a petition for
bankruptcy against the Principal Tenant or any guarantor under the Principal
Lease to be an Event of Default provided (i) all excess cash flow is deposited
into the Excess Cash Flow Reserve (as that term is defined in Section 1.28
herein) until the petition for bankruptcy against the Principal Tenant or any
guarantor under the Principal Lease is dismissed, or the reorganization plan
proposed by the Principal Tenant or any guarantor under the Principal Lease is
confirmed by the bankruptcy court and (ii) the Principal Tenant or any guarantor
under the Principal Lease assumes the Principal Lease under the Bankruptcy Code
and resumes making monthly payments of rent under the Principal Lease.
     (i) The Property or any part thereof shall be taken on execution or other
process of law (other than by eminent domain) in any action against Borrower.
     (j) Borrower abandons all or a portion (other than a de minimis portion) of
the Property less and except personalty in the ordinary course of business.
     (k) The holder of any lien or security interest on the Property (without
implying the consent of Lender to the existence or creation of any such lien or
security interest), whether superior or subordinate to this Mortgage or any of
the other Loan Documents, declares a default and such default is not cured
within any applicable grace or cure period set forth in the applicable document
or such holder institutes foreclosure or other proceedings for the enforcement
of its remedies thereunder.
     (l) The Property, or any part thereof, is subjected to actual physical
waste or to removal, demolition or material alteration so that the value of the
Property is materially diminished thereby.
     (m) Any dissolution, termination, partial or complete liquidation, merger
or consolidation of Borrower, any Indemnitor or the sole member of Borrower or
any Indemnitor, without the prior written consent of Lender.
     (n) If any Lease, sublease or sub-sublease shall be terminated, modified or
amended without the prior written consent of Lender, in violation of any of the
Loan Documents.
     (o) Borrower attempts to supplement, modify, terminate or exercise any
purchase option, if any, under the Principal Lease without the prior written
consent of Lender, or if any of the interests or estates under the Principal
Lease shall be surrendered by a party thereto or the Principal Lease shall be
terminated or cancelled for any reason or under any circumstances whatsoever, or
any of the terms, covenants or conditions of the Principal Lease shall in any
manner be modified, changed, supplemented, altered or amended without the
consent of Lender, in violation of any of the Loan Documents. Notwithstanding
the foregoing to the contrary, Lender shall not deem the termination or
cancellation of the Principal Lease to be an Event of Default provided Borrower
continues to make monthly payments of rent due under the Principal Lease to
Lender, with the balance of any such funds, if any, being deposited by Lender
into the Excess Cash Flow Reserve (as that term is defined in Section 1.28
herein) until a replacement tenant takes possession and occupancy of
substantially all of the Principal Tenant Space pursuant to a lease approved by
Lender in accordance with the terms of the Security Instrument, which lease
shall contain substantially the same term and base rent as the Principal Lease.

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     (p) A default beyond any applicable grace or cure period by Borrower in the
observance or performance of any term covenant or condition of any of the
Principal Lease.
     (q) There shall occur an Event of Default under (i) that certain Mortgage,
Assignment of Leases and Rents and Security Agreement given by HMBF05
Newburyport MA LLC (an affiliate of Borrower), to Lender dated of even date
herewith and intended to be recorded in Essex County, Massachusetts, or
(ii) that certain Mortgage, Assignment of Leases and Rents and Security
Agreement given by SVMMC05 Toledo OH LLC (an affiliate of Borrower), to Lender
dated of even date herewith and intended to be recorded in Lucas County, Ohio
(collectively, the “Other Mortgages”).
ARTICLE III
REMEDIES
     3.1 Remedies Available. If there shall occur an Event of Default under this
Mortgage, then the Property shall be subject to sale and this Mortgage shall be
subject to foreclosure, all as provided by law, and Lender may, at its option
and by or through a trustee, nominee, assignee or otherwise, to the fullest
extent permitted by law, exercise any or all of the following rights, remedies
and recourses, either successively or concurrently:
     (a) Acceleration. Accelerate the maturity date of the Note and declare any
or all of the Obligations to be immediately due and payable without any
presentment, demand, protest, notice, or action of any kind whatever (each of
which is hereby expressly waived by Borrower), whereupon the same shall become
immediately due and payable. Upon any such acceleration, payment of such
accelerated amount shall constitute a prepayment of the principal balance of the
Note and any applicable prepayment fee provided for in the Note shall then be
immediately due and payable.
     (b) Entry on the Property. Either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court and
without regard to the adequacy of its security, enter upon and take possession
of the Property, or any part thereof, without force or with such force as is
permitted by law and without notice or process or with such notice or process as
is required by law unless such notice and process is waivable, in which case
Borrower hereby waives such notice and process, and do any and all acts and
perform any and all work which may be desirable or necessary in Lender’s
judgment to complete any unfinished construction on the Real Estate, to preserve
the value, marketability or rentability of the Property, to increase the income
therefrom, to manage and operate the Property or to protect the security hereof
and all sums expended by Lender therefor, together with interest thereon at the
Default Interest Rate, shall be immediately due and payable to Lender by
Borrower on demand.
     (c) Collect Rents and Profits. With or without taking possession of the
Property, sue or otherwise collect the Rents and Profits, including those past
due and unpaid.
     (d) Appointment of Receiver. Upon, or at any time prior to or after,
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Property, as a matter of strict right and without
notice to Borrower and without regard to the adequacy of the Property for the
repayment of the Obligations or the solvency of Borrower or any person or
persons liable for the payment of the Obligations, and Borrower hereby
irrevocably consent to such appointment, waives any and all notices of and
defenses to such appointment and agrees not to oppose any application therefor
by Lender, but nothing herein is to be construed to deprive Lender of any other
right, remedy or

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privilege Lender may now have under the law to have a receiver appointed,
provided, however, that, the appointment of such receiver, trustee or other
appointee by virtue of any court order, statute or regulation shall not impair
or in any manner prejudice the rights of Lender to receive payment of the Rents
and Profits pursuant to other terms and provisions hereof. Any such receiver
shall have all of the usual powers and duties of receivers in similar cases,
including, without limitation, the full power to hold, develop, rent, lease,
manage, maintain, operate and otherwise use or permit the use of the Property
upon such terms and conditions as said receiver may deem to be prudent and
reasonable under the circumstances as more fully set forth in Section 3.3 below.
Such receivership shall, at the option of Lender, continue until full payment of
all of the Obligations or until title to the Property shall have passed by
foreclosure sale under this Mortgage or deed in lieu of foreclosure.
     (e) Foreclosure. Immediately commence an action to foreclose this Mortgage
or to specifically enforce its provisions or any of the Obligations pursuant to
the statutes in such case made and provided and sell the Property or cause the
Property to be sold in accordance with the requirements and procedures provided
by said statutes in a single parcel or in several parcels at the option of
Lender.
     (1) In the event foreclosure proceedings are filed by Lender, all expenses
incident to such proceeding, including, but not limited to, attorneys’ fees and
costs, shall be paid by Borrower and secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note. The Obligations and all other obligations secured by this Mortgage,
including, without limitation, interest at the Default Interest Rate (as defined
in the Note), any prepayment charge, fee or premium required to be paid under
the Note in order to prepay principal (to the extent permitted by applicable
law), attorneys’ fees and any other amounts due and unpaid to Lender under the
Loan Documents, may be bid by Lender in the event of a foreclosure sale
hereunder. In the event of a judicial sale pursuant to a foreclosure decree, it
is understood and agreed that Lender or its assigns may become the purchaser of
the Property or any part thereof.
     (2) Lender may, by following the procedures and satisfying the requirements
prescribed by applicable law, foreclose on only a portion of the Property and,
in such event, said foreclosure shall not affect the lien of this Mortgage on
the remaining portion of the Property foreclosed.
     (f) Rights under the Uniform Commercial Code. Exercise any or all of the
remedies of a secured party under the Uniform Commercial Code against the UCC
Collateral, either separately or together, and in any order, without in any way
affecting the availability of Lender’s other remedies. Furthermore, to the
extent permitted by law, in conjunction within, addition to or in substitution
for the rights and remedies available to Lender pursuant to any applicable
Uniform Commercial Code: in the event of a foreclosure sale with respect to the
portions of the Property which are not UCC Collateral, the Property (including
the UCC Collateral) may, at the option of Lender, be sold as a whole or in
parts, as determined by Lender in its sole discretion; and (2) it shall not be
necessary that (x) Lender take possession of the UCC Collateral, or any part
thereof, prior to the time that any sale pursuant to the provisions of this
Section is conducted, or (y) the UCC Collateral, or any part thereof, be present
at the location of such sale; and (3) Lender may appoint or delegate any one or
more persons as agent to perform any act or acts necessary or incident to any
sale held by Lender, including the sending of notices and the conduct of the
sale, but in the name and on behalf of Lender.
     (g) Other. Exercise any other right or remedy available (i) hereunder,
including, but not limited to, drawing upon the Letter of Credit, (ii) under any
of the other Loan Documents, (iii) under any of the Other Mortgages or (iv) at
law or in equity.

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     3.2 Application of Proceeds. To the fullest extent permitted by law, the
proceeds of any sale under this Mortgage shall be applied to the extent funds
are so available to the following items in such order as Lender in its
discretion may determine:
     (a) To payment of the costs, expenses and fees of taking possession of the
Property, and of holding, operating, maintaining, using, leasing, repairing,
improving, marketing and selling the same and of otherwise enforcing Lender’s
right and remedies hereunder and under the other Loan Documents, including, but
not limited to, receivers’ fees, court costs, attorneys’, accountants’,
appraisers’, managers’ and other professional fees, title charges and transfer
taxes.
     (b) To payment of all sums expended by Lender under the terms of any of the
Loan Documents and not yet repaid, together with interest on such sums at the
Default Interest Rate.
     (c) To payment of the Obligations and all other obligations secured by this
Mortgage, including, without limitation, interest at the Default Interest Rate
and, to the extent permitted by applicable law, any prepayment fee, charge or
premium required to be paid under the Note in order to prepay principal, in any
order that Lender chooses in its sole discretion.
     The remainder, if any, of such funds shall be disbursed to Borrower or to
the person or persons legally entitled thereto.
     3.3 Right and Authority of Receiver or Lender in the Event of Default;
Power of Attorney. Upon the occurrence of an Event of Default hereunder, and
entry upon the Property pursuant to Section 3.1(b) hereof or appointment of a
receiver pursuant to Section 3.1(d) hereof, and under such terms and conditions
as may be prudent and reasonable under the circumstances in Lender’s or the
receiver’s sole discretion, all at Borrower’s expense, Lender or said receiver,
or such other persons or entities as they shall hire, direct or engage, as the
case may be, may do or permit one or more of the following, successively or
concurrently: (a) enter upon and take possession and control of any and all of
the Property; (b) take and maintain possession of all documents, books, records,
papers and accounts relating to the Property; (c) exclude Borrower and its
agents, servants and employees wholly from the Property; (d) manage and operate
the Property; (e) preserve and maintain the Property; (f) make repairs and
alterations to the Property; (g) complete any construction or repair of the
Improvements, with such changes, additions or modifications of the plans and
specifications or intended disposition and use of the Improvements as Lender may
in its sole discretion deem appropriate or desirable to place the Property in
such condition as will, in Lender’s sole discretion, make it or any part thereof
readily marketable or rentable; (h) conduct a marketing or leasing program with
respect to the Property, or employ a marketing or leasing agent or agents to do
so, directed to the leasing or sale of the Property under such terms and
conditions as Lender may in its sole discretion deem appropriate or desirable;
(i) employ such contractors, subcontractors, materialmen, architects, engineers,
consultants, managers, brokers, marketing agents, or other employees, agents,
independent contractors or professionals, as Lender may in its sole discretion
deem appropriate or desirable to implement and effectuate the rights and powers
herein granted; (j) execute and deliver, in the name of Lender as
attorney-in-fact and agent of Borrower or in its own name as Lender, such
documents and instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter into such Leases, whether of real or personal
property, under such terms and conditions as Lender may in its sole discretion
deem appropriate or desirable; (l) collect and receive the Rents and Profits
from the Property; (m) eject Tenants or repossess personal property, as provided
by law, for breaches of the conditions of their Leases; (n) sue for unpaid Rents
and Profits, payments, income or proceeds in the name of Borrower or Lender;
(o) maintain actions in forcible entry and detainer, ejectment for possession
and actions in distress for rent; (p) compromise or give acquittance for Rents
and Profits, payments, income or proceeds that may become due; (q) delegate or
assign any and all rights and powers given to Lender by this Mortgage; and
(r) do any acts which Lender in its sole discretion deems

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appropriate or desirable to protect the security hereof and use such measures,
legal or equitable, as Lender may in its sole discretion deem appropriate or
desirable to implement and effectuate the provisions of this Mortgage. After an
Event of Default has occurred this Mortgage shall constitute a direction to and
full authority to any Tenant, lessee, or other third party who has heretofore
dealt or contracted or may hereafter deal or contract with Borrower or Lender,
at the request of Lender, to pay all amounts owing under any Lease, contract or
other agreement to Lender without proof of the Event of Default relied upon. Any
such Tenant, lessee or third party is hereby irrevocably authorized to rely upon
and comply with (and shall be fully protected by Borrower in so doing) any
request, notice or demand by Lender for the payment to Lender of any Rents and
Profits or other sums which may be or thereafter become due under its Lease,
contract or other agreement, or for the performance of any undertakings under
any such Lease, contract or other agreement, and shall have no right or duty to
inquire whether any Event of Default under this Mortgage, or any default under
any of the other Loan Documents, has actually occurred or is then existing.
Borrower hereby constitutes and appoints Lender, its assignees, successors,
transferees and nominees, as Borrower’s true and lawful attorney-in-fact and
agent, with full power of substitution in the Property, in Borrower’s name,
place and stead, to do or permit any one or more of the foregoing described
rights, remedies, powers and authorities, successively or concurrently, and said
power of attorney shall be deemed a power coupled with an interest and
irrevocable so long as any Obligations is outstanding. Any money advanced by
Lender in connection with any action taken under this Section 3.3, together with
interest thereon at the Default Interest Rate from the date of making such
advancement by Lender until actually paid by Borrower, shall be a demand
obligation owing by Borrower to Lender.
     3.4 Occupancy After Foreclosure. In the event there is a foreclosure sale
hereunder and at the time of such sale, Borrower or Borrower’s representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Borrower (except tenants of space in the
Improvements subject to Leases entered into prior to the date hereof), are
occupying or using the Property, or any part thereof, then, to the extent not
prohibited by applicable law, each and all shall, at the option of Lender or the
purchaser at such sale, as the case may be, immediately become the tenant of the
purchaser at such sale, which tenancy shall be a tenancy from day-to-day,
terminable at the will of either landlord or tenant, at a reasonable rental per
day based upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable law, in
the event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Real Estate is located.
     3.5 Notice to Account Debtors. Lender may, at any time after an Event of
Default hereunder, notify the account debtors and obligors of any accounts,
chattel paper, negotiable instruments or other evidences of indebtedness, to
Borrower included in the Property to pay Lender directly. Borrower shall at any
time or from time to time upon the request of Lender provide to Lender a current
list of all such account debtors and obligors and their addresses.
     3.6 Cumulative Remedies. All remedies contained in this Mortgage are
cumulative and Lender shall also have all other remedies provided at law and in
equity or in any other Loan Documents. Such remedies may be pursued separately,
successively or concurrently at the sole subjective direction of Lender and may
be exercised in any order and as often as occasion therefor shall arise. No act
of Lender shall be construed as an election to proceed under any particular
provisions of this Mortgage to the exclusion of any other provision of this
Mortgage or as an election of remedies to the exclusion of any other remedy
which may then or thereafter be available to Lender. No delay or failure by
Lender to exercise any right or remedy under this Mortgage shall be construed to
be a waiver of that right or remedy or of any Event of Default hereunder. Lender
may exercise any one or more of its rights and remedies at its option without
regard to the adequacy of its security.

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     3.7 Payment of Expenses. Borrower shall pay on demand all of Lender’s third
party out of pocket expenses incurred in any efforts to enforce any terms of
this Mortgage, whether or not any lawsuit is filed and whether or not
foreclosure is commenced but not completed, including, but not limited to,
reasonable legal fees and disbursements, foreclosure costs and title charges,
together with interest thereon from and after the date incurred by Lender until
actually paid by Borrower at the Default Interest Rate. Furthermore, Borrower
shall, and does hereby, indemnify Lender for, and hold Lender harmless from, any
and all losses, costs, expenses, claims, actions, demands liabilities, loss or
damage which may or might be incurred by Lender under this Mortgage or by the
exercise of rights or remedies hereunder, and from any and all claims and
demands whatsoever which may be asserted against Lender by reason of any alleged
obligations or undertakings on Lender’s part with respect to the Property except
as expressly set forth in the Loan Documents, other than those finally
determined to have resulted solely from the gross negligence or willful
misconduct of Lender. Borrower’s obligation pursuant to the previous sentence
shall include, without limitation, payment to (or reimbursement of) any
compensation payable by the holder of the Loan to any servicing agent under a
Secondary Market Transaction pursuant to the Securitization Documents (as
defined herein) if such payment becomes due solely by reason of the existence
and continuance of any Event of Default. Should Lender incur any such liability,
the amount thereof, including, without limitation, costs, expenses and
attorneys’ fees, together with interest thereon at the Default Interest Rate
from the date incurred by Lender until actually paid by Borrower, shall be
immediately due and payable to Lender from Borrower on demand.
ARTICLE IV
INTENTIONALLY OMITTED
ARTICLE V
MISCELLANEOUS TERMS AND CONDITIONS
     5.1 Time of Essence. Time is of the essence with respect to all provisions
of the Loan Documents.
     5.2 Release of Mortgage. If all of the Obligations be paid and performed,
then and in that event only, upon Borrower’s written request, Lender shall
promptly execute and deliver to Borrower a written satisfaction of the Mortgage,
and upon the recordation thereof, all rights under this Mortgage shall terminate
except for those provisions hereof which by their terms survive, and the
Property shall become wholly clear of the liens, security interests, conveyances
and assignments evidenced hereby, which shall be released by Lender in due form
at Borrower’s cost. No release of this Mortgage or the lien hereof shall be
valid unless executed by Lender.
     5.3 Certain Rights of Lender. Without affecting Borrower’s liability for
the payment of any of the Obligations, Lender may from time to time and without
notice to Borrower: (a) release any person liable for the payment of the
Obligations; (b) extend or modify the terms of payment of the Obligations;
(c) accept additional real or personal property of any kind as security or
alter, substitute or release any property securing the Obligations; (d) consent
in writing to the making of any subdivision map or plat thereof; (e) join in
granting any easement therein; or (f) join in any extension agreement of the
Mortgage or any agreement subordinating the lien hereof.
     5.4 Waiver of Certain Defenses. No action for the enforcement of the lien
hereof or of any other provision hereof, shall be subject to any defense which
would not be good and available to the party interposing such defense in an
action at law upon the Note or any of the other Loan Documents, in each case to
the greatest extent permitted by law.

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     5.5 Notices. All notices, demands, requests or other communications to be
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery, with all charges prepaid, or by depositing the same in the United
States mail, postage prepaid, certified mail, return receipt requested, in any
event addressed to the intended addressee at its address set forth on the first
page of this Mortgage or at such other address as may be designated by such
party as herein provided. All notices, demands and requests shall be effective
upon such personal delivery, or one (1) business day after being deposited with
Federal Express or another reputable national private courier service, or three
(3) business days after being deposited in the United States mail as required
above. Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand or request sent. By giving to the
other party hereto at least fifteen (15) days’ prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America.
     5.6 Successors and Assigns. The terms, provisions, indemnities, covenants
and conditions hereof shall be binding upon Borrower and the successors and
assigns of Borrower, including all successors in interest of Borrower in and to
all or any part of the Property, and shall inure to the benefit of Lender, its
successors and assigns, and shall constitute covenants running with the land.
All indemnities in this Mortgage for the benefit of Lender shall inure to the
benefit of Lender and each of its directors, officers, shareholders, partners,
members, managers, employees and agents (including, without limitation, any
servicers retained by Lender with respect to the Loan), and pledgees and
participants of the Obligations, and their respective successors and assigns.
All references in this Mortgage to Borrower or Lender shall be deemed to include
each such party’s successors and assigns. If Borrower consists of more than one
person or entity, each will be jointly and severally liable to perform the
obligations of Borrower.
     5.7 Severability. A determination that any provision of this Mortgage is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision, and any determination that the application of any provision of
this Mortgage to any person or circumstance is illegal or unenforceable shall
not affect the enforceability or validity of such provision as it may apply to
any other persons or circumstances.
     5.8 Interpretation. Within this Mortgage, words of any gender shall be held
and construed to include any other gender, and words in the singular shall be
held and construed to include the plural, and vice versa, unless the context
otherwise requires. The headings of the sections and paragraphs of this Mortgage
are for convenience of reference only, are not to be considered a part hereof
and shall not limit or otherwise affect any of the terms hereof. In the event of
any inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions of this Mortgage shall
be controlling.
     5.9 Waiver: Discontinuance of Proceedings. Lender may waive any single
Event of Default by Borrower hereunder without waiving any other prior or
subsequent Event of Default. Lender may remedy any Event of Default by Borrower
hereunder without waiving the Event of Default remedied. Neither the failure by
Lender to exercise, nor the delay by Lender in exercising, any right, power or
remedy upon any Event of Default by Borrower hereunder shall be construed as a
waiver of such Event of Default or as a waiver of the right to exercise any such
right, power or remedy at a later date. No single or partial exercise by Lender
of any right, power or remedy hereunder shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification or
waiver of any provision hereof nor

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consent to any departure by Borrower therefrom shall in any event be effective
unless the same shall be in writing and signed by Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose given. No notice to nor demand on Borrower in any case shall of itself
entitle Borrower to any other or further notice or demand in similar or other
circumstances. Acceptance by Lender of any payment in an amount less than the
amount then due on any of the Obligations shall be deemed an acceptance on
account only and shall not in any way affect the existence of a Default or an
Event of Default hereunder. In case Lender shall have proceeded to invoke any
right, remedy or recourse permitted hereunder or under the other Loan Documents
and shall thereafter elect to discontinue or abandon the same for any reason,
Lender shall have the unqualified right to do so and, in such an event, Borrower
and Lender shall be restored to their former positions with respect to the
Obligations, the Loan Documents, the Property and otherwise, and the rights,
remedies, recourses and powers of Lender shall continue as if the same had never
been invoked.
     5.10 Governing Law.
     (A) THE LOAN, SECURED IN PART BY THIS MORTGAGE, WAS NEGOTIATED IN THE STATE
OF NEW YORK, AND MADE BY LENDER IN THE STATE OF NEW YORK. AND THE PROCEEDS OF
THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS MORTGAGE AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED PURSUANT
HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE,
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS MORTGAGE AND THE NOTE, AND THIS MORTGAGE AND THE
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
     (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING
OUT OF OR RELATING TO THIS MORTGAGE MAY AT LENDER’S OPTION BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO
SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY
OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON
CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY SUCH

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COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND
APPOINT:
Corporation Service Company
1133 Avenue of the Americas, Suite 3100
New York, New York 10036
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER,
(II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED
AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE
SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III)
SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO
HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.
     5.11 Counting of Days. The term “days” when used herein shall mean calendar
days. If any time period ends on a Saturday, Sunday or holiday officially
recognized by the state within which the Real Estate is located, the period
shall be deemed to end on the next succeeding business day. The term “business
day” when used herein shall mean a weekday, Monday through Friday, except a
legal holiday or a day on which banking institutions in the State in which the
Real Estate is located are authorized by law to be closed.
     5.12 Relationship of the Parties. The relationship between Borrower and
Lender is that of a borrower and a lender only and neither of those parties is,
nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
     5.13 Application of the Proceeds of the Note. To the extent that proceeds
of the Note are used to pay indebtedness secured by any outstanding lien,
security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced by Lender at Borrower’s request and Lender shall be
subrogated to any and all rights, security interests and liens owned by any
owner or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges or
encumbrances are released.
     5.14 Unsecured Portion of Indebtedness. If any part of the Obligations
cannot be lawfully secured by this Mortgage or if any part of the Property
cannot be lawfully subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is unsecured by
this Mortgage.
     5.15 Cross Default. An Event of Default shall be a default under each of
the other Loan Documents.
     5.16 Interest After Sale. In the event the Property or any part thereof
shall be sold upon foreclosure as provided hereunder, to the extent permitted by
law, the sum for which the same shall

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have been sold shall, for purposes of redemption (pursuant to the laws of the
state in which the Property is located), bear interest at the Default Interest
Rate.
     5.17 Construction of this Document. This document may be construed as a
mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, as determined by Lender, in order
to fully effectuate the liens and security interests created hereby and the
purposes and agreements herein set forth.
     5.18 No Merger. It is the desire and intention of the parties hereto that
this Mortgage and the lien hereof do not merge in fee simple title to the
Property. It is hereby understood and agreed that should Lender acquire any
additional or other interests in or to the Property or the ownership thereof,
then, unless a contrary intent is manifested by Lender as evidenced by an
appropriate document duly recorded, this Mortgage and the lien hereof shall not
merge in such other or additional interests in or to the Property, toward the
end that this Mortgage may be foreclosed as if owned by a stranger to said other
or additional interests.
     5.19 Rights With Respect to Junior Liens. Any person or entity purporting
to have or to take a junior mortgage or other lien upon the Property or any
interest therein shall be subject to the rights of Lender to amend, modify,
increase, vary, alter or supplement this Mortgage, the Note or any of the other
Loan Documents and to extend the maturity date of the indebtedness secured
hereby and to increase the amount of the indebtedness secured hereby and to
waive or forebear the exercise of any of its rights and remedies hereunder or
under any of the other Loan Documents and to release any collateral or security
for the indebtedness secured hereby, in each and every case without obtaining
the consent of the holder of such junior lien and without the lien or security
interest of this Mortgage losing its priority over the rights of any such junior
lien.
     5.20 Lender May File Proofs of Claim. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Borrower or the principals or general partners or
members in Borrower, or their respective creditors or property, Lender, to the
extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Lender allowed in such proceedings for the entire Obligations at the date of the
institution of such proceedings and for any additional amount which may become
due and payable by Borrower hereunder after such date.
     5.21 Fixture Filing. To the extent permitted under applicable law, this
Mortgage shall be effective from the date of its recording as a financing
statement filed as a fixture filing with respect to all goods constituting part
of the Property which are or are to become fixtures. This Mortgage shall also be
effective as a financing statement covering minerals or the like (including oil
and gas) and is to be filed for record in the Real Estate Records of the county
where the Property is situated. The mailing address of Borrower and the address
of Lender from which information concerning the security interests may be
obtained are set forth above. Borrower and Lender acknowledge that for purposes
of Article 9 of the UCC the laws of the State of New York shall govern and
control.
     5.22 After-Acquired Property. All property acquired by Borrower after the
date of this Mortgage which by the terms of this Mortgage shall be subject to
the lien and the security interest created hereby, shall immediately upon the
acquisition thereof by Borrower and without further mortgage, conveyance or
assignment become subject to the lien and security interest created by this
Mortgage. Nevertheless, Borrower (at the sole cost and expense of Borrower)
shall execute, acknowledge, deliver and record or file, as appropriate, all and
every such further mortgages, security agreements, financing

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statements, assignments and assurances, as Lender shall require for
accomplishing the purposes of this Mortgage.
     5.23 No Representation. By accepting delivery of any item required to be
observed, performed or fulfilled or to be given to Lender pursuant to the Loan
Documents, including, but not limited to, any officer’s certificates, balance
sheet, statement of profit and loss or other financial statement, survey,
appraisal or insurance policy, Lender shall not be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance of delivery thereof shall not be or constitute any warranty, consent
or affirmation with respect thereto by Lender.
     5.24 Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Mortgage may be detached from
any counterpart of this Mortgage without impairing the legal effect of any
signatures thereon and may be attached to another counterpart of this Mortgage
identical in form hereto but having attached to it one or more additional
signature pages.
     5.25 Exculpation. Notwithstanding anything to the contrary contained in
this Mortgage, the liability of Borrower and its officers, directors, members
and general partners for the Obligations and for the performance of the other
agreements, covenants and obligations contained herein and in the other Loan
Documents shall be limited as set forth in Section 1.05 of the Note.
     5.26 Recording and Filing. Borrower (at the sole cost and expense of
Borrower) will cause the Loan Documents and all amendments and supplements
thereto and substitutions therefor to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Lender shall reasonably request,
and will pay on demand all such recording, filing, re-recording and re-filing
taxes, fees and other charges. Borrower shall reimburse Lender, or its servicing
agent, for the costs incurred in obtaining a tax service company to verify the
status of payment of Taxes and Other Charges on the Property.
     5.27 Entire Agreement and Modification. This Mortgage and the other Loan
Documents contain the entire agreements between the parties relating to the
subject matter hereof and thereof and all prior agreements relative hereto and
thereto which are not contained herein or therein are terminated. This Mortgage
and the other Loan Documents may not be amended, revised, waived, discharged,
released or terminated orally but only by a written instrument or instruments
executed by the party against which enforcement of the amendment, revision,
waiver, discharge, release or termination is asserted. Any alleged amendment,
revision, waiver, discharge, release or termination which is not so documented
shall not be effective as to any party.
     5.28 Maximum Interest. The provisions of Section 2.03 of the Note are
incorporated in this Mortgage by reference as if more fully set forth herein.
     5.29 Secondary Market Transaction.
     (a) Cooperation. Borrower acknowledges that Lender may effectuate a
Secondary Market Transaction. Borrower shall cooperate in good faith with Lender
in effecting any such Secondary Market Transaction and shall cooperate in good
faith to implement all requirements imposed by any Investor (as defined herein)
or Rating Agency involved therein, including, without limitation, all structural
or other changes to Borrower and/or the Obligations, and modifications to any
Loan Documents; provided, however, that Borrower shall not be obligated to spend
more than $1,000.00 in

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cooperating to effectuate any such Secondary Market Transaction, and the
Borrower shall not be required to modify any Loan Documents if such modification
would (A) increase the interest rate payable under the Note, (B) shorten the
period until the stated maturity of the Note, (C) modify the amortization of
principal of the Note, or (D) modify any other material term of the Obligations.
Borrower shall provide such information and documents relating to Borrower, any
Indemnitor, the Property and any Tenants as Lender may reasonably request in
connection with such Secondary Market Transaction. Borrower shall make available
to Lender all information concerning its business and operations that Lender may
reasonably request.
     (b) Disclosure; Indemnification. Lender shall be permitted to share all
information provided in connection with the Loan with the Investors, Rating
Agencies, investment banking firms, accounting firms, law firms and other
third-party advisory firms involved with the Loan Documents or the applicable
Secondary Market Transaction. It is understood that the information provided to
Lender in connection with the Loan may ultimately be incorporated into the
offering documents for the Secondary Market Transaction and thus potential
Investors may also see some or all of the information with respect to the Loan,
the Property, Borrower and the holders of direct or indirect interests in
Borrower. Borrower irrevocably waives any and all rights it may have under any
applicable laws (including, without limitation, any right of privacy) to
prohibit such disclosure. Lender and all of the aforesaid third-party advisors
and professional firms shall be entitled to rely on the information supplied by,
or on behalf of, Borrower. Borrower hereby indemnifies Lender as to any losses,
claims, damages or liabilities that arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
information provided by or on behalf of Borrower, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated in such information, or necessary in order to make the statements
in such information, or in light of the circumstances under which they were
made, not misleading. Lender may publicize the existence of the Obligations in
connection with its marketing for a Secondary Market Transaction or otherwise as
part of its business development.
     (c) Borrower acknowledges that, as part of the documents creating and
governing any Secondary Market Transaction in which the Loan (or any portion of
or interest in the Loan) may be included (the “Securitization Documents”), the
parties to such Secondary Market Transaction may, in their sole discretion,
elect to impose certain requirements as conditions precedent to certain actions
by one or more of the servicing agents appointed with respect to the Loan
(including, without limitation, that such servicing agent obtain written
confirmation from each applicable Rating Agency that the proposed action will
not result in a downgrade, qualification or withdrawal of any rating issued on
securities evidencing an ownership interest in the Loan that was in effect
immediately prior to such proposed action). No requirement or condition imposed
upon such servicing agent pursuant to such Securitization Documents as a
condition precedent to the granting or denying of any consent or approval, or
the taking or refusal to take of any action, pursuant to this Mortgage (except
only for any action required of Lender hereunder) shall give rise to any claim
or cause of action by Borrower against Lender, or give Borrower any defense for
failure to perform its obligations under the Loan Documents. Borrower further
acknowledges that the cost of any such rating confirmation required by the
Securitization Documents shall be payable by Borrower.
     (d) Definitions: A “Secondary Market Transaction” shall be (1) any sale of
the Mortgage, Note and other Loan Documents to one or more investors as a whole
loan, (2) a participation of the Obligations to one or more investors, (3) a
securitization of the Loan, (4) any other sale or transfer of the Obligations or
any interest therein to one or more investors. “Rating Agency” shall mean any
nationally-recognized statistical rating organization that has been designated
by Lender to provide, or that provides, a rating on Borrower, the Loan or any
securities evidencing an interest in, inter alia, a trust or other entity which
is the holder of the Note. “Investor” shall mean any actual or potential
purchaser, transferee, assignee, servicer, participant or investor in a
Secondary Market Transaction.

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     5.30 WAIVER OF JURY TRIAL.
LENDER AND BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE
OBLIGATIONS OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF
THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR
ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE
     5.31 Letter of Credit
     (a) Additional Definitions. The following capitalized terms shall have the
respective meanings set forth below:
          (i) “Letter of Credit” means a Satisfactory Letter of Credit in the
amount of $980,000.00.
          (ii) “Satisfactory Letter of Credit” shall mean, for purposes of this
Mortgage, a clean, irrevocable and unconditional letter of credit that satisfies
all of the provisions in this Section 5.31.
     (b) The Letter of Credit shall be issued in favor of Lender, its successors
and/or assigns as beneficiary by an issuer having a rating with respect thereto
of “A“ or better by a Rating Agency or such other issuer as shall be approved by
Lender in its sole and absolute discretion (the “Issuing Bank”).
     (c) The Letter of Credit shall be drawable (with partial draws permitted)
by Lender solely upon the presentment to the issuer of a sight draft, demanding
such payment, and accompanying draw certificate, each in form and substance
satisfactory to Lender in its sole and absolute discretion.
     (d) The Letter of Credit shall have an initial expiration date of at least
one (1) year from the date of delivery to Lender provided, however, that such
Letter of Credit bear an “evergreen clause” whereby it shall be deemed
automatically renewed, without amendment, for consecutive periods of one
(1) year each thereafter during the term of the Loan through the date which is
forty-five (45) days following the end of the term of the Loan, unless the
Issuing Bank sends a notice (the “Non-Renewal Notice”) to Lender by certified
mail, return receipt requested, not less than thirty (30) days nor more than
sixty (60) days prior to the then-current expiration date of the Letter of
Credit, stating that the Issuing Bank has elected not to renew such Letter of
Credit. Lender shall have the right, at any time following the receipt of a
Non-Renewal Notice, to draw the full amount of such Letter of Credit, by sight
draft on the Issuing Bank, and shall thereafter maintain the cash proceeds of
such Letter of Credit in the Excess Cash Flow Reserve for Leasing Costs (as
further described in paragraph (e) below) pursuant to the applicable terms of
the Mortgage. Upon presentation by Borrower to Lender of a replacement Letter of
Credit meeting the requirements of Section 5.31, Lender shall refund such cash
proceeds to Borrower. The Issuing Bank shall agree with all drawers, endorsers
and bona fide holders that drafts drawn under and in compliance with the terms
of the Letter of Credit will be duly honored upon presentation to the Issuing
Bank (or its correspondent bank, on terms and conditions no less favorable to
Lender than would apply to such a draft drawn on the Issuing Bank) at an office
location in New York, New York. The Letter of Credit shall be issued subject to
the International Standby Practices 1998 or the most recent revision thereof or
successor

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thereto which shall be in effect from time to time (“ISP 1998”), and, as to
matters not expressly covered by ISP 98, by the law of the State of New York
(including, without limitation, Article 5 of the New York Uniform Commercial
Code, but excluding Section 5-102(4) thereof).
     (e) The Letter of Credit shall be in form and substance satisfactory to
Lender in its sole and absolute discretion.
     (f) Borrower hereby pledges to Lender all of its rights in and to the
Letter of Credit and any proceeds thereof, as additional security for the
payment of the indebtedness evidenced by the Note and secured, in part, by the
Mortgage, including without limitation all expenses (including reasonable
attorneys’ fees and costs), taxes, and all transfer, recordings, filing and
other charges in connection with or incidental to the custody, care, transfer or
administration of the Letter of Credit or in any way relating to the
enforcement, protection or preservation of the rights of remedies of Lender
pursuant to the Letter of Credit. Borrower shall, at its sole cost and expense,
enter into any letter of credit agreements or letter of credit security
agreements required by Lender in its sole and absolute discretion. Borrower
hereby irrevocably authorizes Lender to file UCC Financing Statements, Financing
Statement Amendments and/or Financing Statement Continuations that Lender deems
necessary to perfect and/or continue the perfection of the pledge and security
interest granted hereunder.
     (g) Provided that no Event of Default then exists and that the Letter of
Credit has been delivered to Lender, Lender shall return the Letter of Credit
(or the then available proceeds thereof) to Borrower upon Lender’s
determination, in its sole and absolute discretion, that the Telex Replacement
Tenant Conditions have been satisfied.
     (h) Each Letter of Credit delivered under this Section 5.31 shall be
additional security for the payment of the Obligations. Upon the occurrence of
an Event of Default, Lender shall have the right, at its option, to draw on any
Letter of Credit and to apply all or any part thereof to the payment of the
items for which such Letter of Credit was established or to apply each such
Letter of Credit to payment of the Obligations in such order, proportion or
priority as Lender may determine. Any such application to the Obligations shall
be subject to the Yield Maintenance Charge (as defined in the Note). On the
Stated Maturity Date, any such Letter of Credit may be applied to reduce the
Obligations.
     (i) In addition to any other right Lender may have to draw upon a Letter of
Credit pursuant to the terms and conditions of this Mortgage, Lender shall have
the additional rights to draw in full any Letter of Credit: (i) with respect to
any evergreen Letter of Credit, if Lender has received a notice from the issuing
bank that the Letter of Credit will not be renewed and a substitute Letter of
Credit is not provided at least thirty (30) days prior to the date on which the
outstanding Letter of Credit is scheduled to expire; (ii) with respect to any
Letter of Credit with a stated expiration date, if Lender has not received a
notice from the issuing bank that it has renewed the Letter of Credit at least
thirty (30) days prior to the date on which such Letter of Credit is scheduled
to expire and a substitute Letter of Credit is not provided at least thirty
(30) days prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (iii) upon receipt of notice from the issuing bank that the
Letter of Credit will be terminated (except if the termination of such Letter of
Credit is permitted pursuant to the terms and conditions of this Agreement or a
substitute Letter of Credit is provided); or (iv) if Lender has received notice
that the bank issuing the Letter of Credit shall cease to be an Eligible
Institution (as defined by ISP 1998). Notwithstanding anything to the contrary
contained in the above, Lender is not obligated to draw any Letter of Credit
upon the happening of an event specified in (i), (ii), (iii) or (iv) above and
shall not be liable for any losses sustained by Borrower due to the insolvency
of the bank issuing the Letter of Credit if Lender has not drawn the Letter of
Credit.

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          5.32 State Specific Provisions. Notwithstanding anything foregoing to
the contrary, the following provisions shall govern the rights of the parties to
this Mortgage:
          (a) Application of Rents and Profits. Notwithstanding any provision of
this Mortgage (including, without limitation, Section 1.9 hereof) to the
contrary, all Rents and Profits received from the Property shall be applied as
follows:
          (1) to payment of all reasonable fees of the receiver approved by the
court;
          (2) to payment of all tenant security deposits then owing to tenants
under any of the Leases pursuant to the provisions of Minn. Stat. 504B.178, if
applicable;
          (3) to payment of all prior or current real estate taxes and special
assessments with respect to the Property, or the escrow payments then due;
          (4) to payment of all premiums then due for the insurance required by
the provisions of this Mortgage, or to the escrow payments then due;
          (5) to payment of all expenses to perform the covenants of any lessor
or licensee pursuant to Minn. Stat. 504B.161, subd. 1, if applicable;
          (6) to payment of expenses incurred for normal maintenance and
operation of the Property;
          (7) prior to commencement of any foreclosure, to Lender for payment of
the indebtedness secured by this Mortgage or the assignment of leases and rents
in such order as Lender may elect, but no such payment made after acceleration
of the indebtedness shall affect such acceleration;
          (8) after commencement of any foreclosure, to Lender, but no such
payment made after acceleration of the indebtedness shall affect such
acceleration; and
          (9) after a foreclosure sale, at the option of Lender, in its sole
discretion, to payment of any deficiency or to the amount required to be paid to
effect a redemption, with any excess to be paid to Borrower; provided, however,
that if this Mortgage is not reinstated nor the Property redeemed, the entire
amount received pursuant hereto, after deducting the amounts, if any, applied by
Lender to any deficiency, shall be the property of the purchaser of the Property
at the foreclosure sale.
The rights and powers of the Lender under this Mortgage and the Assignment and
the application of Rents and Profits under this Paragraph, and under Section 1.9
shall continue until expiration of the redemption period from any foreclosure
sale, whether or not any deficiency remains after a foreclosure sale.
          (b) WAIVER OF CONSTITUTIONAL RIGHTS. Borrower UNDERSTANDS AND AGREES
THAT IF AN “EVENT OF DEFAULT” (AS DEFINED IN SECTION 2.1 OF THIS MORTGAGE) SHALL
OCCUR, Lender HAS THE RIGHT, INTER ALIA, TO FORECLOSE THIS MORTGAGE BY
ADVERTISEMENT PURSUANT TO MINNESOTA STATUTES, CHAPTER 580, AS HEREAFTER AMENDED,
OR PURSUANT TO ANY SIMILAR OR REPLACEMENT STATUTE HEREAFTER ENACTED; THAT IF
Lender ELECTS TO FORECLOSE BY ADVERTISEMENT, IT MAY CAUSE THE PROPERTY, OR ANY
PART THEREOF, TO BE SOLD AT PUBLIC AUCTION;

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THAT NOTICE OF SUCH SALE MUST BE PUBLISHED AND GIVEN PERSONALLY TO THE PERSONS
IN POSSESSION OF THE PROPERTY AS PROVIDED BY STATUTE; THAT Borrower WILL HAVE
SUCH PERIOD AS IS PROVIDED BY MINNESOTA STATUTES, SECTION 580.23 OR 582.032, AS
APPLICABLE, OR ANY AMENDMENT THERETO, OR ANY SIMILAR OR REPLACEMENT STATUTE
HEREAFTER ENACTED, TO REDEEM THE PROPERTY SO SOLD BY PAYING THE SALE PRICE, ANY
TAXES, ASSESSMENTS AND INSURANCE PREMIUMS PAID BY THE PURCHASER AT SUCH SALE,
AND OTHER SUMS PERMITTED BY LAW, TOGETHER WITH INTEREST THEREON FROM THE DATE OF
SALE OR PAYMENT AT THE HIGHEST RATE PERMITTED BY LAW.
     BORROWER FURTHER UNDERSTANDS THAT IN THE EVENT OF SUCH DEFAULT, Lender MAY
TAKE POSSESSION OF THE PROPERTY WHICH IS SUBJECT TO THE SECURITY INTEREST
HEREINBEFORE GRANTED AND DISPOSE OF THE SAME BY SALE OR OTHERWISE IN ONE OR MORE
PARCELS, PROVIDED THAT AT LEAST (10) DAYS’ PRIOR NOTICE OF SUCH DISPOSITION MUST
BE GIVEN TO Borrower, ALL AS PROVIDED FOR BY THE MINNESOTA UNIFORM COMMERCIAL
CODE, AS HEREAFTER AMENDED, OR BY ANY SIMILAR OR REPLACEMENT STATUTE HEREAFTER
ENACTED.
     BORROWER FURTHER UNDERSTANDS THAT UNDER THE CONSTITUTION OF THE UNITED
STATES IT MAY HAVE THE RIGHT TO NOTICE AND HEARING BEFORE THE PROPERTY MAY BE
SOLD AND THAT THE PROCEDURE FOR FORECLOSURE BY ADVERTISEMENT DESCRIBED ABOVE
DOES NOT INSURE THAT NOTICE WILL BE GIVEN TO Borrower, AND NEITHER SAID
PROCEDURE FOR FORECLOSURE BY ADVERTISEMENT NOR THE MINNESOTA UNIFORM COMMERCIAL
CODE REQUIRES ANY HEARING OR OTHER JUDICIAL PROCEEDING.
     BORROWER HEREBY RELINQUISHES, WAIVES AND GIVES UP ANY CONSTITUTIONAL RIGHTS
TO NOTICE AND HEARING BEFORE SALE OF THE PROPERTY AND EXPRESSLY CONSENTS AND
AGREES THAT THE PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PORTION
THEREOF WHICH IS SUBJECT TO THE SECURITY INTEREST HEREINBEFORE GRANTED MAY BE
DISPOSED OF PURSUANT TO THE UNIFORM COMMERCIAL CODE, ALL AS DESCRIBED ABOVE.
     BORROWER ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE
SIGNING THIS DOCUMENT THIS SECTION AND ITS CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT IT UNDERSTANDS THE NATURE AND EXTENT OF THE
RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
     (c) Wells and Sewer Systems. Borrower does not know of any wells (as
defined by Minn. Stat. Section 103I.005, subdivision 21, as amended) on the Real
Estate, nor of any individual sewage systems (within the meaning of Minn. Stat.
Section 115.55, subdivision c) on or serving the Real Estate.
     (d) Future Advances. The maximum principal amount of indebtedness secured
by this Mortgage at any one time, excluding advances made by Lender in
protection of the Collateral or the lien of this Mortgage, shall be
$16,940,000.00. To the extent that this Mortgage secures future advances, the
amount of such advances is not currently known. The acceptance of this Mortgage
by Lender, however, constitutes an acknowledgment that Lender is aware of the
provisions of Minnesota Statutes § 287.05, subd. 5, and intends to comply with
the requirements contained therein. The representations contained in this
Section are made solely for the benefit of county recording authorities in
determining the mortgage registry tax payable as a prerequisite to the recording
of this Mortgage. Borrower

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acknowledges that such representations do not constitute or imply an agreement
by Lender to make any future advances to Borrower.
          (e) Supplement to Section 3.1(d). The following is added to
Section 3.1(d) at the end thereof:
“A receiver appointed pursuant to this Mortgage or the Assignment shall apply
all Rents and Profits in accordance with Section 5.32(a) from the date of
appointment of such receiver through the entire redemption period from the
foreclosure sale.”
          (f) Supplement to Section 3.1(e). Without limiting the rights stated
in Section 3.1(e), Lender shall have the right to foreclose this Mortgage by
action or advertisement and/or to specifically enforce its provisions as set
forth in said Section 3.1(e). The rights and obligations of the parties under
Sub-section 3.1(e)(1) of this Mortgage shall apply to any foreclosure of this
Mortgage by action and/or advertisement, or any other action by Lender to
enforce this Mortgage.
        .
[NO FURTHER TEXT ON THIS PAGE]

-62-

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     IN WITNESS WHEREOF, Borrower has executed this Mortgage as of the day and
year first above written.

                  BORROWER:    
 
                TCI06 BURNSVILLE MN LLC, a         Delaware limited liability
company    
 
           
 
  By:        
 
  Name:  
 
Christopher Massey    
 
  Title:   Vice President    

 

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COMMONWEALTH OF VIRGINIA
    )      
 
          : ss.:
COUNTY OF FAIRFAX
    )      

          On this ___day of December, 2006, before me, the undersigned notary
public, personally appeared CHRISTOPHER MASSEY, proved to me through (personal
knowledge) to be the person whose name is signed on the preceding documents, and
acknowledged to me that he signed it voluntarily for its stated purpose as VICE
PRESIDENT of TCI06 BURNSVILLE MN LLC, a Delaware limited liability company.

                            Notary Public    
 
  Print Name:        
 
     
 
   

My Commission Expires:
                                                            

 

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EXHIBIT A
PROPERTY DESCRIPTION